Note 1: SIGNIFICANT ACCOUNTING POLICIES
Reporting Entity
Khandelwal Extractions Limited (the "Company") is a company
domiciled in India and limited by shares (CIN:
L24241UP1981PLC005282).The shares of the company are publicly
traded on the Bombay Stock Exchange Limited. The address of the
company's registered office is 51/47, 3"' floor, Kesharwani Bhawan,
Nayaganj, Kanpur-208001. The company is primarily engaged in the
businessof propertygiven on rent.
1.1 Basis of preparation
The financial statements of the Company have been prepared in
accordance with Indian Accounting Standards (Ind-AS) notified under
the Companies(lndianAccounting Standards) Rules,2015.
1.2 Current and non-current Classification
The Company presents assets and liabilities in the Balance Sheet
based on current/ non-current classification. An asset is treated as
current when:
(a) it expects to realise the asset, or intends to sell or consume it, in its
normal operating cycle;
(b) it holds the asset primarily for the purpose of trading;
(c) it expects to realise the asset within twelve months after the
reporting pe nod; or
(d) the asset is cash or a cash equivalent (as defined in Ind AS 7)
unless the asset is restricted from being exchanged orused to settle a
liability for at least twelve months after the reporting period. All other
assets are classified as non-current.
An entity shall classifya liability as current when:
(a) it expects to settle the liability in its normal operating cycle;
(b) it holds the liability pnmanlyforihe purposeof trading:
(c) the liability is due to be settled within twelve months after the
reporting pe nod; or
(d) it does not have an unconditional right to defer settlement of the
liability for at least twelve months after the reporting period. Terms of a
liability that could, at the option of the counter party, result in its
settlement by the issue of equity instruments do not affect its
classification-
AII otherliabilities are classified as non-current
1.3 Revenue recognition
1.3.1 Sales revenue
The company denves revenues pnmarily from Rent received on
factory buildings given on lease.
Ind AS 115 " Revenue from Contracts with Customers' provides a
control-based revenue recognition model and provides a five step
application approach to be followed for revenue recognition.
• Identifythe contracts(s)with customer:
• Identifythe performanceobligations.
• Determine the transaction price.
• Allocate the transaction price to the performance obligations.
• Recognise revenue when or as an entity satisfies
performanceobligation.
Revenue from contracts with customers is recognised
when control of thegoods orservices are transferred to the
customers at an amount that reflects the consideration to
which the company expects to be entitled in exchange for
those goods or services. The company has generally
concluded that it is the principal in its revenue
arrangements, exceptfor the agency services. Because it
typically controls the goods or services before transferring
th em to the customer.
1.32 Interest
Interest in come is recognised using the Effective Interest Method.
1.3.3 Dividend
Dividend income from investments is recognised when the rights to
receive payment is established.
1.3.4 Other Claims
Other claims (including interest on delayed realization from
customers) are accounted for, when there is certainty of realisation.
1.4 Property, Plant and Equipment (PPE)
Land is carried at historical cost. Historical cost includes expenditure
which are directly attributable to the acquisition of the land like,
rehabilitation expenses, resettlement cost etc.
After recognition, an item of all other Property, plant and quipmentare
carried at its cost less any accumulated depreciation and any
accumulated impairment losses underCost Model. The cost ofan item
of property, plantand equipment comprises:
(a) its purchase price, including import duties and non-refundable
purchase taxes, afterdeducting trade discounts and rebates.
(b) any costs 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.
(c) the initial estimate of thecosts of dismantling and removing the item
and restoring the site on which it is located, the obligation for which an
entity incurs either when the item is acquired or as a consequence of
having used the item during a particular period for purposes other than
to produce inventoriesdunng that penod.
Each part of an item of property, plant and equipment with a costthatis
significant In relation to the total cost of the Item depreciated
separately. However, significant part(s) of an item of PPE having same
useful life and depreciation method are grouped together in
determining thedepreciation charge.
Costs of the day to-day servicing described as for the 'repairs and
maintenance' are recognised in the statement of profit and loss in the
period inwhichthe same are incurred.
Subsequent Measurement
Subsequent cost of replacing parts of an item of property, plant and
equipment are recognised in the carrying amount of the item, if 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. The carrying amount of those parts that are replaced is
derecognised in accordance with the derecognition policy mentioned
below.
When major inspection is performed, its cost is recognised in the
carrying amount of the item of property, plant and equipment as a
replacement if 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. Any remaining carrying amount of the cost of the
previous inspection (as distinct from physical parts)isdere cognised.
An item of Property, plant or equipment is derecognised upon disposal
or when no future economic benefits are expected from the continued
use of assets. Any gain or loss arising on such derecognition ofan item
of property plant and equipment is recognised in profit and Loss.
Depreciation
Depreciation on property, plant and equipment, except freehold land,
is provided on straight line method based on useful life specified in
schedule II to the Companies Act, 2013.The residual value of Property,
plant and equipment is considered as 5% of the original cost of the
asset.
