1.4 SUMMARY OF MATERIAL ACCOUNTING POLICIES
a) Property, Plant and Equipment Measurement at Recognition
An item of property, plant and equipment that qualifies as an asset is measured on the initial recognition at cost. Following the initial recognition, item of property, plant and equipment are carried at its cost less accumulated depreciation and accumulated impairment losses, if any. The Company identifies and determines cost of each part of an item of property, plant and equipment separately, if the part has a cost which is significant to the total cost of that item of property, plant and equipment and has useful life that is materially different from that of the remaining items.
The cost of an item of property, plant and equipment comprises of its purchase price net of discounts, if any, including import duties and other non-refundable purchase taxes or levies, directly attributable cost of bringing the assets to its present location and working condition for its intended use and the initial estimate of decommissioning, restoration, and similar liabilities, if any. Cost includes the cost of replacing a part of the plants and equipments if the recognition criteria are met. Expenses directly attributable to new manufacturing facilities during its construction period are capitalized if the recognition criteria are met. Expenditure related to plans, designs and drawings of buildings or plants and machinery are capitalized under the relevant heads of property, plant and equipment, if the recognition criteria are met. When significant parts of property, plant and equipment are required to be replaced at periodical intervals, the Company recognizes such parts as individual assets with specific useful lives and depreciates them accordingly.
Subsequent costs are included in the asset’s carrying amount or recognized 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. The carrying amount of any components accounted for as a separate asset is de-recognized when replaced.
All the costs, including administrative, financing and general overhead expenses, as are specifically attributable to construction of a specific projects or to the acquisition of a property, plant and equipment or bringing it to its present location and working condition, is include as a part of the cost of construction of the project or as a part of the cost of property, plant and equipment, till the commencement of its commercial production. Any adjustments arising from exchange rate variations attributable to the property, plant and equipment are capitalized as aforementioned.
Borrowing costs relating to the acquisition / construction of property, plant and equipment which takes the substantial period of time to get ready for its intended use are also included in the cost of property, plant and equipment / cost of constructions to the extent they relate to the period till such property, plant and equipment are ready to be put to use.
Any subsequent expenditure related to an item of property, plant and equipment is added to its book value only and only if it increases the future economic benefits from the existing assets beyond its previously assessed standard of performance.
Any items such as spare parts, stand-by equipments and servicing equipments that meet the definitions criteria of the property, plant and equipment are capitalized at cost and depreciated over the useful life of the respective property, plant and equipment. Cost is in the nature of repairs and maintenances are recognized in the standalone statement of profit and loss as and when incurred.
Capital Work-in-Progress and Capital Advances
Cost of property, plant and equipment not ready for intended use, as at 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 out 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 projects. Any advances given towards acquisition of property, plant and equipment outstanding at each balance sheet date is disclosed as “Other Non - Current Assets”.
The Company has elected to consider the carrying value of all its property, plants and equipments appearing in its standalone financial statements and used the same as deemed cost in the opening Ind AS Balance Sheet prepared at April 01, 2018.
Depreciation
Depreciation on each part of property, plant and equipment are provided to the extent of the depreciable amount of the assets on the basis of “Straight Line Method (SLM)” on the useful lives of the tangible property, plant and equipment as estimated by the Company’s management and is charged to the statement of profit and loss, as per the requirement of Schedule - II to the Companies Act, 2013. The estimated useful lives of the property, plant and equipment has been assessed based on the technical advice, which is considered in the nature of the property, plant and equipment, the usage of the property, plant and equipment, expected physical wear and tear of such property, plant and equipment, the operating conditions, anticipated technological changes, manufacturer warranties and maintenance support of the property, plant and equipment etc.
When the parts of an item of the property, plant and equipment have different useful lives, they are accounted for as separate items (major components) and are depreciated over their useful lives or over the remaining useful lives of the principal property, plant and equipment, whichever is less.
The useful lives of the items of property, plants and equipments as estimated by the Company’s management is mentioned below:
The Company based on technical assessment made by the technical experts and the Company’s management estimate, depreciate certain items of property, plant and equipment over the estimated useful lives which are different from the useful lives as prescribed under Schedule - II of the Companies Act, 2013. The Company’s management believes that the useful lives given above are best to represent the period over which Company’s management expects to use this property, plant and equipment.
Freehold land is not depreciated. Leasehold land and their improvement cost are amortized over the period of the lease.
