1.3 Significant Accounting Policies:
1.3.1 Basis of Preparation and Presentation
The Financial Statements have been prepared on the his¬
torical cost basis except for following assets and liabilities
which have been measured at fair value amount:
(a) Certain Financial Assets and Liabilities (including deriv¬
ative instruments if any), and
(b) Defined Benefit Plans - Plan Assets
(c) Certain Property Plant And Equipment which are Reval¬
ued (if any).
The financial statements of the Company have been pre¬
pared to comply with the Indian Accounting standards ('Ind
AS’), including the rules notified under the relevant provi¬
sions of the Companies Act, 2013.
The Company’s Financial Statements are presented in Indian
Rupees, which is also its functional currency
1.3.2 Fair Value Measurement
Some of the Company’s accounting policies and disclosures
require the measurement of fair values, for both financial
and non-financial assets and liabilities.
The Company has an established control framework with
respect to the measurement of fair values. This includes a
financial reporting team that has overall responsibility for
overseeing all significant fair value measurements, including
Level 3 fair values.
The financial reporting team regularly reviews significant un¬
observable inputs and valuation adjustments. If third party
information, such as pricing services, is used to measure
fair values, then the financial reporting team assesses the
evidence obtained from the third parties to support the con¬
clusion that these valuations meet the requirements of Ind
AS, including the level in the fair value hierarchy in which the
valuations should be classified.
Fair values are categorised into different levels in a fair value
hierarchy based on the inputs used in the valuation tech¬
niques 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 li¬
ability fall into different levels of the fair value hierarchy, then
the fair value measurement is categorised 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.
1.3.3 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 it is -
- Expected to be realised or intended to be sold or con¬
sumed in normal operating cycle;
- Held primarily for the purpose of trading;
- Expected to be realised within twelve months after the
reporting period, or
- Cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least twelve
months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in normal operating cycle;
- It is held primarily for the purpose of trading;
- It is due to be settled within twelve months after the
reporting period, or
- There is no unconditional right to defer the settlement
of the liability for at least twelve months after the re¬
porting period.
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-cur¬
rent assets and liabilities.
1.3.4 Property, Plant and Equipment
(a) Tangible Assets
Property, Plant and Equipment are stated at cost, net of re¬
coverable taxes, trade discount and rebates less accumu-
lated depreciation and impairment losses, if any. Such cost
includes purchase price, borrowing cost and any cost di¬
rectly attributable to bringing the assets to its working con¬
dition for its intended use, net charges on foreign exchange
contracts and adjustments arising from exchange rate vari¬
ations attributable to the assets.
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 asso¬
ciated with the item will flow to the entity and the cost can
be measured reliably.
Property, Plant and Equipment which are significant to the
total cost of that item of Property, Plant and Equipment and
having different useful life are accounted separately.
Other Indirect Expenses incurred relating to project, net of
income earned during the project development stage prior
to its intended use, are considered as pre-operative expens¬
es and disclosed under Capital Work-in-Progress.
Depreciation
Depreciable amount for assets is the cost of an asset, or
other amount substituted for cost, less its estimated resid¬
ual value. Based on technical evaluation carried out by man¬
agement, depreciation on fixed assets has been provided on
the Straight line method as per the useful life and residual
value prescribed Schedule II to the Companies Act, 2013. Re¬
sidual value has been assessed at 5% of cost of the assets.
Depreciation and amortization on addition to fixed assets
is provided on pro-rata basis from the date the assets are
ready for intended use. Depreciation and amortization on
sale/ discard from fixed assets is provided for up to the date
of sale, deduction or discard of fixed assets as the case may
be.
Individual assets costing Rs. 5,000 or below are depreciat-
ed/ amortized in full in the year of purchase. Depreciation/
Amortization method and useful lives are reviewed at each
reporting date. If the useful life of an asset is estimated to be
significantly different from previous estimates, the depreci-
ation/ amortization period is changed accordingly.
