1. STATEMENT ON MATERIAL ACCOUNTING POLICIES
This note provides a list of the Material Accounting Policies
adopted in the preparation of the Financial Statements.
These policies have been consistently applied to all the
years presented, unless otherwise stated. The financial
statements have been prepared for the Company as a going
concern on the basis of relevant Ind AS that are effective at
the Company's annual reporting date.
1.1 BASIS FOR PREPARATION OF FINANCIAL STATEMENTS
Statement of compliance with Ind AS
The Standalone Financial Statements have been prepared
in accordance with Indian Accounting Standards (Ind AS)
notified under Section 133 of the Companies Act, 2013
read with Companies (Indian Accounting Standards) Rules,
2015, as amended and other relevant provisions of the Act.
The presentation of the Financials Statements is based on
Ind AS Schedule III of the Act. The financial statements are
presented in Indian Rupee ("?") and all values are rounded
to the nearest Lakhs as per the requirement of Schedule III,
except when otherwise indicated.
Current versus Non-Current classification
All assets and liabilities have been classified as Current or
Non-Current as per the Company's normal operation cycle
i.e. twelve months and other criteria set out in the Schedule
III of the Act.
Historical Cost Convention
The financial statements are prepared on accrual basis of
accounting under historical cost convention in accordance
with Generally Accepted Accounting Principles in India
and the relevant provisions of the Companies Act, 2013
including Indian Accounting Standards notified there under,
except for the following:
> Certain financial assets and liabilities measured at fair
value or at amortised cost depending on classification;
> Defined benefit plans - plan assets measured at fair
value
1.2 USE OF ESTIMATES AND JUDGEMENTS
The preparation of financial statements requires the use
of accounting estimates which by definition will seldom
equal the actual results. Management also need to exercise
judgment in applying the Company's accounting policies.
The preparation of the financial statements is in conformity
with the Ind AS which requires the management to make
estimates, judgments and assumptions that affect the
application of accounting policies, reported amounts of
assets and liabilities, reported revenues and expenses and
disclosure of contingent liabilities. Such estimates and
assumptions are based on management's evaluation of
relevant facts and circumstances as on the date of financial
statements. The actual outcome may differ from these
estimates.
Estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to the accounting estimates are
recognised in the period in which the estimates are revised
and in any future periods affected.
This note provides an overview of the areas that involved
a higher degree of judgment or complexity, and of items
which are more likely to be materially adjusted due to
estimates and assumptions turning out to be different
than those originally assessed. Detailed information about
each of these estimates and judgements is included in
relevant notes together with information about the basis
of calculation for each affected line item in the Financial
Statements.
Information about assumptions and estimation
uncertainties that have a significant risk of resulting in
a material adjustment within the next financial year are
included in the following notes:
Note 02 - Useful Lives of Property, Plant and Equipment
Note 10 - Expected Credit Losses on Financial Assets
Note 23 - Current / Deferred tax expense
Note 22, 29 & 47 - Provisions and contingencies
Note 43 - Measurement of defined benefit obligations
1.3 REVENUE RECOGNITION
Revenue is recognised upon transfer of control of promised
products and services to customers in an amount that
reflects the consideration which the Company expects to
receive in exchange for such products and services.
GST/ value added tax (VAT) is not received by the Company
on its own account. Rather, it is tax collected on value added
to the commodity by the seller on behalf of the government.
Accordingly, it is excluded from revenue.
Sale of Goods
Revenue from the sale of goods is recognised at the point
in time when control is transferred to the customer in
accordance with the terms of the contact. The control of the
goods is transferred upon delivery to the customers either
at factory gate of the Company or specific location of the
customer or when the goods are handed over to the freight
carrier, as per the terms of the contract.
Revenue is measured based on the transaction price, which
is the consideration, adjusted for volume discounts, price
concessions, incentives, and returns, if any, as specified
in the contracts with the customers. In determining the
transaction price for the sale of goods, the group considers
the effects of variable consideration, the existence of
significant financing components, non-cash consideration,
and consideration payable to the customer (if any).
