2 : Material Accounting Policies 1 Property , Plant and Equipment
(i) Recognition and Measurement :
Property, Plant and Equipment (PPE) are measured at Original cost and are net of tax / duty credit availed less accumulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Advances paid towards the acquisition of PPE outstanding at each reporting date are classified as capital advances under Other Non-Current Assets and Property, Plant and Equipment which are not ready for intended use as on the date of Balance Sheet are disclosed as “Capital work-in-progress”.
Capital expenditure on tangible assets for Research and Development is classified under Property, Plant and Equipment and is depreciated on the same basis as other Property, Plant and Equipment.
Property, Plant and Equipment are eliminated from financial statement on disposal and gains or losses arising from disposal are recognised in the statement of Profit and Loss in the year of occurrence.
Lease arrangements for land are identified as finance lease, in case such arrangements result in transfer of the related risks and rewards to the Company
The cost of the property, plant and equipment’s at April 01,2016, the company’s date of transition to Ind AS, was determined with reference to its carrying value at that date.
(ii) Subsequent expenditure :
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are chargedto the Statement of Profit and Loss duringthe period in which they are incurred. When Significant parts of Property, Plant and Equipment’s are required to be replaced, the Company derecognises the replaced part and recognises the new part with its own associated useful life and it is depreciated accordingly
(iii) Depreciation :
Depreciation on property, plant and equipment other than Improvements to Leasehold/Licensed Premises have been provided on straight-line method and computed with reference to the useful life of respective assets specified and in the manner prescribed in Schedule II of the Companies Act, 2013.
In case of additions/deductions to/from the property, plant and equipment made during the year, depreciation has been provided on pro-rata basis.
Leasehold land is amortized over primary lease period.
Improvements to Leasehold/Licensed Premises are depreciated on a straight-line method over the Primary Lease Period or over a period of 5 years whichever is less starting from the date when the Leasehold/Licensed Premises are put to use.
Useful life considered for calculation of depreciation (Specified in Schedule II) for various assets class are as follows:
2 Investment Properties
(i) Recognition and Measurement :
Investment Property comprise of Freehold Land and Buildings.
Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at cost less accumulated depreciation and accumulated impairment loss, if any.
Investment properties are derecognised either when they have been disposed off or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the Statement of Profit and Loss in the period of derecognition.
The cost of the Investment properties at April 01,2016, the company’s date of transition to Ind AS, was determined with reference to its carrying value at that date.
(ii) Depreciation
Depreciation on Investment Property is provided, under the Straight Line Method, pro rata to the period of use, based on useful lives specified in Schedule II to the Companies Act, 2013.
Useful life considered for calculation of depreciation (Specified in Schedule II) for various assets class are as follows:
3 Intangible Assets
(i) Recognition and measurement
Intangible assets are recognised when it is probable that future economic benefits that are attributable to concerned assets will flow to the Company and the cost of the assets can be measured reliably.
Gain or loss arising from derecognition of an intangible asset is recognised in the Statement of Profit and Loss.
(ii) Technical know-how developed by the Company-
Expenditure incurred on know-how developed by the company, post research stage, is recognized as an intangible asset, if and only if the future economic benefits attributable are probable to flow to the Company and the costs can be measured reliably."
(iii) Amortisation
Software’s are stated at cost of acquisition and are amortized on straight line basis over a period of 5 years irrespective of the date of acquisition.
The cost of technical know-how developed is amortized equally over its estimated life i.e. generally three years.
The cost of the Intangible Assets at April 01, 2016, the company's date of transition to Ind AS, was determined with reference to its carrying value at that date.
4 Impairment of non-financial assets
The carrying values of assets / cash generating units at each balance sheet date are reviewed for impairment if any indication of impairment exists.
If the carrying amount of the assets exceed the estimated recoverable amount, impairment is recognized for such excess amount. The impairment loss is recognized as an expense in the Statement of Profit and Loss, unless the asset is carried at revalued amount, in which case any impairment loss of the revalued asset is treated as a revaluation decrease to the extent a revaluation reserve is available for that asset.
When there is indication that an impairment loss recognized for an asset in earlier accounting periods which no longer exists or may have decreased, such reversal of impairment loss is recognized in the Statement of Profit and Loss, to the extent the amount was previously charged to the Statement of Profit and Loss.
5 Investments in Subsidiaries and Jointly Controlled Entities
Investments in subsidiaries and jointly controlled entities are carried at cost less accumulated impairment losses, if any as per Ind As 27. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investments in subsidiaries, and jointly controlled entities the difference between net disposal proceeds and the carrying amounts are recognized in the Statement of Profit and Loss.
6 Inventories
(i) Raw Materials, Traded Goods, Stores & spares, Fuel, Packing and Packaging Materials (Including in Transit) are valued at cost or net realizable value whichever is lower The cost includes the purchase price, freight inwards and other expenditure directly attributable to the acquisition and is net of trade discounts and rebates as well as Tax benefit available, if any.
(ii) Finished goods (including in Transit) are valued at cost or net realizable value whichever is lower. Cost includes appropriate allocation of overheads based on normal operating capacity
(iii) Cost is arrived at on First-in-First-out basis in case of Traded goods and on moving Weighted average basis in case of other items of inventories.
7 Cash & Cash Equivalents
Cash and cash equivalents includes cash on hand , balances with banks in current accounts, and cheques/drafts on hand.
