1. MATERIAL ACCOUNTING POLICIES Statement of compliance
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time and other accounting principles generally accepted in India.
1.1. BasisofPreparation and Measurement:
The financial statements have been prepared on a historical cost basis, except for financial instruments which have been measured at fair value at the end of each reporting period, as explained in the accounting policies mentioned below.
Use of estimates and judgements
The preparation of the financial statements requires that the Management to make estimates andassumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilitiesas at the date of the financial statements and the reported amounts of revenue and expenses during thereporting period. The recognition, measurement, classification or disclosureof an item or informationin the financial statements is made relying on these estimates. The estimates and judgements used in the preparation of the financial statements are continuouslyevaluated by the Company and are based on historical experience and various other assumptions andfactors (including expectations of future events) that the Company believes to be reasonable under theexisting circumstances. Actual results could differ from those estimates.Any revision to accounting estimates is recognised prospectively in current and future periods.
1.2. Current Vs Non-current classifications:
Any asset or liability is classified as current if it satisfies any of the following conditions:
i) The asset/liability is expected to be realised/ settled in the Company’s normal operating cycle.
ii) The asset is intended for sale or consumption.
iii) The asset/liability is held primarily for the purpose of trading.
iv) The asset/liability is expected to be realised/ settled within twelve months after the reporting period.
v) The asset is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting date.
vi) In the case of liability, the Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.
All other assets and liabilities are classified as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities respectively.
1.3.1 Property, Plant and Equipment:
• Measurement at recognition
An item of property, plant and equipment that qualifies as an asset is measured on initial recognition at cost. Followinginitial recognition, items of property, plant and equipment other than land are carried at their cost less accumulated depreciation andaccumulated impairment losses.Freehold land is carried at cost of acquisition.
The cost of an item of property, plant and equipment comprises the purchase price and any cost attributable to bring the asset to its location and working condition for its intended use.Borrowing
costs relating to acquisition of property, plant and equipment which take substantial period of time to get ready for its intended use are also included to the extent they relate to theperiod till such assets are ready to put to use.Items such as spare parts, stand-by equipment and servicing equipment that meet the definition of property, plant andequipment are capitalized at cost and
depreciated over their useful life.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only whenit is probable that future economic benefits associated with the item will flow to the Company and the cost of the itemcan be measured reliably.Costs in nature of repairs and maintenance arerecognized in the Statement of Profit and Loss as and when incurred.
• Capital Work in Progress
Cost of assets not ready for intended use, as on the Balance Sheet date, is shown as capital work in progress. Advancesgiven towards acquisition of fixed assets outstanding at each Balance Sheet date are disclosed as Other Non-Current Assets.
• Depreciation and amortization methods
a) Depreciation is provided on Straight Line Method on the assets over the useful lives specified in Schedule II to the Companies Act, 2013.
b) Depreciation on additions is being provided on pro rata basis from the date of such additions.Depreciation on assets sold, discarded or demolished during the year is being provided up to the date on which suchassets are sold, discarded or demolished.
Impairment
a) Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may notbe recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds itsrecoverable amount. The recoverable amount is the higher of an asset’s fair value less cost of disposal and value in use.For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiablecash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units).
b) Reversal of impairment losses recognized in prioryears is recorded when there is an indicationthat the impairment losses recognized for theasset are no longer existing or have decreased.
• Derecognition
The carrying amount of an item of property, plant and equipment is derecognized on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the Derecognition of an item of property, plantand equipment is measured as the difference between the net disposal proceeds and the carrying amount of the item andis recognized in the
Statement of Profit and Loss when the item is derecognized.
1.3.2 Intangible Assets:
• Computer Software
Computer software ismeasured on initial recognition at cost.Followinginitial recognition, software is carried at its cost less accumulated amortization andaccumulated impairment losses.
• Amortization Methods
The carrying amount of computer software isamortized over the useful life.