(b) Capital Work-in-Progress and Capital Advances
Cost of Property, Plant and Equipment not ready for intended
use, as on the balance sheet date, is shown as a "Capital
Work-in-Progress". The Capital Work-in-Progress is stated at
cost. Any expenditure in relation to survey and investigation
of the properties is carried as Capital Work-in-Progress. Such
expenditure is either capitalized as cost of the projects on
completion of construction project or the same is expensed
in the period in which it is decided to abandon such project.
Any advance given towards acquisition of Property, Plants
and Equipment outstanding at each balance sheet date is
disclosed as "Other Current Assets".
(c) Intangible Assets
Intangible Assets are stated at cost of acquisition net of
recoverable taxes, trade discount and rebates less accu¬
mulated amortisation/depletion and impairment losses, if
any. Such cost includes purchase price, borrowing costs,
and any cost directly attributable to bringing the asset to its
working condition for the intended use, net charges on for¬
eign exchange contracts and adjustments arising from ex¬
change rate variations attributable to the Intangible Assets.
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 asso¬
ciated with the item will flow to the entity and the cost can
be measured reliably.
Amortization
The amortization expenses on Intangible assets with the fi¬
nite lives are recognized in the Statement of Profit and Loss.
The Company’s intangible assets comprises assets with fi¬
nite useful life which are amortised on a straight-line basis
over the period of their expected useful life.
The amortization period and the amortization method for an
intangible asset with finite useful life is reviewed at each fi¬
nancial year end and adjusted prospectively, if appropriate.
1.3.5 Impairment of Non-Financial Assets - Property, Plant and
Equipment and Intangible Assets
The Company assesses at each reporting date as to whether
there is any indication that any Property, Plant and Equip¬
ment and Intangible Assets or group of Assets, called Cash
Generating Units (CGU) may be impaired. If any such indica¬
tion exists, the recoverable amount of an asset or CGU is es¬
timated to determine the extent of impairment, if any. When
it is not possible to estimate the recoverable amount of an
individual asset, the Company estimates the recoverable
amount of the CGU to which the asset belongs.
An impairment loss is recognised in the Statement of Profit
and Loss to the extent, asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is higher of an
asset’s fair value less cost of disposal and value in use. Val¬
ue in use is based on the estimated future cash flows, dis¬
counted to their present value using pre- tax discount rate
that reflects current market assessments of the time value
of money and risk specific to the assets.
The impairment loss recognised in prior accounting period
is reversed if there has been a change in the estimate of
recoverable amount.
There are no losses from impairment of assets to be recog¬
nized in the financial statements.
1.3.6 Investment Properties
Investment properties (if any), are measured initially at cost,
including transaction costs. Subsequent to initial recogni¬
tion. Items of investment properties are measured at cost
less accumulated depreciation/ amortization and accumu¬
lated impairment losses. Cost includes expenditure that is
directly attributable to bringing the asset to the location and
condition necessary for its intended use. Investment prop¬
erties are depreciated on straight line method on pro-rata
basis at the rates specified therein. Subsequent expendi¬
ture including cost of major overhaul and inspection is rec¬
ognized as an increase in the carrying amount of the asset
when it is probable that future economic benefits associat¬
ed with the item will flow to the Company and the cost of the
item can be measured reliably.
Long-term investments are stated at cost. Provision for dim¬
inution in the value of Long- Term investment is being made
only if such decline is of other than temporary in nature in
the opinion of management. Current investments are stated
at lower of cost or fair value.
1.3.7Inventories
Inventory includes raw material, work in progress, finished
goods and stock in trade.
a) Inventories values at lower of cost or net realisable
value. Cost includes purchase price, taxes (excluding
those subsequently recoverable by the enterprise from
the concerned revenue authorities), freight inwards and
other expenditure incurred in bringing such inventories
to their present location and condition. In determining
the cost, weighted average method is used.
b) Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated cost of
completion and the estimated costs necessary to make
the sale.
c) The comparison of cost or net realisable value is made
on item by item basis.
d) Stock of Finished Goods and Work in Progress are val¬
ued at lower of cost or net realizable value and cost is
determined by taking material, labour and related over¬
heads
e) Scrap is valued at net realizable value.
