Material Accounting Policy Information
Pursuant to the Companies (Indian Accounting Standards) Amendment Rules, 2023 effective 01-04-2023, the
company is required to disclose ‘material accounting policy Information’ in lieu of the earlier requirement of
disclosing ‘significant accounting policies.
All accounting policies followed by the company are in accordance with the Indian Accounting Standards
(Ind AS) notified u/s 133 of the Companies Act, 2013 read with the Companies (Indian Accounting
Standards) Rules, 2015 and conform to Schedule III to the Companies Act, 2013 as applicable.
Specific disclosure of material accounting policy information where Ind AS permits options is made
hereunder:
The company has assessed the materiality of the accounting policy information, which involves exercising
judgement and considering both quantitative and qualitative factors by taking into account not only the size
and nature of the item or condition but also the characteristics of the transactions, events or conditions that
could make the information more likely to impact the decisions of the users of the financial statements.
a) Current vs non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification.
An asset is classified as current when it is:
(a) Expected to be realized or intended to be sold or consumed in normal operating cycle;
(b) expected to be realized within twelve months after the reporting period; or
(c) cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least
twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
(a) expected to be settled in normal operating cycle;
(b) due to be settled within twelve months after the reporting period; or
(c) there is no unconditional right to defer the settlement of the liability for at least twelve months after the
reporting period.
All other liabilities are classified as non-current.
b) Property, plant and equipment
Recognition and initial measurement
Property, plant and equipment are stated at their cost of acquisition. The cost comprises purchase price,
borrowing cost if capitalisation criteria are met and directly attributable cost of bringing the asset to its
working condition for the intended use. Any trade discount and rebates are deducted on arriving at the
purchase price. 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 repair and maintenance costs are
recognised in the statement of profit and loss.
Pursuant to the requirements under schedule II of the Company Act 2013, the company has identified the cost
of each component of the assets on the basis of its technical expertise and no component had a cost which is
significant to the total cost of the assets and has useful life materially different from that of the remaining
asset.
Subsequent measurement (depreciation method, useful lives and residual value)
Property, plant and equipment are subsequently measured at cost less accumulated depreciation and
impairment losses. Depreciation on property, plant and equipment is provided on the straight-line method
over the useful life of the assets as prescribed under Part ‘C’ of Schedule II of the Companies Act, 2013.
Asset class Useful life
Building 60 years
Plant and machinery 15 years
Office equipment 5 years
Computer equipment 3 years
Furniture and fixtures 10 years
Vehicles 8-10 years
Depreciation is calculated on a pro-rata basis from the date on which the asset is ready for use or till the date
the asset is sold or disposed. The residual values, useful lives and method of depreciation are reviewed at the
end of each financial year.
De-recognition
An item of property, plant and equipment and any significant part initially recognised is de-recognised upon
disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising
on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying
amount of the asset) is recognised in the statement of profit and loss, when the asset is de-recognised.
Capital work-in-progress
Capital work-in-progress is carried out at cost, comprising direct cost and related incidental expenses acquire
property, plant and equipment. Assets which are not ready to be intended use are also shown under capital
work-in-progress.
c) Intangible assets
Recognition and initial measurement
Intangible assets are stated at their cost of acquisition. The cost comprises purchase price including any import
duties and other taxes (other than those subsequently recoverable from taxation authorities), borrowing cost if
capitalisation criteria are met and directly attributable cost of bringing the asset to its working condition for
the intended use.
Subsequent measurement (amortisation method, useful lives and residual value)
Intangible assets are amortised over a period of 3 years from the date when the assets are available for use.
The estimated useful life (amortisation period) of the intangible assets is arrived basis the expected pattern of
consumption of economic benefits and is reviewed at the end of each financial year and the amortisation
period is revised to reflect the changed pattern, if any.
d) Revenue recognition
Interest income on loans
Interest income is recorded on an accrual basis using the effective interest rate (EIR) method. Additional
interest/overdue interest/ penal charges, if any, are recognised only when it is reasonable certain that the
ultimate collection will be made.
Fees and Commission income
Income from business correspondent services is recognised as and when the services are rendered as per
agreed terms and conditions of the contract.
Dividend income
Dividend income is recognised at the time when the right to receive is established by the reporting date.
Miscellaneous income
All other income is recognised on an accrual basis when there is certainty in the ultimate realization
/collection.
e) Finance costs
Finance costs include interest expense computed by applying the effective interest rate on respective financial
instruments measured at amortised cost. Finance costs are charged to the Statement of profit and loss.
f) Borrowing costs
Borrowing costs that are directly attributable to the acquisition and/or construction of a qualifying asset, till
the time such qualifying assets become ready for its intended use, are capitalised. Borrowing cost consists of
interest and other costs that the Company incurred in connection with the borrowing of funds. A qualifying
asset is one that necessarily takes a substantial period of time to get ready for its intended use. All other
borrowing costs are charged to the Statement of Profit and Loss as incurred basis the effective interest rate
method.
g) Taxation
Tax expense recognised in Statement of Profit and Loss comprises the sum of deferred tax and current tax
except to the extent it recognised in other comprehensive income or directly in equity.
Current tax comprises the tax payable or receivable on taxable income or loss for the year and any adjustment
to the tax payable or receivable in respect of previous years. Current tax is computed in accordance with
relevant tax regulations. The amount of current tax payable or receivable is the best estimate of the tax amount
expected to be paid or received after considering uncertainty related to income taxes, if any. Current tax
relating to items recognised outside profit or loss is recognised outside profit or loss (either in other
comprehensive income or in equity).