Revenue is measured based on the transaction price, which
is the consideration, adjusted for volume discounts, price
concessions, incentives, and returns, if any, as specified
in the contracts with the customers. In determining the
transaction price for the sale of goods, the company
considers the effects of variable consideration, the
existence of significant financing components, non-cash
consideration, and consideration payable to the customer
(if any).
Export Benefits / Incentives
Incomes in respect of Duty Drawback in respect of exports
made during the year are accounted on accrual basis.
Remission of Duties and Taxes on Export Products (RoDTEP)
income is recognised on accrual basis when considering the
related expenses to the same profit or losses on transfer of
licenses are accounted in year of the sales.
Export incentives are recognised in the year where there is
a reasonable assurance that the Company will comply with
the conditions attaching to it and that the export incentive
will be received.
Interest Income
Interest income from a financial asset is recognized when
it is probable that the economic benefits will flow to the
Company and the amount of income can be reliably.
Interest income is accrued on a time basis, by reference to
the principal outstanding and at the effective interest rate
(EIR) 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
Dividend income is recognised when the right to receive the
same is established, which is generally when shareholders
approve the dividend.
Other Income
Other income is recognised when no significant uncertainty
as to its determination or realisation exists.
Scrap Sales
Income from Sales of Scrap is recognized at the point in time
when control of the assets is transferred to the customer.
Insurance Claims
Insurance claims are accounted for on the basis of claims
admitted/expected to be admitted and to the extent that
there is no uncertainty in receiving the claims.
Contract Balances (Trade Receivables)
A receivable represents the company's right to an amount
of consideration that is unconditional (i.e., only the passage
of time is required before payment of the consideration is
due). Refer SAP on Financial instruments - initial recognition
and subsequent measurement.
Contract Liabilities
A contract liability is the obligation to transfer goods or
services to a customer for which the company has received
consideration (or an amount of consideration is due) from
the customer. If a customer pays consideration before the
company transfers goods or services to the customer, a
contract liability is recognised when the payment is made
or the payment is due (whichever is earlier). It is recognised
as revenue when the company performs under the contract.
1.4 FOREIGN CURRENCY TRANSACTIONS
Functional and Presentation Currency
Items included in the financial statements are measured
using the currency of the primary economic environment
in which the entity operates ('the functional currency'). The
financial statements are presented in Indian rupee ('), which
is the Company's functional and presentation currency.
Transactions and Balances
On initial recognition, all foreign currency transactions are
recorded by applying to the foreign currency amount the
exchange rate between the functional currency and the
foreign currency at the date of the transaction. Gains/Losses
arising out of fluctuation in foreign exchange rate between
the transaction date and settlement date are recognised in
the Statement of Profit and Loss.
All monetary assets and liabilities in foreign currencies are
restated at the year end at the exchange rate prevailing at
the year end and the exchange differences are recognised
in the Statement of Profit and Loss.
Non-monetary items that are measured in terms of historical
cost in a foreign currency are translated using the exchange
rates at the dates of the initial transactions.
1.5 PROPERTY, PLANT AND EQUIPMENTS
Tangible Assets
Freehold Land is carried at historical cost. All other items
of Property, Plant and Equipment are stated at historical
cost less accumulated depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition
of the items. Cost may also include transfers from equity of
any gains or losses on qualifying cash flow hedges of foreign
currency purchases of property, plant and equipment.
The cost of self-constructed assets includes cost of materials
plus any other directly attributable costs of bringing the
assets to working condition for its intended use.
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.
An item of Property, Plant or Equipment is derecognised
upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset.
Items of Property, Plant or Equipment that are retired
from active use and are held for disposal are stated at the
lower of their net book value and net realizable value and
are presented separately in the Financial Statements. Any
expected loss is recognized immediately in the Statement
of Profit and Loss.
