1.2 MATERIAL ACCOUNTING POLICIES FOLLOWED BY THE COMPANY
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all theyears presented, unless otherwise stated.
A] Basisfor preparation:
i. Compliance with Ind AS
These financial statements have been prepared in accordance with the Indian Accounting Standards (hereinafter referred to as the 'Ind AS') as notified by Ministry of Corporate Affairs pursuant to Section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Act.
The financial statements have been prepared on accrual and going concern basis. The accounting policies are applied consistently to all the periods presented in the financial statements. All assets and liabilities have been classified as current or non current as per the Company's normal operating cycle and other criteria as set out in the Division II of Schedule III to the Companies Act, 2013. Based on the nature of products and the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.
ii. Basis of measurement
The financial statements have been prepared on an accrual basis and in accordance with the historical cost convention except:
a) Certain financial assets that are measured at fairvalue.
b) Defined benefit plans measured at fair value.
B] Use of Judgments and Estimates
The estimates and judgements used in the preparation of financial statements are continuously evaluated by the company and are based on historical experience and various other assumptions and factors that were reasonable under the circumstances. Difference between the actual results and estimates are recognized in the period in which the results are known /materialized.
C] Functional and Presentation Currency
The functional and presentation currency of the company is the Indian Rupees (INR).
D] Foreign Currency Transaction
The transactions in foreign currencies are recorded at the rate prevailing on the date of the transaction. Monetary items denominated in foreign currency are restated at the rate prevailing on the balance sheet date. Exchange gains/ losses on settlement and on conversion of monetary items denominated in foreign currency are dealt with in the profit and loss account.
E] Property, Plant and Equipment
Property, plant and equipment is stated at acquisition cost net of accumulated depreciation and accumulated impairment losses, if any. Cost includes expenditure that is directly attributable to the acquisition and installation of the assets. 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 cost are charged to the Statement of Profit and Loss during the period in which they are incurred.
F] Depreciation methods, estimated useful lives and residual value
Depreciation on property, plant and equipment has been provided on useful life of the assets as prescribed in the Schedule II to the Companies Act, 2013. Assets which are purchased, sold or scrapped during the year, depreciation has been provided on pro-rata basis. The estimated useful life of items of Property, Plant & Equipments are as follows:
The residual values and useful lives of Property, Plant & Equipments are reviewed at each financial year and adjusted prospectively.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the Statement of Profit & Loss.
G] Financial Instruments
Initial recognition and measurement:
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value.
(1) Financial Assets:
The company classifies its financial assets as
follows:
a) Financial Assets at amortised cost: Assets that are held for collection of contractual cash flows where these cash flows represent solely payments of principal and interest are measured at amortised cost.
Financial assets are measured initially at fair value and subsequently carried at amortised cost using the effective interest method. Financial assets at amortised cost are represented by security deposits with others.
b) Fair value of current assets such as trade receivables, cash and cash equivalents
approximate their carrying amounts largely due to short term maturities.
(2) Financial Liabilities:
Fair value of current liabilities such as trade payables, borrowings and other financial liabilities approximate their carrying amounts due to short term maturities.
H] Inventories
Inventories of raw materials, work in progress, stores and spares, finished goods and stock in trade are stated at the lower of cost or net realizable value. Cost is determined on the basis of FIFO method. The cost comprises all cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition.
I] Cash & Cash Equivalents:
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash in hand. Credit balance in bank accounts, other short term highly liquid investments with original maturities of three months that are readily convertible to known amounts of cash and which are subject to an insignificant riskof changes in value.
J] Employee Benefits
a. Short Term Benefits:
Liabilities for wages and salaries benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled.
b. Defined Contribution Plans:
Payments to defined contribution plan viz. government administered provident funds and ESIC are recognized as an expense when employees have rendered service entitling them to contributions.
c. Post Employment/Termination Benefits:
Company has established a separate fund with Life Insurance Corporation of India. Liability on these benefits is calculated and provided based on actuarial valuation provided by independent actuary using "Projected unit credit" method.
K] Borrowing Cost
Borrowing cost that is attributable to the acquisition or construction of qualifying assets is capitalized as part of the cost of such assets. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use. All other borrowing cost is recognized as an expense in the period in which they are incurred.
L] Income tax
a) Current tax:
Current tax is measured at the amount of tax expected to be payable on the taxable income for the year as determined in accordance with the provisions of the Income Tax Act, 1961.Tax payable is calculated using the tax rates that have been enacted by the end of the reporting period.
b) Deferred Tax:
Deferred tax is recognized using the balance sheet approach on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting on the reporting date.
Deferred tax are recognized to the extent it is probable that taxable profit will be available against which the deductible differences against which the temporary differences and losses will be adjusted. Tax rate used to compute the tax is those that have been enacted by the end of the reporting period.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available.
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.
M] Revenue Recognition
The Company derives revenue primarily from sale of manufactured and traded goods. The Company recognises revenue on the basis of Ind AS 115 -'Revenue from contracts with customers' which establishes a comprehensive framework for
determining whether, how much and when revenue is to be recognized.
Revenue from sale of goods is recognized when control of the products being sold is transferred to our customer and when there are no longer any unfulfilled obligations.
The Performance Obligations in our contracts are fulfilled at the time of dispatch or delivery.
Revenue is measured at fair value of consideration received or receivable, after deduction of any trade discounts, volume rebates and any taxes or duties collected on behalf of the government such as goods and service tax etc. Revenue is only recognized to the extent that it is highly probable a significant reversal will not occur.
Interest income is recognised on accrual basis or by using the effective interest method, wherever applicable.
N] Earningpershare
The company presents Basic and Diluted earnings per share data for its equity shares. Basic and diluted earnings per share are calculated by dividing the profit or loss attributable to equity shareholders of the company by the weighted average number of equity shares outstanding during the year.
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