8 Assets held for Sale
Non-current assets or disposal groups comprising of assets and liabilities are classified as 'held for sale’ when all of the following criteria’s are met:
(i) decision has been made to sell;
(ii) the assets are available for immediate sale in its present condition;
(iii) the assets are being actively marketed and
(iv) sale has been agreed or is expected to be concluded within 12 months of the Balance Sheet date.
Subsequently, such non-current assets and disposal groups classified as held for sale are measured at the lower of its carrying value and fair value less costs to sell. Non-current assets held for sale are not depreciated or amortised.
9 Financial Assets :
(i) Initial recognition and measurement
Financial assets are recognised when the Company becomes a party to the contractual provisions of the instrument.
On initial recognition, a financial asset is recognised at fair value, in case of Financial assets which are recognised at fair value through profit and loss (FVTPL), its transaction cost is recognised in the statement of profit and loss. In other cases, the transaction cost is attributed to the acquisition value of the financial asset.
(ii) Subsequent measurement
Financial assets are subsequently classified and measured at
(i) Amortised Cost
(ii) fair Value through profit & Loss ( FVTPL)
(iii) fair Value through other comprehensive income (FVOCI)
Financial assets are not reclassified subsequent to their recognition, except if and in the period the Company changes its business model for managing financial assets."
(iii) Trade Receivables and Loans
Trade receivables are initially recognised at fair value. Subsequently, these assets are held at amortised cost, using the effective interest rate (EIR) method net of any expected credit losses. The EIR is the rate that discounts estimated future cash income through the expected life of financial instrument.
(iv) Debt Instruments
Debt instruments are initially measured at amortised cost, fair value through other comprehensive income ('FVOCI’) or fair value through profit or loss ('FVTPL’) till derecognition on the basis of
(i) the Company’s business model for managing the financial assets and
(ii) the contractual cash flow characteristics of the financial asset.
(a) Measured at amortised cost:
Financial assets that are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows that are solely payments of principal and interest, are subsequently measured at amortised cost using the effective interest rate ('EIR’) method less impairment, if any The amortisation of EIR and loss arising from impairment, if any is recognised in the Statement of Profit and Loss.
(b) Measured at fair value through other comprehensive income:
Financial assets that are held within a business model whose objective is achieved by both, selling financial assets and collecting contractual cash flows that are solely payments of principal and interest, are subsequently measured at fair value through other comprehensive income. Fair value movements are recognized in the other comprehensive income (OCI). Interest income measured using the EIR method and impairment losses, if any are recognised in the Statement of Profit and Loss. On derecognition, cumulative gain or loss previously recognised in OCI is reclassified from the equity to 'Other Income’ in the Statement of Profit and Loss."
(c) Measured at fair value through profit or loss:
A financial asset not classified as either amortised cost or FVOCI, is classified as FVTPL. Such financial assets are measured at fair value with all changes in fair value, including interest income and dividend income if any recognised as 'Other Income’ in the Statement of Profit and Loss.
(v) Equity Instruments and Mutual Fund
All investments in equity instruments classified under financial assets are initially measured at fair value, the Company may on initial recognition, irrevocably elect to measure the same either at FVOCI or FVTPL.
The Company makes such election on an instrument-by-instrument basis. Fair value changes on an equity instrument is recognised as other income in the Statement of Profit and Loss unless the Company has elected to measure such instrument at FVOCI. Fair value changes excluding dividends, on an equity instrument measured at FVOCI are recognized in OCI. Amounts recognised in OCI are not subsequently reclassified to the Statement of Profit and Loss. Dividend income on the investments in equity instruments are recognised as 'other income’ in the Statement of Profit and Loss.
(vi) Derecognition
The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the contractual rights to receive the cash flows from the asset.
(vii) Impairment of Financial Asset
Expected credit losses are recognized for all debt instruments subsequent to initial recognition other than financials assets in FVTPL category.
For financial assets other than trade receivables, as per Ind AS 109, the Company recognises 12 month expected credit losses for all originated or acquired financial assets if at the reporting date the credit risk of the financial asset has not increased significantly since its initial recognition. The expected credit losses are measured as lifetime expected credit losses if the credit risk on financial asset increases significantly since its initial recognition. The Company’s trade receivables do not contain
significant financing component and loss allowance on trade receivables is measured at an amount equal to life time expected losses i.e. expected cash shortfall.
The impairment losses and reversals are recognised in Statement of Profit and Loss.
10 Financial Liabilities :
(i) Initial recognition and measurement
Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument. Financial liabilities are initially measured at the amortised cost unless at initial recognition, they are classified as fair value through profit and loss. In case of trade payables, they are initially recognised at fair value and subsequently these liabilities are held at amortised cost, using the effective interest method.
(ii) Subsequent measurement
Financial liabilities are subsequently measured at amortised cost using the EIR method. Financial liabilities carried at fair value through profit or loss are measured at fair value with all changes in fair value recognised in the Statement of Profit and Loss.
(iii) Financial guarantee contracts
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind-AS 109 and the amount recognised less cumulative amortisation.
(iv) Derecognition
A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expires.
11 Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously
12 Derivative financial instruments
The Company uses derivative financial instruments suchas forward currency contracts to hedge its foreigncurrencyrisks. Such derivative financial instruments are initially recognisedat fair value onthe date onwhich a derivative contract is entered into and are subsequently remeasured at fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivativeisdesignatedasahedginginstrument,andifso,thenatureofitembeinghedgedandthetypeofhedgerelationshipdesignated. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
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