The gain or loss arising on the disposal or retirement of
an asset is determined as the difference between sales
proceeds and the carrying amount of the asset and is
recognized in Statement of Profit and Loss for the relevant
financial year.
The Company had applied for the one time transition
exemption of considering the carrying cost on the transition
date as the deemed cost under Ind AS. Hence regarded
thereafter as historical cost.
Capital Work in Progress included in PPE is stated as Cost
and includes expenditure directly related to construction
and incidental thereto. The same is transferred or allocated
to respective item Property, Plant, and Equipment on
commissioning of the project.
1.6 INTANGIBLE ASSETS
Intangible Assets acquired separately
Intangible assets with finite useful lives that are acquired
separately are carried at cost less accumulated amortisation
and accumulated impairment losses. Amortisation is
recognised on a straight-line basis over their estimated
useful lives. The estimated useful life and amortisation
method are reviewed at the end of each reporting period,
with the effect of any changes in estimate being accounted
for on a prospective basis. Intangible assets with indefinite
useful lives that are acquired separately are carried at cost
less accumulated impairment Losses.
Internally - generated intangible assets - Research and
Development expenditure
Assessment of whether an internally generated Intangible
Asset meets the criteria for recognition, the expenditure
on generation of the asset is classified into research phase
and development phase. Expenses incurred during research
phase are recognized immediately in the Statement of Profit
and Loss. Expenditure during the development phase is
recognized as an Intangible Asset under development on
fulfilment of following conditions:
> The technical feasibility of completing the Intangible
Asset so that it will be available for use or sale;
> The intention to complete the Intangible Asset and
use or sell it;
> The ability to use or sell the Intangible Asset;
> The Intangible Asset will generate probable future
economic benefits;
> The availability of adequate technical, financial and
other resources to complete the development and to
use or sell the Intangible Asset; and
> The ability to measure reliably the expenditure
attributable to the Intangible Asset during its
development.
The amount initially recognised for internally-generated
Intangible Assets is the sum of the expenditure incurred
from the date when the intangible asset first meets the
recognition criteria listed above. Where no internally-
generated intangible asset can be recognised, development
expenditure is recognised in the Statement of Profit and
Loss in the period in which it is incurred.
Derecognition of Intangible Assets
An Intangible Asset is derecognised on disposal, or when no
future economic benefits are expected from use or disposal.
Gains or losses arising from derecognition of an intangible
asset, measured as the difference between the net disposal
proceeds and the carrying amount of the asset, are-
recognised in the Statement of Profit and Loss when the
asset is de-recognised
1.7 NON- CURRENT ASSET HELD FOR SALE AND
DISCONTINUED OPERATIONS
The Company classifies assets and operations as held for
sale / distribution to owners or as discontinued operations
if their carrying amounts will be recovered principally
through a sale / distribution rather than through continuing
use. Classification as a discontinued operations occur upon
disposal or when the operation meets the below criteria,
whichever is earlier.
Non Current Assets are classified as held for sale only when
both the conditions are satisfied:
> The sale is highly probable, and
> The asset or disposal group is available for immediate
sale in its present condition subject only to terms that
are usual and customary for sale of such assets.
Non-current assets which are subject to depreciation are
not depreciated or amortized once those classified as held
for sale.
A discontinued operation is a component of the
Company's business, the operations of which can be clearly
distinguished from those of the rest of the Company and i)
is part of a single coordinated plan to dispose of a separate
major line of business or geographical area of operations; or
ii) is a subsidiary acquired exclusively with a view to resale.
Non-current assets held for sale / distribution to owners
and discontinued operations are measured at the lower
of their carrying amount and the fair value less costs to
sell / distribute. Assets and liabilities classified as held for
sale / distribution are presented separately in the balance
sheet. The results of discontinued operations are excluded
from the overall results of the Company and are presented
separately in the statement of profit and loss. Also, the
comparative statement of profit and loss is re-presented as
if the operations had been discontinued from the start of
the comparative period.