The useful lives, residual value of each part of an item of property, plant and equipment and method of depreciation is reviewed at the end of each reporting period, if any, of these expectations differ from the previous estimates, such change is accounted for as a change in accounting estimate and adjusted prospectively, if appropriate.
Derecognition
The carrying amount of an item of property, plant and equipment and other intangible assets are recognized on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from derecognition of the property, plant and equipment is measured as the difference between the net disposal proceeds and the carrying amount of the assets and is recognized in the standalone statement of profit and loss, as and when the assets are de-recognized.
b) Intangible Assets
Measurement at Recognition
Intangible assets acquired separately measured on the initial recognition at cost. Intangible assets arising on the acquisition of businesses are measured at fair value as at the date of acquisition. Internally generated intangible assets including research costs are not capitalized and the related expenditure is recognized in the standalone statement of profit and loss in the period in which the expenditure is incurred. Following the initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment loss, if any.
The Company has elected to consider the carrying value of all intangible assets appearing in its standalone financial statements and used the same as deemed cost in the opening Ind AS Balance Sheet prepared at April 01, 2018.
Amortization
Intangible assets with the finite lives are amortized on a “Straight Line Basis ” over the estimated useful economics lives of such intangible assets. The amortization expenses on intangible assets with finite lives are recognized in the standalone statement of profit and loss. The estimated useful lives of intangible assets is mentioned below:
The amortization period and the amortization method for an intangible asset with the finite useful lives are reviewed at the end of each financial year. If any of these expectations differ from the previous estimates, such changes are accounted for as a change in an accounting estimate and adjusted prospectively, if appropriate.
Derecognition
The carrying amount of an intangible asset is derecognized at disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the de-recognition of an intangible assets is measured as the difference between the net disposal proceeds and the carrying amount of the intangible assets and is recognized in the standalone statement of profit and loss, as and when such assets are de-recognized.
c) Impairment
Assessment for impairment is done at each Balance Sheet date as to whether there is any indication that a nonfinancial asset may be impaired. Assets that have an indefinite useful life are not subject to amortization and are tested for impairment annually and whenever there is an indication that the assets may be impaired.
Assets that are subject to depreciation and amortization and assets representing investment in subsidiary and associate companies are reviewed for impairment, whenever events or changes in circumstances indicate that carrying amount may not be recoverable. Such circumstances include, though are not limited to, significant or sustained decline in revenues or earnings and material adverse changes in the economic environments.
The Company assesses at each reporting date, whether there is an indication that assets may be impaired, if any indication exists based on internal or external factors, or when Annual impairment testing for assets is required, the Company estimates the asset’s recoverable amount. Where the carrying amount of the assets or its cash generating unit (CGU) exceeds its recoverable amount, the assets are considered impaired and written down to its recoverable amount. The recoverable amount is greater of the fair value less cost to sell and value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax rate that reflects current market rates and the risk specific to the assets. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the CGU to which the assets belong. Fair value less cost to sell is the best estimate of the amount obtainable from the sale of an assets in an arm’s length transactions between knowledgeable, willing parties, less cost of disposal. After the impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful lives.
Reversal of impairment losses recognized in prior years is recorded when there is an indication that the impairment losses recognized for the assets no longer exists or has decreased. However, the increase in the carrying amount of assets due to the reversal of an impairment loss is recognized to the extent it does exceed the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognized for the assets in the prior years.
Impairment losses, if any, are recognized in the standalone statement of profit and loss and included in depreciation and amortization expense. Impairment losses are reversed in the standalone statement of profit and loss only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had previously been recognized.
d) Revenue Recognition
Revenue from Contracts with Customers
Revenue from contracts with customers is recognized on transfer of control of promised goods or services to a customer at an amount that reflects the consideration to which the Company is expected to be entitled in exchange for those goods or services. Revenue towards satisfaction of a performance obligation is measured in the amount of transaction price (net of variable consideration on accounts of various discounts and schemes offered by the Company as a part of the Contracts) allocated to that performance obligation. These variable considerations are estimated based on the expected value of outflow. Revenue (net of variable consideration) is recognized only to the extent that it is highly probable that the amount will not be subject to significant reversal when uncertainty relating to its recognition is resolved.
Sale of Products
Revenue from sales of goods is recognized when control on the goods has been transferred to the customers. The performance obligation in the case of sale of goods is satisfied at a point in time i.e. when the material is shipped to the customers or delivery to the customers as may be specified in the contracts with them.