Depreciation on the assets added / disposed of during the year is
provided on pro-rata basis with reference to the month of addition /
disposal.
Capital Expenses Incurred by the company on construction/
development of certain assets which are essential for production,
supplyofgoodsorfortheaccesstoanyexistingAssetsofthe company
are recognised as Enabling Assets under Property, Plant and
Equipment.
1.5 Impairment of Assets
The Company assesses on a forward looking basis the expected credit
losses associated with its assets carried at a mortised cost a nd FVOCI
debt instruments. The impairment methodology applied depends on
whether there has been a significant in crease in credit risk.
With regard to trade receivable, the Company applies the simplified
approach as permitted by Ind AS 109, Financial Instruments, which
requires expected lifetime losses to be recognised from the initial
recognition of the trade receivables.
The Company assesses at the end of each reporting penod 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. An asset's recoverable amount is the higher of the asset's or
cash-generating unit's value in use and its fair value less costs of
disposal, and is determined for an individual asset, unless the asset
does not generate cash inflows that are largely independent of those
from other assets or groups of assets, in which case the recoverable
amount is determined for the cash-generating unit to which the asset
belongs.
Investment Property
Property (land or a building or part of building or both) held to earn
rentals or for capital appreciation or both, rather than for, use in the
production or supply of goods or services or for administrative
purpose; or sale in the ordinary course of business are classified as
investment property. Investment property is measured initially at its
cost, including related transaction costs and where applicable
borrowing cost. Investment properties are depreciated using the
written down value method overthe estimated useful lives.
1.6 Financial Instruments
Afinancial instrument is any contract that gives rise to a financial asset
of one entity and a financial liability or equity instrument of another
entity.
1.6.1 Financial assets
1.6.1 Initial recognition and measurement
All financial assets are recognised initially at fair value, in the case of
financial assets not recorded at fair value through profit or loss, plus
transaction costs that are attributable to the acquisition of the financial
asset. Purchases or sales of financial assets that require delivery of
assets within a time frame established by regulation or convention in
the market place (regular way trades) are recognised on the trade
date, i.e., the date that the Company commits to purchase or sell the
asset.
1.6.2 Subsequentmeasurement
For purposes of subsequent measurement, financial assets are
classified in tourcategories:
• Debtinstruments at amortised cost
• Debt instruments at fair value through other comprehensive
income (FVTOCI)
• Debt instruments, derivatives and equity instruments at fair
value through profitorloss(FVTPL)
• Equity instruments measured at fair value through other
comprehensive income (FVTOCI)
1.6.3 Impairmentoffinancial assets
The Company assesses on a forward looking basis the expected credit
tosses associated with its assets carried at a mortised cost and FVOCI
debt instruments. The impairment methodology applied depends on
whetherthere has been a significant increase in credit risk.
With regard to trade receivable, the Company applies the simplified
approach as permitted by Ind AS 109, Financial Instmments, which
requires expected lifetime losses to be recognised from the initial
recognition of the trad e receivables.
The Company assesses at the end of each reporting period 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. An asset's recoverable amount Is the higher of the asset's or
cash-generating unit's value in use and its fair value less costs of
disposal, and is determined for an individual asset, unless the asset
does not generate cash inflows that are largely independent of those
from other assets or groups of assets, in which case the recoverable
amount is determined for the cash-generating unit to which the asset
belongs.
1.6.4 Financial liabilities
1.6.4.1 Initial recognition and measurement
The Company's financial liabilities include trade and other payables,
loans and borrowings including bankoverdrafts.
All financial liabilities are recognised initially at fair value and, in the
case of loans and borrowings and payables, net of directly attributable
transaction costs.
1.6.4.2 Subsequent measurement
The measurement of financial liabilities depends on their
classification, asdescrlbed below:
1.6.4.3 Financial liabilities at fair value through profit or loss
Financial liabilities at fairvalue through profit or loss include financial
liabilities held for trading and financial liabilities designated upon initial
recognition as at fair value through profit or loss Financial liabilities are
classified as held for trading if they are incurred for the purpose of
repurchasing in the near term. This category also includes derivative
financial instruments entered into by the Company that are not
designated as hedging instruments in hedge relationships as defined
by Ind AS 109. Separated embedded derivatives are also classified as
held for trading unless they are designated as effective hedging
instmments.
Gains orlosses on liabilities held for trading are recognised in the profit
or loss.
Financial liabilities designated upon initial recognition at fair value
through profit or loss are designated as such at the initial date of
recognition, and only if the criteria in Ind AS 109 are satisfied. For
liabilities designated as FVTPL, fairvalue gains/ tosses attributable to
changes in own credit risk are recognized in OCI. These gains/ loss are
not subsequently transferred to P&L. However, the Company may
transfer the cumulative gain or loss within equity. All other changes in
fair value of such liability are recognised In the statement of profit or
toss. The Company has not designated any financial liability as at fair
value through profit and loss.