1.8 IMPAIRMENT OF INVESTMENT
The Company reviews its carrying value of investments
carried at amortised cost annually, or more frequently when
there is an indication for impairment. If the recoverable
amount is less than its carrying amount, the impairment loss
is accounted for.
1.9 IMPAIRMENT OF NON- FINANCIAL ASSETS
The Company assesses, at each reporting date, whether
there is an indication that an asset may be impaired. If any
indication exists, or when annual impairment testing for
an asset is required, the Company estimates the asset's
recoverable amount. An asset's recoverable amount is the
higher of an asset's or Cash-Generating Unit's (CGU) fair
value less costs of disposal and its value in use. Recoverable
amount 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.
When the carrying amount of an asset or CGU exceeds its
recoverable amount, the asset is considered impaired and is
written down to its recoverable amount.
1.10 DEPRECIATION AND AMORTISATION
Depreciation is calculated to systematically allocate the cost
of Property, Plant and Equipment and Intangible Asset net
of the estimated residual values over the estimated useful
life. Depreciation is computed using Straight Line Method
(SLM) over the useful lives of the assets as specified in
Schedule II to the Companies Act, 2013.
The residual values are not more than 5% of the original cost
of the item of Property, Plant and Equipment. The asset's
residual values and useful lives are reviewed, and adjusted if
appropriate, at the end of each reporting period.
Depreciation on items of Property, Plant and Equipment
acquired / disposed off during the year is provided on pro¬
rata basis with reference to the date of addition / disposal.
Depreciation is not provided on Freehold Land. Leasehold
land is amortized over the available balance lease period.
1.11 FINANCIAL INSTRUMENTS
Fair value measurement of Financial Instruments
The Company's accounting policies and disclosures require
the measurement of fair values for certain financial and non¬
financial assets and liabilities based on their classification.
Fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
In estimating the fair value of an asset or liability, the
company takes into account the characteristics of the
asset or liability if market participants would take those
characteristics into account when pricing the asset or
liability at the measurement date.
Fair values are categorized into different levels in a fair
value hierarchy based on the inputs used in the valuation
techniques as follows:
> Level 1: quoted prices (unadjusted) in active markets
for identical assets or liabilities.
> Level 2: inputs other than quoted prices included in
Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived
from prices).
> Level 3: inputs for the asset or liability that are not
based on observable market data (unobservable
inputs).
When measuring the fair value of an asset or a liability, the
Company uses observable market data as far as possible. If
the inputs used to measure the fair value of an asset or a
liability fall into different levels of the fair value hierarchy,
then the fair value measurement is categorized in its entirety
in the same level of the fair value hierarchy as the lowest
level input that is significant to the entire measurement.
The Company recognises transfers between levels of the fair
value hierarchy at the end of the reporting period during
which the change has occurred.
For the purpose of fair value disclosures, the Company has
determined classes of assets and liabilities on the basis of
the nature, characteristics and risks of the asset or liability
and the level of the fair value hierarchy as explained above.
Fair value for measurement and/or disclosure purposes in
these financial statements is determined on such a basis,
except for measurements that have some similarities to fair
value but are not fair value, such as net realizable value in
Ind AS 2 or value in use in Ind AS 36.
Financial Instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
Financial Asset
Initial recognition and measurement
All financial assets are recognised in balance sheet when,
and only when, the entity becomes party to the contractual
provisions of the instrument and initially measured at fair
value plus, in the case of financial assets not recorded at
fair value through profit or loss, transaction costs that are
attributable to the acquisition of the financial asset or liability
are added to or deducted from the fair value. 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.