Sales (Gross) excludes Goods and Service Tax (GST) and is a net of discounts and incentives to the customers. Sale of Services
Revenue from sales of service is recognized over time by measuring the progress towards satisfaction of performance obligation for the service rendered. The revenue is recognized based on the agreements / arrangements with the customers as the service is performed and based on the satisfaction of performance obligation.
Advances from customers are recognized under “Other Current Liabilities” and released to revenue on satisfaction of performance obligation.
Interest
Revenue from interest income is recognized using the effective interest method. Effective interest rate (EIR) is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instruments or a shorter period, where appropriate, to the gross carrying amount of the financial assets or to the amortized cost of financial liabilities.
Insurance Claim
Claim receivable on account of insurance are accounted for to the extent the Company is reasonably certain of their ultimate collections.
e) Government Grants and Subsidies Recognition and Measurements
The Company recognizes grant as income when there is reasonable assurance that the Company will comply with all the necessary conditions attached to them and the grant will be received in accordance with Ind AS - 20, “Accounting for Government Grants and Disclosure of Government Assistance”. The Company is entitled to certain non-refundable subsidies from the Government in respect of manufacturing units located in the state of Maharashtra, which are measured at amounts receivable from the Government.
Income from such benefits is recognized on a systematic basis over the period in which the related costs that are intended to be compensated by such grants are recognized.
Presentation
Income from the above grants and subsidies are presented under Revenue from Operations.
f) Inventories
Raw material, work-in-progress, finished goods, packing material, stores and spares, components, consumables and stock-in-trade are carried at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written - down below cost, if the finished goods in which they will be incorporated are expected to be sold at or above costs. The comparison of costs and net realizable value is made on an item-by-item basis. In determining the cost of raw materials, work-in-progress, finished goods, packing materials, stores and spares, components and stock-in-trade, “ Weighted Average” method is used. Cost of inventories comprises all costs of purchase, non-refundable duties and taxes, cost of conversion including an appropriate share of fixed and variable production overheads and all other costs incurred in bringing the inventory to its present location and conditions.
“Net Realizable Value” is the estimated selling price of inventories in the ordinary course of business, less estimated costs of completion and estimated cost necessary to make the sales of the products.
The Company considers factors like estimated shelf life, product discontinuances and aging of inventory in determining the provision for slow moving, obsolete and other non - saleable inventory and adjusts the inventory provision to reflect the recoverable value of the inventory.
g) Financial Instruments
A financial instrument is in any contract that gives rise to the financial assets of one entity and financial liabilities or equity instruments of another entity.
Financial Assets
Initial Recognition and Measurements
The Company recognizes a financial asset in its standalone balance sheet as and when it becomes party to the contractual provisions of the instruments. All the financial assets are recognized initially at fair value, plus in the case of financial assets not recorded at fair value through profit or loss (FVTPL), transaction costs that are attributable to the acquisition of the financial assets. However, trade receivables that do not contain a significant financing component are measured at transaction price.
Where the fair value of a financial assets at initial recognition is different from its transaction price, the difference between the fair value and the transaction price is recognized as a gain or loss in the standalone statement of profit and loss at initial recognition, if the fair value is determined through a quoted market price in an active market for an identical asset (i.e. level 1 input) or through a valuation technique that uses data from observable markets (i.e. level 2 input).
In case the fair value is not determined using a level 1 or level 2 input as mentioned above, the difference between the fair value and transaction price is deferred appropriately and recognized as a gain or loss in the standalone statement of profit and loss only to the extent that such gain or loss arises due to a change in factor that market participants taken into account, when pricing the financial assets.
Subsequent Measurements
For subsequent measurements, the Company classifies a financial asset in accordance with the below criteria:
i) The Company’s business model for managing the financial assets and
ii) The contractual cash flows characteristics of the financial assets.
Based on the above criteria, the Company classifies its financial assets into the following categories:
i) Financial assets measured at amortized costs
ii) Financial assets measured at fair value through other comprehensive income (FVTOCI)
iii) Financial assets measured at fair value through profit or loss (FVTPL)
Financial Assets measured at Amortized Costs
A financial asset is measured at the amortized costs if both the following conditions are met:
a) The Company’s business model objective for managing the financial assets is to hold financial assets in order to collect contractual cash flows, and
b) The contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
This category applies to cash and bank balances, trade receivables, loans and other financial assets of the Company. Such financial assets are subsequently measured at amortized cost using the effective interest method. Under the effective interest method, the future cash receipts are discounted to the initial recognition value using the effective interest rate. The cumulative amortization using the effective interest method of the difference between the initial recognition amounts and the maturity amount is added to the initial recognition value (net of principal repayments, if any) of the financial assets over the relevant period of the financial assets to arrive at the amortized costs at each reporting date. The corresponding effect of the amortization, under effective interest method is recognized as interest income over the relevant period of the financial assets. The same is included under “Other Income” in the standalone statement of profit and loss. The amortized costs of financial assets are also adjusted for loss allowance, if any.