• Derecognition
The carrying amount of an intangible asset is derecognized on disposal or when no future economic benefits are expectedfrom its use or disposal. The gain or loss arising from the Derecognition of an intangible asset is measured as the differencebetween the net disposal proceeds and the carrying amount of the intangible asset and is recognized in the Statement ofProfit and Loss when the asset is derecognized.
Leases
The Company assesses whether a contract contains a lease, at the inception of the contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Company as a lessee, The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the site on which it is located, less any lease incentives received. Certain lease arrangements include the option to extend or terminate the lease before the end of the lease term. The right-of-use assets and lease liabilities include these options when it is reasonably certain that the option will be exercised. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain re-measurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.
The lease liability is subsequently measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, or if there is a change in the lease payments or a change in the assessment of an option to purchase the underlying asset. For a lease modification that is not a separate lease, at the effective date of the modification, the lessee accounts for the lease modification by remeasuring the lease liability using a discount rate determined at that date and the lessee makes a corresponding adjustment to the right-of-use asset. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-ofuse asset has been reduced to zero. Lease payments have been classified as financing activities in the Statement of Cash Flow. The Company has elected not to recognise right-ofuse assets and lease liabilities for short term leases that have a lease term of less than or equal to 12 months with no purchase option and assets with low value leases. The Company recognises the lease payments associated with these leases as an expense in statement of profit and loss over the lease term. The related cash flows are classified as operating activities.
Company as a lessor, Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Rental income from operating lease is recognized on a straight-line basis over the term of the relevant lease. Contingent rents are recognized as revenue in the period in which they are earned. Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Company to the lessee. Company didn’t enter into any finance lease agreements.
1.3.3 Cash and cash equivalents:
Cash and cash equivalents include cash on hand and at bank, deposits held at call with banks, with original maturities of three months or less other short term highly liquid investments that are readily convertible to a known amount of cash which are subject to an insignificant risk of changes in value and are held for meeting short-term cash commitments.
1.3.4 Inventories
Inventoriesare valued at the lower cost and net realizable value.
Scrap is valued at Net realizable value.
The cost is computed on First in First Out.
Cost of Stock-in-trade, stores and packing material comprisescost of purchases and includes all other costs incurredin bringing the inventories to their present locationand condition.
Net realizable value is the estimated selling price in theordinary course of business less the
estimated costsof completion and the estimated costs necessary tomake the sale.
Spare parts, stand-by equipment and servicingequipment are recognized in accordance with this IndAS-16 when they meet the definition of Property, Plantand Equipment. Otherwise, such items are classifiedas inventory.
1.3.5 Financial Instruments
A financial instrument is any contract that gives rise toa financial asset of one entity and a financial liability orequity instrument of another entity.
Financial Assets
• Initial recognition and measurement:
All financial assets are recognized initially at fairvalue plus, in the case of financial assets notrecorded at fair value through profit or loss,transaction costs that are attributable to theacquisition of the financial asset. Transactioncosts of financial assets carried at fair valuethrough profit or loss are expensed in statementof profit or loss.
• Subsequent measurement:
For subsequent measurement, the Company classifies its financial assets into the following categories:
(i) Amortized cost
(ii) Fair value through profit and loss (FVTPL)
(iii) Fair value through other comprehensive income (FVTOCI).
a) Financial Asset measured at amortized cost
Financial Assets held within a business model whose objective is to hold financial assets 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 are measured at amortized cost using effective interest rate (EIR) method. The EIR amortization is recognized as finance income in the statement of Profit & Loss.
The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and transaction costs and other premiums or discounts) through the expected life of the financial assets, or where appropriate, a shorter period, to the gross carrying amount on initial recognition.
The company while applying above criteria has classified all the financial assets (except investments in mutual funds) at amortized cost.
b) Financial Asset 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 recognized in the Statement of Profit and Loss. On derecognition, cumulative gain or loss previously recognized in OCI is reclassified from the equity to ‘other income’ in the Statement of Profit and Loss.