Subsequent Measurement
For purposes of subsequent measurement, financial assets
are classified into four categories:
> Debt instruments at amortised cost
> Debt instruments at fair value through other
comprehensive income (FVTOCI)
> Debt instruments and equity instruments at fair value
through profit or loss (FVTPL)
> Equity instruments measured at FVTOCI
The measurement of financial assets depends on their
classification, as described below:
Debt instruments at amortised cost
A 'debt instrument' is measured at the amortised costif both
the following conditions are met:
> The asset is held within a business model whose
objective is to hold assets for collecting contractual
cash flows, and
> Contractual terms of the asset give rise on specified
dates to cash flows that are solely payments of
principal and interest (SPPI) on the principal amount
outstanding.
After initial measurement, financial assets are subsequently
measured at amortised cost using the Effective Interest Rate
(EIR) method. The effective interest method is a method of
calculating the amortised cost of a debt instrument and
of allocating interest income over the relevant period. The
effective interest rate is the rate that exactly discounts
estimated future cash receipts (including all fees and points
paid or received that form an integral part of the effective
interest rate, transaction costs and other premiums or
discounts) through the expected life of the debt instrument,
or, where appropriate, a shorter period, to the net carrying
amount on initial recognition. Income is recognised on
an effective interest basis for debt instruments other than
those financial assets classified as at FVTPL. Interest income
is recognised in profit or loss and is included in the "Other
income" line item. Amortised cost is calculated by taking
into account any discount or premium on acquisition and
fees or costs that are an integral part of the EIR. The EIR
amortisation is included in finance income in the profit or
loss. The losses arising from impairment are recognised
in the Statement of Profit and Loss. This category covers
Trade Receivables, Loans, Cash & Bank Balances and Other
Receivables.
Debt instruments at fair value through other comprehensive
income (FVTOCI)
A 'debt instrument' is classified as at the FVTOCI if both of
the following criteria are met:
> The objective of the business model is achieved both
by collecting contractual cash flows and selling the
financial assets, and
> Contractual terms of the asset give rise on specified
dates to cash flows that are solely payments of
principal and interest (SPPI) on the principal amount
outstanding.
Debt instruments included within the FVTOCI category are
measured initially as well as at each reporting date at fair
value. Fair value movements are recognised in the other
comprehensive income (OCI). On derecognition of the
asset, cumulative gain or loss previously recognised in OCI
is reclassified to the Statement of Profit and Loss. Interest
earned while holding FVTOCI debt instrument is reported
as interest income using the EIR method.
Debt instruments and equity instruments at fair value
through profit or loss (FVTPL)
FVTPL is a residual category for debt instruments. Any
debt instrument, which does not meet the criteria for
categorization as at amortized cost or as FVTOCI, is classified
as at FVTPL.
Debt and Equity instruments included within the FVTPL
category are measured at fair value with all changes
recognized in the Statement of Profit and Loss.
Equity instruments included within the FVTPL category are
measured at fair value with all changes recognized in the
Statement of Profit and Loss.
Equity instruments measured at FVTOCI
All equity investments in the scope of Ind AS 109 are
measured at fair value. Equity instruments which are held
for trading are classified as at FVTPL. For all other equity
instruments, the Company decides to classify the same either
as at FVTOCI or FVTPL. The Company makes such election
on an instrument-by-instrument basis. The classification is
made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as
at FVTOCI, then all fair value changes on the instrument,
excluding dividends, are recognized in the OCI. There is no
recycling of the amounts from OCI to Statement of Profit and
Loss, even on sale of investment. However, the Company
may transfer the cumulative gain or loss within equity.
Derecognition of Financial Assets
The Company de-recognises a financial asset only when the
contractual rights to the cash flows from the asset expires or
it transfers the financial asset and substantially all the risks
and rewards of ownership of the asset.
When the Company has transferred its rights to receive
cash flows from an asset or has entered into a pass-through
arrangement, it evaluates if and to what extent it has
retained the risks and rewards of ownership. When it has
neither transferred nor retained substantially all of the risks
and rewards of the asset, nor transferred control of the asset,
the Company continues to recognise the transferred asset
to the extent of the Company's continuing involvement.
In that case, the Company also recognises an associated
liability. The transferred asset and the associated liability are
measured on a basis that reflects the rights and obligations
that the Company has retained.
