2. SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PREPARATION
The accompanying financial statements are
prepared in compliance with the requirements under
Section 133 of the Companies Act, 2013 ("the Act"),
read with Rule 7 of the Companies (Accounts) Rules,
2014 and Companies (Accounting Standard
Amendment Rules, 2016) and other Generally
Accepted Accounting Principles ("GAAP") in India,
under the historical cost convention, on the accrual
basis of accounting.
All the assets and liabilities have been classified as
current or non-current as per Company's normal
operating cycle and other criteria set out in the
Schedule III to the Companies Act, 2013. Based on the
nature of activities, the Company has ascertained its
operating cycle as 12 months for the purpose of
current and non-current classification of assets and
liabilities.
B. USE OF ESTIMATES
The preparation of financial statements in
conformity with the generally accepted accounting
principles requires the Management to make
estimates and assumptions that affects the reported
balances of assets and liabilities and disclosures
relating to the contingent assets and liabilities at the
date of financial statements and the reported
amount of income and expenses during the year.
Current / Non-current classification
Assets
An asset is classified as current when it satisfies any
of the following criteria:
(a) it is expected to be realised in, or is intended for
sale or consumption in the entity's normal
operating cycle;
(b) it is held primarily for the purpose of being traded;
(c) it is expected to be realised within twelve months
after the balance sheet date; or
(d) it is cash or a cash equivalent unless it is
restricted from being exchanged or used to settle
a liability for atleast twelve months after the
balance sheet date.
(i) Current assets include the current portion of
non-current assets
(ii) All other assets are classified as non-current.
Liabilities
A liability is classified as current when it satisfies any
of the following criteria:
(a) it is expected to be settled in the entity's normal
operating cycle;
(b) it is held primarily for the purpose of being traded;
(c) it is due to be settled within twelve months after
the balance sheet date; or
(d) the Company does not have an unconditional right
to defer settlement of the liability for at least 12
months after the reporting date. Terms of a
liability that could, at the option of the
counterparty, result in its settlement by the issue
of equity instruments do not affect its
classification.
(i) Current liabilities include current portion of
non-current liabilities.
(ii) All other liabilities are classified as non¬
current.
Operating Cycle
Operating cycle is the time between the acquisition
of assets for processing and their realisation in cash
or cash equivalents.
C. INVESTMENTS
Non-Current/ Long-term Investments are stated at
cost. Provision is made for diminution in the value of
the investments, if, in the opinion of the
management, the same is considered to be other
than temporary in nature. On disposal of an
investment, the difference between its carrying
amount and net disposal proceeds is charged or
credited to the Statement of Profit and Loss.
Current investments are carried at lower of cost and
fair value determined on an individual basis. On
disposal of an investment, the difference between its
carrying amount and net disposal proceeds is
charged or credited to the Statement of Profit and
Loss.
D. REVENUE RECOGNISATION
(a) Revenue from sale of goods is recognized when
significant risk and rewards of ownership of the
goods have been passed to the buyer and it is
reasonable to expect ultimate collection. Sale of
goods is recognized net of GST and other taxes as
the same is recovered from customers and passed
on to the government.
(b) Interest is recognized on a time proportion basis
taking into account the amount outstanding and
the rate applicable.
(c) Income from export entitlement is recognized as
on accrual basis.
E. FOREIGN CURRENCY TRANSACTION
(a) Initial recognition - Transactions in foreign
currency are accounted for at exchange rates
prevailing on the date of the transaction.
(b) Measurement of foreign currency monetary items
at Balance Sheet date
Foreign currency monetary items (other than
derivative contracts) as at Balance Sheet date are
restated at the year end conversion rate of
currency.
(c) Exchange difference - Exchange differences
arising on settlement of monetary items are
recognized as income or expense in the period in
which they arise.
Exchange difference arising of foreign currency
monetary items as at the year End being
difference between exchange rate prevailing on
initial recognition transactions is adjusted in
statement of Profit & Loss for the respective year.
F. Depreciation And Amortization
Depreciation on fixed assets provided on the written
down value method at the rates provided in schedule
II of Companies act, 2013 on pro-rata basis.
G. PROPERTY, PLANT AND EQUIPMENT
Tangible Assets: The tangible items of property,
plant and equipment are carried at cost less
accumulated depreciation and accumulated
impairment losses, if any, using the cost model as
prescribed under Accounting Standard, AS-10
"Property, Plant & Equipment". Cost of an item of
property, plant and equipment comprises of the
purchase price, including import duties, if any, non¬
refundable purchase taxes, after deducting trade
discounts and rebates, and costs that are directly
attributable to bringing the asset to the location and
condition necessary for it to be capable of operating
in the manner intended by management.