The company while applying above criteria has identified that there are no financial assets that can be classified at fair value through other comprehensive income
c) Financial Asset measured at fair value through profit and loss (FVTPL)
Financial Assets are measured at fair value through Profit & Loss if it does not meet the criteria for classification as measured at amortized cost or at FVTOCI. All fair value changes are recognized in the statement of Profit & Loss.
Investments in Mutual funds are classified as financial assets measured at FVTPL.
• Impairment
In accordance with Ind AS 109, the Companyapplies expected credit loss (ECL) model formeasurement and recognition of impairmentloss on the debt instruments, that aremeasured at amortized cost e.g., loans, debtsecurities, deposits, trade receivables and bankbalance.
Expected credit loss is the difference betweenall contractual cash flows that are due to theCompany in accordance with the contract andall the cash flows that the entity expects toreceive.
The management uses a provision matrix todetermine the impairment loss on the portfolioof trade and other receivables. Provision matrices based on its historically observed expectedcredit loss rates over the expected life of thetrade receivables and is adjusted for forwardlooking estimates.
Expected credit loss allowance or reversalrecognized during the period is recognized asincome or expense, as the case may be, in thestatement of profit and loss. In case of balancesheet, it is shown as reduction from the specificfinancial asset.
• Derecognition
The Company derecognizes a financial asset when the contractual rightsto the cash flows from the financial asset expire, or it transfers thecontractual rights to receive the cash flows from the asset.
Financial Liabilities
• Initial Recognition and Measurement
Financial liabilities are recognized initially at fair valueplus any transaction cost that are attributable to theacquisition of the financial liability except financialliabilities at FVTPL that are measured at fair value.
• Subsequent Measurement
a. Financial liabilities at fair valuethrough profit or loss
Financial liabilities at fair value throughprofit or loss include financial liabilitiesheld for trading and financial liabilitiesdesignated upon initial recognition as atfair value through profit or loss. Gain orlosses on liabilities held for trading arerecognized in the profit or loss.The Company doesn’t designate anyfinancial liability at fair value throughprofit or loss.
b. Financial liabilities at amortized cost
All financial liabilities of the Company are subsequently measured at amortized cost using the effective interest method.
• Derecognition
A financial liability is derecognized when the obligation specified in the contract is discharged, cancelled or expires.
1.3.6 Revenue
Revenue from contract with customer is recognized upon transfer of control of promised products or services to customers on complete satisfaction of performance obligations for an amount that reflects the consideration which the Company expects to receive in exchange for those products or services. Revenue is measured based on the transaction price, which is the consideration, adjusted for discounts and other incentives, if any, as per contracts with the customers. Revenue also excludes taxes or amounts collected from customers in its capacity as agent.
• Sale of goods:
Revenue is recognized when the significantrisks and rewards of ownership of goods havepassed to the buyer. Amounts disclosed as revenue arenet of returns, tradeallowances, rebates,GST. Rendering of Services
Revenue from services rendered is recognised when the work is performed and as per the terms of agreement.
• Interest / Dividend
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.Dividend income is recognized when right toreceive is established.
1.3.7 Prior period items
In case prior period adjustments are material in nature, the Company prepares the restated financial statements as required under Ind AS 8 - “Accounting Policies, Changes in Accounting Estimates
and Errors”. Immaterial items pertaining to prior periods are shown under respective items in the Statement of Profit and Loss.
1.3.8 Income taxes
Income tax expense for the year comprises current tax and deferred tax.It is recognized in the Statement of Profit and Loss except to the extentit relates to a business combination or to an item which is recognized directly in equity or in other comprehensive income.
Current tax is the expected tax payable/receivable on the taxable income/loss for the year using applicable tax rates at the Balance Sheet date, andany adjustment to taxes in respect of previous years. Interest expense if any, related to income tax are included incurrent tax expense.
Deferred taxDeferred tax assets and liabilities are recognised for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount, except when the deferred 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 or loss at the time of the transaction.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised. 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.
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