Financial Assets measured at FVTOCI
A financial asset is measured at FVTOCI if both of the following conditions are met:
a) The Company’s business model objective for managing the financial assets is achieved both by collecting contractual cash flows and selling the financial assets, and
b) The contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
This category applies to certain investments in debt instruments. Such financial assets are subsequently measured at fair value at each reporting date. Fair value changes are recognized in the Other Comprehensive Income (OCI). However, the Company recognizes interest income and impairment losses and its reversals in the standalone statement of profit and loss.
On de-recognition of such financial assets, cumulative gain or loss previously recognized in OCI is reclassified from equity to standalone statement of profit and loss.
Further, the Company, through an irrevocable election at initial recognition, has measured certain investments in equity instruments at FVTOCI. The Company has made such selection 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 other comprehensive income. However, the Company recognizes dividend income from such instruments in the standalone statement of profit and loss, when the right to receive such payment is established, it is probable that the economic benefits will flow to the Company and the amount can be measured reliably.
On de-recognition of such financial assets, cumulative gain or loss previously recognized in OCI is not reclassified from equity to standalone statement of profit and loss. However, the Company may transfer such cumulative gain or loss into retained earnings within equity.
Financial Assets measured at FVTPL
A financial asset is measured at FVTPL unless it is measured at amortized costs or at FVTOCI as explained above. This is a residual category applied to all other investments of the Company excluding investments in subsidiary and associate companies. Such financial assets are subsequently measured at fair value at each reporting date. Fair value changes are recognized in the standalone statement of profit and loss.
Derecognition
A financial asset (or, where applicable, a part of a financial assets or part of a group of similar financial assets) is derecognized (i.e. removed from the Company’s standalone balance sheet) when any of the following occurs:
i) The contractual rights to cash flows from the financial assets expire.
ii) The Company transfers its contractual rights to receive cash flows of the financial assets and has substantially transferred all the risks and rewards of ownership of the financial asset.
iii) The Company retains the contractual rights to receive cash flows but assumes a contractual obligation to pay the cash flows without material delay to one or more recipients under a “pass-through” arrangement (thereby substantially transferring all the risks and rewards of ownership of the financial assets).
iv) The Company neither transfers nor retains substantially all risk and rewards of ownership and does not retain control over the financial assets.
In cases, where the Company has neither transferred nor retained substantially all the risks and rewards of the financial assets, but retains control of the financial assets, the Company continues to recognize such financial assets to the extent of its continuing involvement in the financial assets. In that case, the Company also recognizes an associated liability. The financial assets and the associated liabilities are measured on a basis that reflects the rights and obligations that the Company has retained.
On de-recognition of financial assets, (except as mentioned in above for financial assets measured at FVTOCI), the difference between the carrying amount and the consideration received is recognized in the standalone statement of profit and loss.
Impairment of Financial Assets
The Company applies expected credit losses (ECL) model for measurements and recognition of loss allowance on the following:
i) Trade receivables
ii) Financial assets measured at amortized costs (other than trade receivables)
iii) Financial assets measured at fair value through other comprehensive income (FVTOCI)
In the case of trade receivables, the Company follows a simplified approach wherein an amount equal to lifetime ECL is measured and recognized as loss allowance.
In the case of other assets (listed as ii and iii above), the Company determines if there has been a significant increase in credit risk of the financial assets since the initial recognition. If the credit risk of such assets has not increased significantly, an amount equal to twelve months ECL is measured and recognized as loss allowance. However, if credit risk has increased significantly, an amount equal to lifetime ECL is measured and recognized as loss allowance.
Subsequently, if the credit quality of the financial assets improves such that there is no longer a significant increase in credit risk since initial recognition, the Company reverts to recognizing impairment loss allowance based on twelve months ECL.
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 entity expected to receive (i.e., all cash shortfalls), discounted at the original effective interest rate. Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of financial assets. Twelve months ECL is a portion of the lifetime ECL which results from default events that are possible within twelve months from the reporting date.
ECL are measured in a manner that they reflect unbiased, and probability weighted amounts determined by a range of outcomes, taking into account the time value of money and other reasonable information available as a result of past events, current conditions and forecasts of future economic conditions.