H. INVENTORIES
Raw materials are carried at the lower of cost and net
realisable value. Cost is determined on a weighted
average basis. Purchased goods-in-transit are
carried at cost. Work-in-progress is carried at the
lower of cost and net realisable value. Stores and
spare parts are carried at lower of cost and net
realisable value. Finished goods produced or
purchased by the Company are carried at lower of
cost and net realisable value. Cost includes direct
material and labour cost and a proportion of
manufacturing overheads.
Inventories of traded goods are valued at lower of
cost and net realizable value. Cost comprises of all
cost of purchases and other cost incurred in bringing
the inventories to their present location and
condition, cost formula used in FIFO.Net Realisable
value is the estimated selling price in ordinary course
of business less estimated cost necessary to make
the sale.
I. IMPAIRMENT OF ASSETS
Assessment is done at each Balance Sheet date as to
whether there is any indication that a tangible asset
might be impaired.
J. EMPLOYEE BENEFITS
(i) Short-term employee benefits
Short term employee benefits are recognized as
an expense at the undiscounted amount in the
statement of Profit and loss for the year which
includes benefits like salary, wages, bonus and are
recognized as expenses in the period in which the
employee renders the related service.
(ii) Post-Employment benefits
Defined Contribution Plan:
The Company has Defined Contribution Plans for
Post-employment benefits in the form of
Provident Fund for all employees which are
administered by Regional Provident Fund
Commissioner. Provident Fund and Employee
State Insurance are classified as defined
contribution plans as the Company has no further
obligation beyond making the contributions. The
Company's contributions to Defined Contribution
plans are charged to the Statement of Profit and
Loss as and when incurred.
Defined benefit Plans:
Unfunded Plan the Company has a defined benefit
plan for post-employment benefit in the form of
Gratuity.
Liability for the above defined benefit plan is
provided on the basis of valuation, as at the
Balance Sheet date, carried out by an
independent actuary. The actuarial method used
for measuring the liability is the Projected Unit
Credit method.
K. BORROWING COSTS
Borrowing costs are interest, commitment charges
and other costs incurred by an enterprise in
connection with Short Term/ Long-Term borrowing
of funds. Borrowing cost directly attributable to
acquisition or construction of qualifying assets are
capitalized as a part of the cost of the assets, up to
the date the asset is ready for its intended use. All
other borrowing costs are recognized in the
Statement of Profit and Loss in the year in which
they are incurred.
L. EARNING PER SHARE
The earnings in ascertaining the Company's EPS
comprises the net profit after tax attributable to
equity shareholders and includes the post-tax effect
of any extraordinary items. The number of shares
used in computing basic EPS is the weighted average
number of shares outstanding during the year.
Diluted earnings per share is computed by dividing
the profit/(loss) after tax attributable to Equity
Shareholders (including the post-tax effect of extra
ordinary items, if any) as adjusted for dividend,
interest and other charges to expense or income
relating to the dilutive potential equity shares, by the
weighted average number of equity shares which
could have been issued on conversion of all dilutive
potential equity shares. Potential equity shares are
deemed to be dilutive only if their conversion to
equity shares would decrease the net profit per share
from continuing ordinary operations. Potential
dilutive equity shares are deemed to be converted as
at the beginning of the period, unless they have been
issued at a later date. Dilutive potential equity shares
are determined independently for each period.
M. TAXATION
Tax expense for the year comprising current tax &
deferred tax are considered in determining the net
profit for the year. Provision is made for current tax
based on tax liability computed in accordance with
relevant tax laws applicable to the Company.
Provision is made for deferred tax for timing
difference arising between taxable incomes &
accounting income at currently enacted or
substantively enacted tax rates, as the case may be.
Deferred tax assets (other than in situation of
unabsorbed depreciation and carry forward losses)
are recognized only if there is reasonable certainty
that they will be realized and are reviewed for the
appropriateness of their respective carrying values
at each Balance Sheet date. Deferred tax assets, in
situation of unabsorbed depreciation and carry
forward losses under tax laws are recognized only to
the extent that where is virtual certainty supported
by convincing evidence that sufficient future taxable
income will be available against which such deferred
tax assets can be recognized. Deferred Tax Assets
and Deferred Tax Liability are been offset wherever
the Company has a legally enforceable right to set off
current tax assets against current tax liability and
where the Deferred Tax Asset and Deferred Tax
Liability relate to Income taxes is levied by the same
taxation authority.
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