Continuing involvement that takes the form of a guarantee
over the transferred asset is measured at the lower of the
original carrying amount of the asset and the maximum
amount of consideration that the Company could be
required to repay.
Impairment Financial Assets (other than at fair value)
In accordance with Ind AS 109, the Company applies
expected credit loss (ECL) model or measurement and
recognition of impairment loss for the following financial
assets and credit risk exposures:
> Financial assets that are debt instruments and are
measured at amortised cost e.g., loans, deposits and
bank balance
> Trade Receivables that result from transactions that
are within the scope of Ind AS 115.
The Company follows 'simplified approach' for recognition
of impairment loss allowance on trade receivables. The
application of simplified approach does not require the
Company to track changes in credit risk. It recognises
impairment loss allowance based on lifetime ECLs at each
reporting date, right from its initial recognition.
As a practical expedient, the company uses a provision matrix
to determine impairment loss allowance on portfolio of its
receivables. The provision matrix is based on its historically
observed default rates over the expected life of the trade
receivables and is adjusted for forward looking estimates. At
every reporting date, the historical observed default rates
are updated and changes in the forward looking estimates
are analysed.
For recognition of impairment loss on other financial assets
and risk exposure, the Company determines whether there
has been a significant increase in the credit risk since initial
recognition. If credit risk has not increased significantly, 12
quarter ECL is used to provide for impairment loss. However,
if credit risk has increased significantly, lifetime ECL is used.
If, in a subsequent period, credit quality of the instrument
improves such that there is no longer a significant increase
in credit risk since initial recognition, then the entity reverts
to recognising impairment loss allowance based on 12
quarter ECL. Lifetime ECL are the expected credit losses
resulting from all possible default events over the expected
life of a financial instrument. The 12 quarter ECL is a portion
of the lifetime ECL which results from default events that are
possible within 12 months after the reporting date. ECL is
the difference between all contractual cash flows that are
due to the Company in accordance with the contract and
all the cash flows that the Company expects to receive.
When estimating the cash flows, the Company is required to
consider:
• All contractual terms of the financial assets (including
prepayment and extension) over the expected life of
the assets.
• Cash flows from the sale of collateral held or other
credit enhancements that are integral to the
contractual terms.
Financial Liabilities
Initial Recognition and Measurement
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss.
All financial liabilities are recognized initially at fair value
and, in the case of loans and borrowings and payables, net
of directly attributable transaction costs.
The Company's financial liabilities include trade and other
payables, loans and borrowings.
Subsequent Measurement
The measurement of financial liabilities depends on their
classification, as described below:
Financial liabilities at fair value 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.
Gains or losses on liabilities held for trading are recognised
in the profit or loss.
Financial Liability at Amortised cost
After initial recognition, financial liabilities are subsequently
measured at amortised cost using the EIR method. Gains
and losses are recognized in Statement of Profit and Loss
when the liabilities are derecognized as well as through the
EIR amortisation process. Amortised cost is calculated by
taking into account any discount or premium on acquisition
and fees or costs that are an integral part of the EIR. The EIR
amortisation is included as finance costs in the Statement of
Profit and Loss.
Financial Liabilities at Fair Value Through Profit or Loss
(FVTPL)
Financial liabilities at fair value through profit or loss include
financial liabilities held for trading and financial liabilities
designated upon initial recognition as such. Subsequently,
any changes in fair value are recognised in the Statement of
Profit and Loss.
Derecognition of Financial Liability
A financial liability is de-recognised when the obligation
under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another
from the same lender on substantially different terms, or the
terms of an existing liability are substantially modified, such
an exchange or modification is treated as the derecognition
of the original liability and the recognition of a new liability.
The difference in the respective carrying amounts is
recognised in the Statement of Profit and Loss.
Offsetting of Financial Instruments
Financial assets and financial liabilities are offset and the
net amount is reported in the 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 liabilities simultaneously.