Current tax assets and liabilities are offset only if there is a legally enforceable right to set off the recognised
amounts, and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
Deferred tax is recognised in respect of temporary differences between carrying amount of assets and
liabilities for financial reporting purposes and corresponding amount used for taxation purposes. Deferred tax
assets are recognised on unused tax loss, unused tax credits and deductible temporary differences to the extent
it is probable that the future taxable profits will be available against which they can be used. This is assessed
based on the Company’s forecast of future operating results, adjusted for significant non-taxable income and
expenses and specific limits on the use of any unused tax loss. Unrecognised deferred tax assets are reassessed
at each reporting date and are recognised to the extent that it has become probable that future taxable profits
will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the
asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date. The measurement of deferred tax reflects the tax consequences
that would follow from the manner in which the Company expects, at the reporting date, to recover or settle
the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset only if there is a
legally enforceable right to set off the recognised amounts, and it is intended to realise the asset and settle the
liability on a net basis or simultaneously. Deferred tax relating to items recognised outside statement of profit
and loss is recognised outside statement of profit or loss (either in other comprehensive income or in equity).
h) Employee benefits
Short-term employee benefits
Short-term employee benefits including salaries, short term compensated absences (such as a paid annual
leave) where the absences are expected to occur within twelve months after the end of the period in which the
employees render the related service, profit sharing and bonuses payable within twelve months after the end
of the period in which the employees render the related services and non-monetary benefits for current
employees are estimated and measured on an undiscounted basis.
i) Impairment of non-financial assets
At each reporting date, the Company assesses whether there is any indication that an asset may be impaired. If
any such indication exists, the Company estimates the recoverable amount of the asset. A recoverable amount
is higher of an asset’s net selling price and its value in use. If such recoverable amount of the asset or the
recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the
carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is
recognised in the Statement of Profit and Loss. If at the reporting date there is an indication that if a
previously assessed impairment loss no longer exists, the recoverable amount is reassessed, and the asset is
reflected at the recoverable amount.
Compensation for impairment
Compensation from third parties for items of property, plant and equipment that were impaired, lost or given
up are recognised in the statement of profit and loss when the compensation becomes receivable.
j) Impairment of financial assets
Loan assets.
The Company follows a ‘three-stage’ model for impairment based on changes in credit quality since initial
recognition as summarised below:
• Stage 1 (1-30 days) includes loan assets that have not had a significant increase in credit risk since
initial recognition or that have low credit risk at the reporting date.
• Stage 2 (31-60 days) includes loan assets that have had a significant increase in credit risk since initial
recognition but that do not have objective evidence of impairment.
• Stage 3 (more than 90 days) includes loan assets that have objective evidence of impairment at the
reporting date.
The Expected Credit Loss (ECL) is measured at 12-month ECL for Stage 1 loan assets and at lifetime ECL for
Stage 2 and Stage 3 loan assets. ECL is the product of the Probability of Default, Exposure at Default and
Loss Given Default, defined as follows:
Probability of Default (PD)
The PD represents the likelihood of a borrower defaulting on its financial obligation, either over the next 12
months (12 months PD), or over the remaining lifetime (Lifetime PD) of the obligation.
Loss Given Default (LGD)
LGD represents the Company’s expectation of the extent of loss on a defaulted exposure. LGD varies by type
of counterparty, type and preference of claim and availability of collateral or other credit support.
Exposure at Default (EAD)
EAD is based on the amounts the Company expects to be owed at the time of default.
Forward-looking economic information (including management overlay) is included in determining the 12-
month and lifetime PD, EAD and LGD. The assumptions underlying the expected credit loss are monitored
and reviewed on an ongoing basis.
Trade receivables
In respect of trade receivables, the Company applies the simplified approach of Ind AS 109, which requires
measurement of loss allowance at an amount equal to lifetime expected credit losses. Lifetime expected credit
losses are the expected credit losses that result from all possible default events over the expected life of trade
receivables.
Other financial assets
In respect of its other financial assets, the Company assesses if the credit risk on those financial assets has
increased significantly since initial recognition. If the credit risk has not increased significantly since initial
recognition, the Company measures the loss allowance at an amount equal to 12-month expected credit losses,
else at an amount equal to the lifetime expected credit losses.
When making this assessment, the Company uses the change in the risk of a default occurring over the
expected life of the financial asset. To make that assessment, the Company compares the risk of a default
occurring on the financial asset as at the balance sheet date with the risk of a default occurring on the financial
asset as at the date of initial recognition and considers reasonable and supportable information, that is
available without undue cost or effort, that is indicative of significant increases in credit risk since initial
recognition. The Company assumes that the credit risk on a financial asset has not increased significantly
since initial recognition if the financial asset is determined to have low credit risk at the balance sheet date.
Write-offs
Financial assets are written off either partially or in their entirety to the extent that there is no realistic
prospect of recovery. Any subsequent recoveries are credited to impairment on financial instrument on
statement of profit and loss.
k) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand (including imprest), demand deposits and short-term highly
liquid investments (certificate of deposits and commercial paper) that are readily convertible into known
amount of cash and which are subject to an insignificant risk of changes in value. The Company has netted off
the balance of bank overdraft with cash and cash equivalents for cash flow statement.
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