1.3.8 Borrowing Costs
Borrowing costs include exchange differences arising from
foreign currency borrowings to the extent they are regarded
as an adjustment to the interest cost. Borrowing costs that
are directly attributable to the acquisition or construction of
qualifying assets are capitalised as part of the cost of such
assets. A qualifying asset is one that necessarily takes sub¬
stantial period of time to get ready for its intended use.
Interest income earned on the temporary investment of spe¬
cific borrowings pending their expenditure on qualifying as¬
sets is deducted from the borrowing costs eligible for capi¬
talisation.
All other borrowing costs are charged to the Statement of
Profit and Loss for the period for which they are incurred.
1.3.9 Employee Benefits
(A) Short-Term Employee Benefits
The undiscounted amount of short-term employee ben¬
efits expected to be paid in exchange for the services
rendered by employees are recognised as an expense
during the period when the employees render the ser¬
vices.
(B) Post-Employment Benefits
(i) Defined Contribution Plans
The Company recognizes contribution payable to the
provident fund scheme as an expense, when an em¬
ployee renders the related service. If the contribution
payable to the scheme for service received before the
balance sheet date exceeds the contribution already
paid, the deficit payable to the scheme is recognized
as a liability. If the contribution already paid exceeds
the contribution due for services received before the
balance sheet date, then excess is recognized as an
asset to the extent that the pre- payment will lead to a
reduction in future payment or a cash refund.
(ii) Defined Benefit Plans
(a) Gratuity Scheme: The Company pays gratuity to the em¬
ployees who have completed five years of service with
the Company at the time of resignation/superannuation.
The gratuity is paid @ 15 days basic salary and dear¬
ness allowances for every completed year of service
as per the Payment of Gratuity Act, 1972. The liability in
respect of gratuity and other post- employment bene¬
fits is calculated using the Projected Unit Credit Method
and spread over the period during which the benefit is
expected to be derived from employees’ services.
Remeasurement gains and losses arising from adjust¬
ments and changes in actuarial assumptions are rec¬
ognised in the period in which they occur in Other Com¬
prehensive Income.
(iii) Other Long - Term Employee Benefits
Entitlement to annual leave is recognized when they ac¬
crue to employees.
1.3.10 Revenue Recognition
Revenue from contracts with customers is recognised when
control of the goods or services are transferred to the cus¬
tomer at an amount that reflects the consideration entitled
in exchange for those goods or services.
The Company has generally typically controls the goods or
services before transferring them to the customer.
Generally, control is transferred upon shipment of goods to
the customer or when the goods is made available to the
customer, provided transfer of title to the customer occurs
and the Company has not retained any significant risks of
ownership or future obligations with respect to the goods
shipped.
Revenue from rendering of services is recognised on when
the services are rendered and related cost are incurred over
time by measuring the progress towards complete satisfac¬
tion of performance obligations at the reporting period.
Revenue is measured at the amount of consideration which
the Company expects to be entitled to in exchange for trans¬
ferring distinct goods or services to a customer as specified
in the contract, excluding amounts collected on behalf of
third parties (for example taxes and duties collected on be¬
half of the government). Consideration is generally due upon
satisfaction of performance obligations and a receivable is
recognised when it becomes unconditional.
Export Incentives
Export incentive revenues are recognized when the right to
re ceive the credit is established and there is no signifi¬
cant uncertainty regarding the ultimate collection.
Interest Income
Interest Income from a Financial Assets is recognised using
effective interest rate method.
Dividend Income
Dividend Income is recognised when the Company’s right to
receive the amount has been established.
Surplus / (Loss) on disposal of Property, Plants and Equip¬
ment / Investments
Surplus or loss on disposal of property, plants and equip¬
ment or investment is recorded on transfers of title from the
Company, and is determined as the difference between the
sales price and carrying value of the property, plants and
equipment or investments and other incidental expenses.