As a practical expedient, the Company uses a provision matrix to measure lifetime ECL on its portfolio of trade receivables. The provision matrix is prepared based on historically observed default rates over the expected life of trade receivables and is adjusted for forward-looking estimates. At each reporting date, the historically observed default rates and changes in the forward-looking estimates are updated.
ECL impairment loss allowance (or reversal) recognized during the reporting period are recognized as income/ expense in the standalone statement of profit and loss under the head “Other Expenses”.
Financial Liabilities
Initial Recognition and Measurements
The Company recognizes financial liabilities in its balance sheet when it becomes party to the contractual provisions of the instruments. All financial liabilities are recognized initially at fair value, in the case of financial liabilities not recorded at fair value through profit or loss (FVTPL), transaction costs that are attributable to the acquisition of the financial liabilities.
Where the fair value of a financial liabilities at initial recognition is different from its transaction price, the difference between the fair value and the transaction price is recognized as a gain or loss in the standalone statement of profit and loss at initial recognition if the fair value is determined through a quoted market price in an active market for an identical asset (i.e. level 1 input) or through a valuation technique that uses data from observable markets (i.e. level 2 input).
In case the fair value is not determined using a level 1 or level 2 input as mentioned above, the difference between the fair value and transaction price is deferred appropriately and recognized as a gain or loss in the standalone statement of profit and loss, only to the extent that such gain or loss arises, due to a change in factor that market participants taken into account when pricing the financial liabilities.
Subsequent Measurements
All the financial liabilities of the Company are subsequently measured at amortized costs using the effective interest method.
Under the effective interest method, the future cash payments are exactly discounted to the initial recognition value using the effective interest rate. The cumulative amortization using the effective interest method of the difference between the initial recognition amount and the maturity amount is added to the initial recognition value (net of principal repayments, if any) of the financial liabilities over the relevant period of the financial liabilities to arrive at the amortized costs at each reporting date. The corresponding effect of the amortization, under effective interest method are recognized as interest expense over the relevant period of the financial liabilities. The same is included under finance costs in the standalone statement of profit and loss.
Derecognition
A financial liability is de-recognized when the obligation under the liabilities is discharged or cancelled or expires. When existing financial liabilities are replaced by another from the same lender on substantially different terms, or the terms of an existing liabilities are substantially modified, such an exchange or modification are treated as the de-recognition of the original liabilities and the recognition of a new liabilities. The difference between the carrying amount of the financial liabilities de-recognized and the consideration paid is recognized in the standalone statement of profit and loss.
Offsetting of Financial Assets and Financial Liabilities
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 recognized amounts and there is an intention to settle on a net basis or to realize the assets and settle the liabilities simultaneously.
h) Derivative Financial Instruments and Hedge Accounting
The Company enters into derivative financial contracts in the nature of forward currency contracts with external parties to hedge its foreign currency risks relating to foreign currency denominated financial liabilities measured at amortized cost. The Company formally establishes a hedge relationship between such forward currency contracts (“Hedging Instruments”) and recognized financial liabilities (“Hedged Items”) through a formal documentation at the inception of the hedge relationship in line with the Company’s Risk Management objective and strategy.
The hedge relationship so designated is accounted for in accordance with the accounting principles prescribed for a fair value hedge under Ind AS - 109, “Financial Instruments”.
Recognition and Measurement of Fair Value Hedge
Hedging instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently measured at fair value at each reporting date. Gain or loss arising from such changes in the fair value of hedging instruments is recognized in the standalone statement of profit and loss. Hedging instruments is recognized as financial assets in the Standalone Balance Sheet, if it’s fair value as at reporting date is positive as compared to carrying value and as financial liabilities, if it’s fair value as at reporting date is negative as compared to carrying value.
Hedged items (recognized financial liabilities) are initially recognized at fair value on the date of entering into the contractual obligation and are subsequently measured at amortized costs. The hedging gain or loss on the hedged items is adjusted to the carrying value of the hedged item as per the effective interest method and the corresponding effects are recognized in the Standalone Statement of Profit and Loss.
Derecognition
On derecognition of the hedged items, the unamortized fair value of the hedging instrument adjusted to the hedged items, is recognized in the standalone statement of profit and loss.
i) Fair Value
The Company measures financial instruments at fair value in accordance with the accounting policies mentioned above. 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. The fair value measurement is based on the presumption that the transaction to sell the assets or transfer the liabilities takes place either:
* In the principal market for the assets or liabilities, or
* In the absence of a principal market, in the most advantageous market for the assets or liabilities.