1.6.5 Offsetting offinancial instruments
Financial assets andfinancial liabilities are offset and the net amount is
reported in the consolidated balance sheet if there is a currently
enforceable legal right to offset the recognised amounts and there is
an intention to settle on a net basis, to realise the assets and settle the
liab ilities s imulta neously.
1.7 Borrowing Costs
Borrowing costs are expensed as incurred except where they are
directly attributable to the acquisition, construction or production of
qualifying assets i.e. the assets that necessarily takes substantial
period of time to get ready for intended use, in which case they are
capitalised as part of the cost of those asset up to the date when the
qualifying asset is ready for its intended use.
1.8Tax Expenses
The tax expense for the period comprises current and deferred tax. Tax
is recognised in Statement of Profit and Loss, except to the extent that
it relates to items recognised in the comprehensive income or in equity.
In which case, the tax is also recognised in other comprehensive
Income or equity.
CurrentTax:
Current tax assets and liabilities are measured at the amount
expected to be recovered from or paid to the taxation authorities,
based on tax rates and laws that are enacted or substantively enacted
atthe BalanceSheetdate.
Deterred Tax:
Deterred Tax is recognised on temporary differences between
the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation
of taxable profit.
1.9 Employee Benefits
(i) Short term employeebenefits
Short-term employee benefits are expensed as the related service is
provided. A liability is recognised for the amount expected to be paid if
the Company has a present legal or constructive obligation to pay this
amount as a result of past service provided by the employee and the
obligation can be estimated reliably.
(ii) Defined contribution plans
Obligations for contributions to defined contribution plans are
expensed as the related service is provided. The company has
following defined contribution plans:
a) Provident to nd
b) Superannuation scheme
(iii) Defined benefit plans
The company net obligation in respect of defined benefit plans is
calculated separately for each plan by estimating the amountoffuture
benefit that employees have earned in the current and prior periods,
discounting that amount and deducting the fair value of any plan
assets.
The calculation of defined benefit obligations is performed annually by
a qualified actuary using the projected unit credit method. When the
calculation results in a potential asset for the company, the recognised
asset is limited to the present value or economic benefits available in
the form of any future refunds from the plan or reductions in future
contributions to the plan. To calculate the present value of economic
benefits, consideration is given to any applicable minimum funding
requirements.
Remeasurement of the net defined benefit liability, which comprise
actuarial gains and losses, the return on plan assets (excluding
interest) and the effect of the asset ceiling (if any, excluding interest),
are recognised immediately in Other Comprehensive Income. Net
interest expense (income) on the net defined liability (assets) is
computed by applying the discount rate, used to measure the net
defined liability (asset), to the net defined liability (asset) at the start of
the financial year after taking into account any changes as a result of
contribution and benefit payments during the year. Net interest
expense and other expenses related to defined benefit plans are
recognised in profit or loss.
When the benefits of a plan are changed orwhen a plan is curtailed, the
resulting change in benefitthat relates to pa stservice or thegainorloss
on curtailment is recognised immediately in profit or loss. The company
recognises gains and losses on the settlement of a defined benefit plan
when thesettlement occurs
The company hasfoMowing defined benefit plans:
a) Gratuity
The company provides for its gratuity liability based on
actuarial valuation of the gratuity liability as at the Balance
Sheet date, based on Projected Unit Credit Method, carried
out by an independent actuary and contributes to the gratuity
fund of the company. The contributions made are recognized
as plan assets. The defined benefit obligation as reduced by
fairvalue of plan assets is recognized in the Balance Sheet
Re-measurements are recognized in the Other
Comprehensive Income, net of tax in the year in which they
arise.
1.10 Foreign Currency Transactions
The company's reported currency and the functional currency for
majority of its operations is in Indian Rupees (INR) being the principal
cu rrency of the economic environm ent in which it operates.
Transactions in foreign currencies are converted into the reported
currency of the company using theexchange rate prevailing at the
transaction date. Monetary assets and liabilities denominated in
foreign currencies outstanding at the end of the reporting period are
translated at the exchange rates prevailing as at the end of reporting
period. Exchange differences arising on the settlement of monetary
assets and liabilities or on translating monetary assets and liabilities at
rates different from those at which they were translated on initial
recognition during the period or in previous financial statements are
recognised in statement of profit and loss in the period in which they
arise.
Non monetary items denominated in foreign currency are valued at
the exchange rates prevailing at the transaction date.
required.
1.12Cash and Cash Equivalent
Cash and cash equivalents in the balance sheet comprise
cash at banks and on hand and short term deposits with an
original maturity of three months or less, which are subject
to an insiqnificant risk of chanqes in value.
Net realisable value is the estimated selling price in the ordinary course
of business, lessestimated costs of completion and tomakethesale.
i) Work-in-progress, finished goods and traded goods have
been valued as per the principles and basis consistently
followed.
ii) Provision for obsolete/ old inventories is made, wherever
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