Rental Income
Rental income arising from operating lease on investments
properties is accounted for on a straight - line basis over the
lease term except the case where the incremental lease re¬
flects inflationary effect and rental income is accounted in
such case by actual rent for the period.
Insurance Claim
Claim receivable on account of insurance is accounted for
to the extent the Company is reasonably certain of their ulti¬
mate collections.
Other Income
Revenue from other income is recognized on accrual basis.
1.3.11 Foreign Currency Transactions and Translation
Transactions in foreign currencies are recorded at the ex¬
change rate prevailing on the date of transaction. Monetary
assets and liabilities denominated in foreign currencies are
translated at the functional currency closing rates of ex¬
change at the reporting date. Exchange differences arising
on settlement or translation of monetary items are rec¬
ognised in Statement of Profit and Loss except to the extent
of exchange differences which are regarded as an adjust¬
ment to interest costs on foreign currency borrowings that
are directly attributable to the acquisition or construction of
qualifying assets which are capitalised as cost of assets.
Non-monetary items that are measured in terms of historical
cost in a foreign currency are recorded using the exchange
rates at the date of the transaction. Non-monetary items
measured at fair value in a foreign currency are translated
using the exchange rates at the date when the fair value
was measured. The gain or loss arising on translation of
non-monetary items measured at fair value is treated in line
with the recognition of the gain or loss on the change in fair
value of the item (i.e., translation differences on items whose
fair value gain or loss is recognised in Other Comprehensive
Income or Statement of Profit and Loss are also recognised
in Other Comprehensive Income or Statement of Profit and
Loss, respectively).
1.3.12 Government Grants and Subsidies
Grants in the nature of subsidies which are non-refundable
are recognized as income where there is reasonable assur¬
ance that the Company will comply with all the necessary
conditions attached to them. Income from grants is recog¬
nized on a systematic basis over periods in which the re¬
lated costs that are intended to be compensated by such
grants are recognized.
Refundable government grants are accounted in accor¬
dance with the recognition and measurement principle of
Ind AS 109, "Financial Instruments". It is recognized as in¬
come when there is a reasonable assurance that the Com¬
pany will comply with all necessary conditions attached to
the grants. Income from such benefit is recognized on a
systematic basis over the period of the grants during which
the Company recognizes interest expense corresponding to
such grants.
1.3.13 Financial Instruments - Financial Assets
(A) Initial Recognition and Measurement
All Financial Assets are initially recognised at fair value.
Transaction costs that are directly attributable to the
acquisition or issue of Financial Assets, which are not
at Fair Value Through Profit or Loss, are adjusted to the
fair value on initial recognition.
Purchase and sale of Financial Assets are recognised
using trade date accounting.
(B) Subsequent Measurement
a) Financial Assets measured at Amortised Cost (AC)
A Financial Asset is measured at Amortised 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
to cash flows on specified dates that represent sole¬
ly payments of principal and interest on the principal
amount outstanding.
b) Financial Assets measured at Fair Value Through Other
Comprehensive Income (FVTOCI)
A Financial Asset is measured at FVTOCI 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 Fi-
nancial Asset give rise on specified dates to cash flows
that represents solely payments of principal and inter¬
est on the principal amount outstanding.
Further, the Company, through an irrevocable election
at initial recognition, has measured certain investments
in equity instruments at FVTOCI. The Company has made
such election on an instrument-by-instrument basis.
These equity instruments are neither held for trading
nor are contingent consideration recognized under a
business combination. Pursuant to such irrevocable
election, subsequent changes in the fair value of such
equity instruments are recognized in OCI. However, the
Company recognizes dividend income from such in¬
struments in the Statement of Profit and Loss.
c) Financial Assets measured at Fair Value Through Profit
or Loss (FVTPL)
A Financial Asset which is not classified in any of the
above categories is measured at FVTPL. Financial as¬
sets are reclassified subsequent to their recognition, if
the Company changes its business model for managing
those financial assets. Changes in business model are
made and applied prospectively from the reclassifica¬
tion date which is the first day of immediately next re¬
porting period following the changes in business model
in accordance with principles laid down under Ind AS
109 - Financial Instruments.