All the assets and liabilities for which fair value is measured or disclosed in the standalone financial statements are categorized within fair value hierarchy that categorizes into three levels, described are as follows, the inputs to valuation techniques used to measure value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs).
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly.
Level 3 - Inputs that are unobservable for the assets or liabilities.
For assets and liabilities that are recognized in the standalone financial statements at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization at the end of each reporting period and discloses the same.
j) Investments in Associate Companies
The Company has elected to recognize its investments in associate companies at cost in accordance with the option available in Ind AS - 27, “Separate Financial Statements”. Investments in associates are carried at cost less accumulated impairment losses, if any. Cost includes cash consideration paid on initial recognition adjusted for embedded derivatives and estimated contingent considerations (earn out), if any. Contingent consideration (earn out) is remeasured at fair value at each reporting date and changes in the fair value of the contingent consideration are recognized in the standalone statement of profit and loss.
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 associates, the difference between net disposal proceeds and the carrying amounts are recognized in the standalone statement of profit and loss.
k) Foreign Currency Transactions
a) Initial Recognition
Transactions in the foreign currencies entered into by the Company are accounted in the functional currency (i.e. Indian Rupee '), by applying the exchange rates prevailing on the date of the transaction i.e. spot exchange rate. Any exchange difference arising on foreign exchange transactions settled during the reporting period are recognized in the standalone statement of profit and loss except to the extent that they are regarded as an adjustment to the finance costs on foreign currency borrowings that are directly attributable to the acquisition or constructions of the qualifying assets, are capitalized to the qualifying assets.
b) Measurement of Foreign Currency Items at Reporting Date
Foreign currency monetary items of the Company are restated as at the end of the reporting date by using the closing exchange rate as prescribed by the Reserve Bank of India. Non-monetary items are recorded at the exchange rate prevailing on the date of the transactions i.e. measured at historical costs. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is measured i.e. using the exchange rate at the date of transactions. Exchange differences arising out of foreign exchange translations and settlements during the period are recognized in the standalone statement of profit and loss.
l) Taxes on Income
Tax expense comprises current tax and deferred income tax. Tax expenses are the aggregate amount included in the determination of profit or loss for the reporting period current tax and deferred income tax. Tax expenses are recognized in the standalone statement of profit and loss, except to the extent that it relates to the items recognized in the other comprehensive income or in the equity. In that case, tax is also recognized in other comprehensive income or equity.
Current income tax is the amount of income tax payable in respect of taxable profit for the reporting period. Taxable profit differs from “Profit Before Tax” as reported under standalone statement of profit and loss because of item of expenses or income that are taxable or deductible in other years and items that are never taxable or deductible under Income Tax Act, 1961.
Current tax assets and liabilities are measured by using the tax rates that have been enacted by the end of the reporting period for the amounts expected to be recovered from or paid to the income tax authorities. Current tax also includes any adjustment amount to tax payable / receivable in respect of previous reporting period.
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the standalone financial statements and the corresponding tax bases used in the computation of taxable profit under Income Tax Act, 1961 and their carrying amounts. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are generally recognized for all deductible and taxable temporary differences. However, in the case of temporary differences that arise from initial recognition of assets or liabilities in a transaction (other than business combination) that affect neither the taxable profits nor the accounting profits or does not give rise to equal taxable and deductible temporary difference, deferred tax assets and liabilities are not recognized. Also, for temporary differences, if any, that may arise from initial recognition of goodwill, deferred tax liabilities are not recognized.
Deferred tax assets are generally recognized for all deductible temporary differences, and any unused tax losses and unused tax credits, to the extent, it is probable that taxable profits will be available against which those deductible temporary difference can be utilized. In the case of temporary differences that arise from initial recognition of assets or liabilities in a transaction that affect neither the taxable profits nor the accounting profits, deferred tax assets are not recognized.
The carrying amount of deferred tax assets / liabilities are reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the benefits of part or all such deferred tax assets to be utilized.
Deferred tax assets and liabilities are measured at the tax rates that have been enacted or substantively enacted by the Balance Sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Uncertain Tax Positions
The Company’s management periodically evaluates the positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and consider whether it is probable that a taxation authority will accept uncertain tax treatments. The Company reflects the effect of uncertainty for each uncertain tax treatment by using one of two methods, the expected value method (the sum of the possibility - weighted amounts in range of possible outcomes) or the most likely amount (single most likely amount method in a range of possible outcomes), depending on which is expected to better predict the resolution of the uncertainty. The Company applies consistent judgments and estimates, if an uncertain tax treatment affects both the current and deferred income tax.