Investment in subsidiaries and associates
Investments in subsidiaries and associates are carried at
cost less accumulated impairment losses, if any. Where an
indication of impairment exists, the carrying amount of
the investment is assessed and written down immediately
to its recoverable amount. On disposal of investments in
subsidiaries and associates, the difference between net
disposal proceeds and the carrying amounts are recognised
in the profit or loss. Upon first-time adoption of Ind AS,
the Company has elected to measure its investments in
subsidiaries and associates at the previous GAAP carrying
amount as its deemed cost on the date of transition to Ind AS.
1.12 INVENTORIES
> I nventories are stated at the lower of cost and net
realizable value.
> Cost of Raw Material is determined on FIFO basis.
> Stores and Consumables are valued at cost or net
realizable value whichever is lower.
> Finished goods are valued at cost or net realizable
value whichever is lower. Cost comprises direct
materials and where applicable, direct labour costs,
those overheads that have been incurred in bringing
the inventories to their present location and condition.
> Work in Progress is valued at cost or net realizable
value whichever is less. Cost comprises direct materials
and appropriate portion of direct labour costs and
manufacturing overheads.
> Semi - Finished Goods is valued at cost or net realizable
value whichever is less. Cost comprises direct materials
and appropriate portion of direct labour costs and
manufacturing overheads.
> Traded Goods: cost includes cost of purchase and
other costs incurred in bringing the inventories to their
present location and condition. Cost is determined on
weighted average basis.
> Materials in transit are valued at cost-to-date.
> Net realizable value represents the estimated selling
price less all estimated costs of completion and costs
to be incurred in marketing, selling and distribution.
1.13 RECOVERABILITY OF TRADE RECEIVABLE
Judgements are required in assessing the recoverability
of overdue trade receivables and determining whether
a provision against those receivables is required. Factors
considered include the credit rating of the counterparty,
the amount and timing of anticipated future payments and
any possible actions that can be taken to mitigate the risk of
non-payment.
The Company applies Expected Credit Loss ("ECL") model
for measurement and recognition of loss allowance on the
following:
• Trade receivables and lease receivables
• Financial assets measured at amortised cost (other
than trade receivables and lease receivables)
In accordance with Ind AS 109 - Financial Instruments,
the Company applies ECL model for measurement and
recognition of impairment loss on the trade receivables or
any contractual right to receive cash or another financial
asset that result from transactions that are within the scope
of Ind AS 115 Revenue from Contracts with Customers.
1.14 LITIGATION
From time to time, the Company is subject to legal
proceedings, the ultimate outcome of each being always
subject to many uncertainties inherent in litigation. A
provision for litigation is made when it is considered
probable that a payment will be made and the amount
of the loss can be reasonably estimated. Significant
judgement is made when evaluating, among other factors,
the probability of unfavourable outcome and the ability
to make a reasonable estimate of the amount of potential
loss. Litigation provisions are reviewed at each accounting
period and revisions made for the changes in facts and
circumstances.
1.15 BORROWING COSTS
Borrowing costs consist of interest, ancillary costs and
other costs in connection with the borrowing of funds
and exchange differences arising from foreign currency
borrowings to the extent they are regarded as an adjustment
to interest costs.
Borrowing costs attributable to acquisition and/ or
construction of qualifying assets are capitalized as a part of
the cost of such asset, up to the date such assets are ready
for their intended use. Other borrowing costs are charged to
the Statement of Profit and Loss.
1.16 EMPLOYEE BENEFITS
Short term employee benefit obligations
Liabilities for wages and salaries, including nonmonetary
benefits that are expected to be settled wholly within 12
months after the end of the year in which the employees
render the related service are recognized in respect of
employees' services up to the end of the year and are
measured at the amounts expected to be paid when the
liabilities are settled. The liabilities are presented as current
employee benefit obligations in the balance sheet.
