2 Material accounting policies
A Basis of Preparation of financial statements
The financial statements have been prepared to comply, in all material respects with the notified accounting standards under
Section 133 of the Companies Act, 2013 (‘the Act’). The financial statements are prepared in accordance with Indian Accounting
Standards (referred to as “Ind AS”) as applicable for the relevant year, under the historical cost convention on an accrual basis,
except for certain financial instruments which are measured at fair values at the end of each reporting year as explained in the
accounting policies below:
The material accounting policies are consistently applied by the Company except where a revision to an existing accounting
standard requires a change in the accounting policy hitherto in use.
B Use of Estimates:
The preparation of financial statements in conformity with Ind AS requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial
statements and the results of operations during the reporting year end. Difference between the actual results and estimates are
recognised in the year in which the results materialise.
C Property Plant and Equipment (PPE) & Investment Property:
(i) Tangible Assets
Property,Plant and Equipment (PPE) are stated at cost less accumulated depreciation and impairment losses, if any. Cost
comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use.
Borrowing costs relating to acquisition of PPE which takes substantial period of time to get ready for its intended use are
also included to the extent they relate to the period till such assets are ready to be put to use. Improvement to PPE which
has the effect of increasing the future benefits from the existing assets beyond their previously assessed standard of
performance is included in the gross block.
Tangible assets not ready for the intended use on the date of the Balance Sheet are disclosed as “ capital work in progress”.
Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all its property, plant and equipment
recognised as at 1 April, 2016 measured as per the previous GAAP and use that carrying value as the deemed cost of the
property, plant and equipment.
(ii) Intangible assets
Intangible assets are recognised when it is probable that the future economic benefits that are attributable to the assets will
flow to the Company and the cost of the assets can be measured reliably.
Intangible assets are stated at original cost less accumulated amortization and impairment losses, if any
(iii) Investment property
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.
Though the company measures investment property using cost based measurement, the fair value of investment property
is disclosed in the notes. Fair values are determined based on an annual evaluation performed by an accredited external
independent registered valuer / on the basis of ready reckoner rate (circle rate).
D Depreciation and amortization
Depreciation on PPE except buildings and plant and equipments is provided on the written down value basis at the rates
derived, based on the useful life of the assets as specified in Schedule II to the Companies Act, 2013.
Depreciation on buildings and plant and equipment is provided on straight line basis at the rates as derived, based the useful
life of the assets as specified in Schedule II to the Companies Act, 2013.
Leasehold land is amortised on a straight line basis over the unexpired period of the respective lease.
Intangible assets being software licenses are amortized on straight line basis over their estimated useful life.
E Financial Instruments
(i) Initial recognition
Financial assets and financial liabilities are recognised in the Company’s statement of financial position when the Company
becomes a party to the contractual provisions of the instrument. The Company determines the classification of its financial
assets and liabilities at initial recognition. All financial assets and liabilities are initially recognised at fair value plus directly
attributable transaction costs, in case of financial assets and liabilities not at fair value through statement of profit and loss.
Financial assets and liabilities carried at fair value through statement of profit and loss are initially recognised at fair value,
and transaction costs are expensed in the income statement. However, trade recivables that do not contain significant
financing component are measured at transaction price.
(ii) Subsequent Measurement
a) Financial assets carried at amortized cost
A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is to
hold the asset in order to collect contractual cash flows, and the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
b) Financial assets carried at fair value through other comprehensive income
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a
business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and
the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payment of
principal and interest on the principal amount outstanding. Further, in cases where the company has made an irrevocable
election, based, on its business model, for its investments which are classified as equity instruments, the subsequent
changes in fair value are recognised in other comprehensive income.
c) Financial assets carried at fair value through profit and loss
A financial asset which is not classified in any of the above categories is subsequently fair valued through profit and
loss.
d) Financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest method. For trade and other
payables maturing within one year from the Balance sheet date, the carrying amount approximates fair value due to
the short maturity of these instruments.
e) Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of
its liabilities. Equity instruments issued by the Company are recognized at the proceeds received.
f) Investment in subsidiaries
Investment in subsidiaries is carried at cost in the financial statements.
(iii) Derecognition of financial instruments
The company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire
or it transfers the financial asset and the transfer qualifies for derecognition under Ind AS 109. A financial liability (or a part
of financial liability) is derecognized from the Company’s Balance Sheet when the obligation specified in the contract is
discharged or cancelled or expires.
(iv) Fair value of financial instruments
In determining the fair value of its financial instruments, the Company uses a variety of methods and assumptions that are
based on market conditions and risks existing at each reporting date. The method used to determine fair value include
available quoted market prices and discounted cash flow analysis. All methods of assessing fair value result in general
approximation of value, and such value may never actually be realized.
For financial assets and liabilities maturing within one year from the Balance Sheet date and which are not carried at fair
value, the carrying amounts approximates fair value due to the short maturity of these instruments.