Presentation
Current tax and deferred tax are recognized as income or an expense in the standalone statement of profit and loss, except when they relate to items that are recognized in other comprehensive income, in which case, the current tax and deferred tax income / expense are recognized in other comprehensive income.
The Company offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis, or to realize the assets and settle the liabilities simultaneously. In case of deferred tax assets and deferred tax liabilities, the same are offset, if the Company has a legally enforceable right to set off corresponding current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority on the Company.
m) Lease
A lease is classified at the inception date as finance lease or an operating lease. A lease that transfers substantially all the risk and rewards incidental to the ownership of the Company is classified as a finance lease. All other leases are classified as operating leases.
The Company as a Lessee
a) Operating Lease: Rental payable under the operating lease is charged to the standalone statement of profit and loss on a “Straight- line”basis over the term of the relevant lease except where another systematic basis is more representative of time pattern in which economic benefits from the leased assets are consumed.
b) Finance Lease: Finance leases are capitalized at the commencement of the lease, at the lower of the fair value of the property or the present value of the minimum lease payments. The corresponding liabilities for the lessor are included in the Standalone Balance Sheet as a finance lease obligation. Lease payments are appropriated between finance expenses and the reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liabilities. Finance expenses are charged directly against the income over the period of the lease unless they are directly attributable to the qualifying assets, in which case they are capitalized. Contingent rental is recognized as an expense in the period in which they are incurred.
A leased assets are depreciated over the useful lives of the assets, however, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the assets are depreciated over the shorter of the estimated useful lives of the assets and the lease terms.
The Company as a Lessor:
Lease payments under operating leases are recognized as an income on a straight - line basis in the standalone statement of profit and loss over the lease term except where the lease payments are structured to increase in line with expected general inflation. The respective leased assets are included in the standalone balance sheet based on their nature.
n) Borrowing Costs
Borrowing cost include the interest, commitments charges on bank borrowings, amortization of ancillary costs incurred in connection with the arrangement of borrowings and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the finance cost.
Borrowing costs, if any, that are directly attributable to the acquisition or constructions or production of qualifying property, plant and equipment are capitalized as a part of cost of that property, plant and equipment until such time that the assets are substantially ready for their intended use. Qualifying assets are assets which take a substantial period of time to get ready for the intended use or sale.
When the Company borrows the funds specially for the purpose of obtaining the qualifying assets, the borrowing costs incurred are capitalized with the qualifying assets. When the Company borrows fund generally and use them for obtaining a qualifying asset, the capitalization of borrowing costs is computed on weighted average cost of general costs that are outstanding during the reporting period and used for acquisition of the qualifying assets. Capitalization of the borrowing costs ceases when substantially all the activities necessary to prepare the qualifying assets for intended use are complete.
Other borrowing costs are recognized as expenses in the period in which they are incurred. Any interest income earned on temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
o) Employee Benefits Short-Term Employee Benefits
All the employee benefits payable wholly within twelve months of rendering the services are classified as short -term employee benefits and they are recognized in the period in which the employee renders the related services. The Company recognizes the undiscounted amount of short - term employee benefits expected to be paid in exchange for services are rendered as a liability (accrued expense) after deducting any amount already paid.
Post - Employment Benefits
a) Defined Contribution Plans
Defined contribution plans are employee state insurance scheme and Government administrated pension fund scheme for all the applicable employees and superannuation scheme for all the eligible employees, who met eligible criteria. The Company’s contribution to defined contribution plans is recognized in the standalone statement of profit and loss in the reporting period to which they relate.
i) Recognition and Measurement of Defined Contribution Plans
The Company recognizes contribution payable to a defined contribution plan as an expense in the standalone statement of profit and loss when the employees render services to the Company during the reporting period. If the contributions payable for services received from employees before the reporting date exceed the contributions already paid, the deficit payable is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the reporting date, the excess is recognized as an asset to the extent that the prepayment will lead to, for example, a reduction in future payments or a cash refund.
b) Defined Benefits Plans i) Gratuity
The Company operates a defined benefits plan for its employees. The Company pays the gratuity to employee whoever has completed its five years of service with the Company at the time of retirement or resignation or superannuation. The gratuity is paid @ 15 Days salary for every completed year of service as per the Payment of Gratuity Act, 1972.