(C) Investments
Investments are classified in to Current or Non-Current In¬
vestments. Investments that are readily realizable and in¬
tended to be held for not more than a year from the date of
acquisition are classified as Current Investments. All other
Investments are classified as Non - Current Investments.
However, that part of Non - Current Investments which are
expected to be realized within twelve months from the Bal¬
ance Sheet date is also presented under "Current Invest¬
ments" under "Current portion of Non-Current Investments"
in consonance with Current/Non-Current classification of
Schedule - III of the Act.
All the equity investment which covered under the scope of
Ind AS 109, "Financial Instruments" is measured at the fair
value. Investment in Mutual Fund is measured at fair value
through profit and loss (FVTPL). Trading Instruments are
measured at fair value through profit and loss (FVTPL).
(D) Investment in Subsidiaries, Associates and Joint Ventures
The Company has accounted for its investments in Subsid¬
iaries, associates and joint venture at cost less impairment
loss (if any).
(E) Impairment of Financial Assets
In accordance with Ind AS 109, the Company uses 'Expected
Credit Loss’ (ECL) model, for evaluating impairment of Finan¬
cial Assets other than those measured at Fair Value Through
Profit and Loss (FVTPL).
1.3.14 Financial Instruments - Financial Liabilities
(A) Initial Recognition and Measurement
All Financial Liabilities are recognised at fair value and in
case of borrowings, net of directly attributable cost. Fees of
recurring nature are directly recognised in the Statement of
Profit and Loss as finance cost.
(B) Subsequent Measurement
Financial Liabilities are carried at amortised cost using the
effective interest method. For trade and other payables ma¬
turing within one year from the balance sheet date, the car¬
rying amounts approximate fair value due to the short matu¬
rity of these instruments.
1.3.15 Derivative Financial Instruments and Hedge Accounting
The Company enters into derivative contracts in the nature
of forward currency contracts with external parties to hedge
its foreign currency risks relating to foreign currency denom¬
inated financial assets measured at amortised cost.
The Company formally establishes a hedge relationship
between such forward currency contracts ('hedging in¬
strument’) and recognised financial assets ('hedged item’)
through a formal documentation at the inception of the
hedge relationship in line with the Company’s Risk Manage¬
ment objective and strategy.
The hedge relationship so designated is accounted for in
accordance with the accounting principles prescribed for a
cash flow hedge under Ind AS 109, 'Financial Instruments’.
Recognition and measurement of cash flow hedge:
The Company strictly uses foreign currency forward con¬
tracts to hedge its risks associated with foreign currency
fluctuations relating to certain forecasted transactions. As
per Ind AS 109 - Financial Instruments, foreign currency for¬
ward contracts are initially measured at fair value and are
re-measured at subsequent reporting dates. Changes in the
fair value of these derivatives that are designated and effec¬
tive as hedges of future cash flows are recognised in hedge
reserve (under reserves and surplus) through other compre¬
hensive income and the ineffective portion is recognised
immediately in the statement of profit and loss.
The accumulated gains / losses on the derivatives account¬
ed in hedge reserve are transferred to the statement of prof¬
it and loss in the same period in which gains / losses on the
underlying item hedged are recognised in the statement of
profit and loss.
Derecognition:
Hedge accounting is discontinued when the hedging instru¬
ment expires or is sold, terminated, or exercised, or no longer
qualifies for hedge accounting. When hedge accounting is
discontinued for a cash flow hedge, the net gain or loss will
remain in hedge reserve and be reclassified to the state¬
ment of profit and loss in the same period or periods during
which the formerly hedged transaction is reported in the
statement of profit and loss. If a hedged transaction is no
longer expected to occur, the net cumulative gains / losses
recognised in hedge reserve is transferred to the statement
of profit and loss.