F Inventories
Stock in Trade and Goods in transit are valued at cost or estimated realizable value whichever is lower. Cost of inventories also
include all other costs incurred in bringing the inventories to their present location and condition. Net realisable value is the
estimated selling price in the ordinary course of business less estimated costs necessary to make the sale.
Slow moving, damaged, unsalable or obsolete inventories are identified at the each reporting date on the basis of technical
evaluation by the management and valued at estimated realizable value.
G Revenue from contract with customers
(i) Sale of products
Revenue from contract with customers is recognised when the Company satisfies performance obligation by transferring
promised goods and services to the customer. Performance obligations are said to be satisfied at a point of time when the
customer obtains control of the goods.
Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price (net of variable
consideration) allocated to that performance obligation. The transaction price of goods sold and services rendered is net of
variable consideration on account of variable discounts and schemes offered by the Company as part of the contract.
(ii) Other operating revenue
Other operational revenue represents income earned from activities incidental to the business and is recognised when
right to receive the income is established.
(iii) Other Income
Interest income from a financial asset is recognized using the effective interest rate.
Dividend income is recognised in the year in which the right to receive the same is established.
H Trade Receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business.
Trade receivables are measured at their transaction price on initial recognition and are subsequently measured at amortised
cost less loss/ allowance.
I Purchases
Purchases are recognised net of incentive and commission received from suppliers and adjusted for claims rejected. Incentive
and commission from suppliers are recognised when no significant uncertainty exists regarding their collectability.
J Trade and other payables
These amounts represent undischarged liabilities for goods and services provided to the Company prior to the end of financial
year. The amounts are unsecured and are usually paid in accordance with the terms with the vendors. Trade and other payables
are presented as current liabilities unless payment is not due within 12 months after the end of the reporting period. They are
recognised initially at their fair value and subsequently measured at amortized cost using the effective interest method.
K Functional currency
The functional currency of the Company is the Indian Rupee and these financial statements are presented in Indian rupees
(rounded off to lakhs).
L Employee benefits
(i) Short term employee benefits :
All employee benefits due wholly within twelve months of rendering of services are classified as short term employee
benefits. Benefits like salaries, wages, leave salary, contribution to Provident Fund/ Employee State Insurance contributions
etc. paid or payable during the reporting year and the expected bonus expense are recognised as an expense on an
undiscounted basis in the year in which the employee renders the related service.
(ii) Post -employment benefits
a) Defined Contribution Plan
The State governed Provident Fund Scheme, Employees’ State Insurance Scheme and Employees Pension Scheme
are defined contribution plans. The Company has no obligation, other than the contribution payable to the Provident
Fund Scheme, Employees’ State Insurance Scheme and Employees Pension Scheme. The contribution paid /payable
under the schemes is recognised during the year in which employee renders the related service.
b) Defined Benefit Plan
The liability is provided based on actuarial valuation certified by consulting actuary. The Company recognizes the net
obligation of a defined benefit plan in its balance sheet as an asset or liability.The Company recognizes the service
cost,net interest expense & other expenses related to net defined benefits obligation as an expense in the statement
of profit & loss. Remeasurements comprising of actuarial gains and losses, the effect of the asset ceiling (excluding
amounts included in net interest on the net defined benefit liability) and the return on plan assets (excluding amounts
included in net interest on the net defined benefit liability) relating to retirement benefit plans are recognised in Other
Comprehensive Income which are not reclassified to profit and loss in subsequent years.
The Company’s Gratuity is Defined Benefit Retirement Plan. The Company ‘s liability towards Gratuity is determined
using the Projected Unit Credit Method which recognises each year of service as giving rise to additional unit of
employee benefit entitlement.
In respect of eligible employees including Key Mangement Personnel, the Gratuity scheme is operated through Group
Gratuity Trust Scheme of Life Insurance Corporation of India.
M Income taxes
The accounting treatment followed for taxes on income is to provide for Current Income Tax and Deferred Income Tax. Income
tax expense is recognized in the Statement of Profit and Loss except to the extent that it relates to items recognized directly in
equity, in which case it is recognized in other comprehensive income. Current income tax for current and prior period is the
aggregate amount of income tax determined as payable using the tax rates and tax laws that have been enacted or substantially
enacted by the Balance Sheet date. Deferred Income Tax asset and liability are recognized for all temporary differences arising
between the tax base of assets and liabilities and their carrying amounts in the financial statements except when the deferred
income tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and
affects neither accounting nor taxable profit and loss at the time of the transaction. Deferred Income tax assets are reviewed at
each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted
by the Balance Sheet date and are expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. A deferred tax asset is recognized to the extent that it is probable that future taxable profit
will be available against which the deductible temporary differences and tax losses can be utilized. Deferred tax is not provided
on the undistributed earnings of subsidiaries where it is expected that the earnings of the subsidiary will not be distributed in the
foreseeable future. The company offsets current tax asset and current tax liabilities, where it has a legally enforceable right to
set off the recognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the liability
simultaneously.
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