The liabilities in respect of gratuity are calculated using “Project Unit Credit Method” and spread over the period during which the benefits are expected to be derived from employee services. The remeasurements of defined benefits plan in respect of post - employments are charged to the other comprehensive income (OCI).
ii) Provident Fund Scheme
Provident fund is defined contribution plan covering certain eligible employees. The Company and the eligible employees make a monthly contribution to the provident fund maintained by the regional provident fund commissioners equal to the specified percentage of the basic salary of the eligible employees as per the scheme. The contributions to the provident fund are charged to the standalone statement of profit and loss for the period when the contributions are due. The Company has no obligation, other than the contributions payable to the provident fund.
iii) Pension Scheme
The Company operates a defined benefit pension plan for certain specified employees and is payable upon the employee satisfying certain conditions, as approved by the Board of Directors.
iv) Post - Retirement Medical Benefit Plan
The Company operates a defined post-retirement medical benefits plan for certain specified employees and is payable upon the employee satisfying certain conditions.
v) Leave Encashment
Accumulated leave, which is expected to be utilized within the next twelve months, is treated as short - term employee benefits for measurement purposes. The Company measures the expected cost of such absence as the additional amount that are expected to pay as a result of unused entitlement that has accumulated at the reporting date.
The Company treats accumulated leave expected to be carried forward beyond twelve months, as long - term employee benefits for measurement purpose. Such long - term compensated absences are provided based on the actuarial valuation using the “Project Unit Credit Method” at the reporting date. Actuarial gain / losses are immediately taken to the standalone statement of profit and loss and are not deferred.
Recognition and Measurement of Defined Contribution Plans
The cost of providing defined benefits is determined using the “Projected Unit Cash Credit” method with actuarial valuations being carried out at each Balance Sheet date. The defined benefit obligations recognized in the balance sheet represent the present value of the defined benefit obligations as reduced by the fair value of plan assets, if applicable. Any defined benefit assets (negative benefit defined obligations resulting from these calculations) are recognized representing the present value of available refunds and reductions in future contributions to the plan.
All expenses represented by current service cost, past service cost, if any, and net interest on defined benefit liabilities / (assets) are recognized in the standalone statement of profit and loss. Remeasurement of the net defined benefits liabilities/ (assets) comprising actuarial gains and losses and the return on the plan assets (excluding amounts included in net interest on the net defined benefit liabilities /assets), are recognized in other comprehensive income. Such remeasurements are not reclassified to the standalone statement of profit and loss in the subsequent periods.
Past service cost is recognized immediately to the extent that the benefits are already vested, else is amortized on a straight-line basis over the average period until the amended benefits become vested. Actuarial gain or losses in respect of the defined benefits plan are recognized in the standalone statement of profit and loss in the year in which they arise.
The Company presents the above liabilities as current and non-current in the balance sheet as per the actuarial valuation by the independent actuary.
p) Segment Reporting
Segments are identified having regard to the dominant source and nature of the risks and returns and the internal organization and management structures. The Company has considered business segments as primary segments. The Company does not have any geographical segments.
Identification of Segments
The Company’s operating business are organized and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers the different products and serves the different markets. Majorly, the Company’s business segments are Aluminium Powder and Paste, Aluminium Conductor, Aluminium Foils and Others.
Segment Accounting Policies
The Company’s Board of Directors is identified as the Chief Operating Decision Maker (CODM). The CODM reviews the overall financial information of the Company together for performance evaluation and allocation of resources and does not review any discrete information to evaluate the performance of any individual products or geography. The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the standalone financial statements of the Company as a whole.
Operating Segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM). The CODM is responsible for assessing the performance and allocating the resources of the operating segment of the Company. Refer “Note No. 43” for Segment information.
q) Earnings per Share
The Company reports the basic and diluted Earnings per Share (EPS) in accordance with Ind AS - 33, “Earnings per Share”. Basic EPS is computed by dividing the net profit or loss attributable to the equity shareholders of the Company for the period by the weighted average number of Equity shares outstanding during the period.
Diluted EPS is computed by dividing the net profit or loss attributable to the equity shareholders for the period by the weighted average number of Equity shares outstanding during the period as adjusted for the effects of all potential equity shares, except where the results are anti - dilutive.
The weighted average number of Equity shares outstanding during the period is adjusted for events such a bonus Issue, bonus elements in right issue, share splits, and reverse share split (consolidation of shares) that have changed the number of Equity shares outstanding, without a corresponding change in resources.
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