Fair Value Hedge:
The Company designates derivative contracts or non-deriv¬
ative Financial Assets/Liabilities as hedging instruments to
mitigate the risk of change in fair value of hedged item due
to movement in interest rates, foreign exchange rates and
commodity prices.
Changes in the fair value of hedging instruments and
hedged items that are designated and qualify as fair value
hedges are recorded in the Statement of Profit and Loss.
If the hedging relationship no longer meets the criteria for
hedge accounting, the adjustment to the carrying amount
of a hedged item for which the effective interest method is
used is amortised to Statement of Profit and Loss over the
period of maturity.
1.3.16 Derecognition of Financial Instruments
The Company derecognises a Financial Asset when the con¬
tractual 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 li¬
ability (or a part of a financial liability) is derecognised from
the Company’s Balance Sheet when the obligation specified
in the contract is discharged or cancelled or expires.
1.3.17 Financial Instruments - Offsetting
Financial Assets and Financial Liabilities are offset and the
net amount is presented in the balance sheet when, and
only when, the Company has a legally enforceable right to
set off the amount and it intends, either to settle them on a
net basis or to realise the asset and settle the liability simul¬
taneously.
1.3.18 Taxes on Income
The tax expenses for the period comprises of current tax
and deferred income tax. Tax is recognised in Statement of
Profit and Loss, except to the extent that it relates to items
recognised in the Other Comprehensive Income. In which
case, the tax is also recognised in Other Comprehensive In¬
come.
(a) Current Tax
Current tax assets and liabilities are measured at the amount
expected to be recovered from or paid to the Income Tax au¬
thorities, based on tax rates and laws that are enacted at
the Balance sheet date.
(b) Deferred Tax
Deferred tax is recognised on temporary differences be¬
tween the carrying amounts of assets and liabilities in the
Financial Statements and the corresponding tax bases used
in the computation of taxable profit.
Deferred tax assets are recognised to the extent it is prob¬
able that taxable profit will be available against which the
deductible temporary differences, and the carry forward of
unused tax losses can be utilised. Deferred tax liabilities
and assets are measured at the tax rates that are expected
to apply in the period in which the liability is settled or the
asset realised, based on tax rates (and tax laws) that have
been enacted or substantively enacted by the end of the re-
porting period. The carrying amount of Deferred tax liabilities
and assets are reviewed at the end of each reporting period.
Presentation
The Company offsets current tax assets and current tax li¬
abilities, 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. In case of deferred tax assets and deferred
tax liabilities, the same are offset if the Company has a le¬
gally enforceable right to set off corresponding current tax
assets against current tax liabilities and the deferred tax as¬
sets and deferred tax liabilities relate to income taxes levied
by the same tax authority on the Company.
1.3.19 Segment Reporting
Segments are identified having regard to the dominant
source and nature of risks and returns and the internal or¬
ganization and management structure. Operating segments
are reported in a manner consistent with the internal re¬
porting provided to the chief operating decision maker. The
Chairman and Managing Director (CMD) of the Company
have been identified as the Chief Operating Decision Maker
(CODM).
1.3.20 Research and Development
Revenue expenditure pertaining to research is charged to
the Statement of Profit and Loss as and when incurred.
Development costs are capitalised as an intangible asset if
it can be demonstrated that the project is expected to gen¬
erate future economic benefits, it is probable that those fu¬
ture economic benefits will flow to the entity and the costs
of the asset can be measured reliably, else it is charged to
the Statement of Profit and Loss.
1.3.21 Earnings per Share
Basic earnings per share is calculated by dividing the net
profit after tax by the weighted average number of equity
shares outstanding during the year adjusted for bonus ele¬
ment in equity share. Diluted earnings per share adjusts the
figures used in determination of basic earnings per share
to take into account the conversion of all dilutive potential
equity shares. Dilutive potential equity shares are deemed
converted as at the beginning of the period unless issued at
a later date.
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