Other long term employee benefit obligations
Defined contribution plan
Provident Fund: Contribution towards provident fund is
made to the regulatory authorities, where the Company has
no further obligations. Such benefits are classified as Defined
Contribution Schemes as the Company does not carry any
further obligations, apart from the contributions made on a
monthly basis which are charged to the Statement of Profit
and Loss.
Employee's State Insurance Scheme: Contribution
towards employees' state insurance scheme is made to
the regulatory authorities, where the Company has no
further obligations. Such benefits are classified as Defined
Contribution Schemes as the Company does not carry any
further obligations, apart from the contributions made on a
monthly basis which are charged to the Statement of Profit
and Loss.
Defined benefit plans
Gratuity Obligations
The liability or asset recognised in the balance sheet in
respect of defined benefit gratuity plans is present value of
the defined benefit obligation at the end of the reporting
period less the fair value of plan assets. The defined benefit
obligation is calculated annually by actuaries using the
projected unit credit method.
The present value of the defined benefit obligations is
determined by discounting the estimated future cash
outflows by reference to market yields at the end of the
reporting period on government bonds that have terms
approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount
rate to the net balance of the defined benefit obligation and
the fair value of plan assets. This cost is included in employee
benefit expenses in the statement of profit and loss.
Remeasurement gains and losses arising from experience
adjustments and changes in actuarial assumptions are
recognised in the period in which they occur, directly in
other comprehensive income. They are included in retained
earnings in the statement of changes in equity and in the
balance sheet.
Changes in present value of the defined benefit obligation
resulting from plan amendment or curtailments are
recognised immediately in profit or loss as past service cost.
1.17 GOODS AND SERVICE TAX
GST Credit of Raw Materials and Other Consumables
is accounted at the time of purchase and the same is
being adjusted to the cost of Raw Materials and Other
Consumables.
1.18 ACCOUNTING FOR TAXES ON INCOME
Income Taxes
The income tax expense or credit for the period is the tax
payable on the current period's taxable income based on
the applicable income tax rate for each jurisdiction adjusted
by changes in Deferred Tax Assets and Liabilities attributable
to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of
the tax laws enacted or substantively enacted at the end of
the reporting period i.e. as per the provisions of the Income
Tax Act, 1961, as amended from time to time. Management
periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is
subject to interpretation. It establishes provisions where
appropriate on the basis of amounts expected to be paid to
the tax authorities.
Current income tax assets and liabilities are measured
at the amount expected to be recovered from or paid to
the taxation authorities, based on the rates and tax laws
enacted or substantively enacted, at the reporting date in
the country where the Company operates and generates
taxable income. Current tax items are recognised in
correlation to the underlying transaction either in OCI or
directly in equity.
Deferred Taxes
Deferred tax is provided in full on temporary difference
arising between the tax bases of the assets and liabilities and
their carrying amounts in standalone financial statements.
Deferred tax amounts of income taxes recoverable in future
periods in respect of deductible temporary differences, the
carry forward of unused tax losses and the carry forward of
unused tax credits.
Deferred income tax is determined using tax rates (and laws)
that have been enacted or substantially enacted by the end
of the reporting period and are expected to apply when the
related deferred income tax asset is realised or the deferred
income tax liability is settled.
Deferred Tax Assets are recognised for all deductible
temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to
utilise those temporary differences and losses.
Deferred Tax Assets and Liabilities are offset when there is
a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the
same taxation authority. Current tax assets and tax liabilities
are offset where the Company has a legally enforceable
right to offset and intends either to settle on a net basis, or
to realise the asset and settle the liability simultaneously.
Current and Deferred Tax is recognised in the Statement of
Profit and Loss, except to the extent that it relates to items
recognised in other comprehensive income or directly
in equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity, respectively.
The carrying amount of Deferred Tax Assets is reviewed
at each reporting date and reduced to the extent that it
is no longer probable that sufficient taxable profit will be
available to allow all or part of the Deferred Tax Asset to be
utilised. Unrecognised Deferred Tax Assets are re-assessed
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.
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