1.2 Material Accounting Policies
1.2.1 Revenue Recognition
Revenue is measured at the fair value of the Consideration received or receivable. Amounts disclosed
as revenue are net of returns, trade allowances, rebates, volume discounts and Goods and Service Tax
(GST). Accumulated experience is used to estimate and provide for the sales returns.
The company recognises revenue when the amount of revenue can be reliably measured, it is probable
that future economic benefits will flow to the Company and specific criteria have been met for each of the
company's revenue items. The company bases its estimates on historical results, taking into
consideration the type of customer, the type of transaction and the specifics of each arrangement.
(i) Sale of goods
Revenue is recognized upon transfer of control of promised goods to customers in an amount that
reflects the consideration expected to be received in exchange for those goods. The arrangements
with the customers generally create a single performance obligation which is satisfied at a point of
time when the obligation is discharged i.e. on sale of goods.
Revenue is measured at the fair value of the consideration received or receivable, taking into account
contractually defined terms of payment and excluding taxes and duties. Expected defective stock
returns, volume-based discounts, turnover based discounts and other pricing incentives are
accounted as reduction of revenue basis the estimate of customers' future purchases / customers'
future sales to downstream customers in the value-chain. Any changes in the estimated amount of
obligations for discounts /incentives are recognized prospectively in the period in which the change
occurs.
The Contract with customers involves performance of a single obligation, the amount stated in the
contract is the transaction price allocated to the performance obligation.
Contract balances
Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the
customer when that right is conditioned on something other than the passage of time. If the
Company performs by transferring goods or services to a customer before the customer pays
consideration or before payment is due, a contract asset is recognised for the earned consideration
that is conditional.
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).
Contract liabilities are recognised as revenue when the Company performs under the contract.
(ii) Dividend Income
Dividend income from investments is recognized when the Company's right to receive payment has
been established.
(iii) Interest Income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the
effective interest rate applicable, which is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial asset to that asset's net carrying amount on initial
recognition.
(iv) Other operating Revenue
Other operating revenue comprises of income from ancillary activities incidental to the operations of
the Company and is recognized when the right to receive the income is established as per the terms
of the contract .
1.2.2 Employee benefits
Retirement benefit costs and termination benefits
> Defined Contribution Plans
Payments to defined contribution plans i.e., Company's contribution to provident fund, employee
state insurance wherever applicable and other funds are determined under the relevant
schemes and/ or statute and charged to the Statement of Profit and Loss in the period of
incurrence when the services are rendered by the employees.
> Defined Benefit Plans
For defined benefit plans i.e. Company's liability towards gratuity (funded), other retirement/
termination benefits, the cost of providing benefits is determined using the projected unit credit
method, with actuarial valuations being carried out at the end of each annual reporting period.
Defined benefit costs are comprised of:
• Service cost (including current service cost, past service cost, as well as gains and losses on
curtailments and settlements);
• Net interest expense or income; and
• Remeasurement
The Company presents the first two components of defined benefit costs in Statement of profit and
loss in the line item 'Employee benefits expense'.
Re-measurement of net defined benefit liability/asset is reflected immediately in the balance sheet
with a charge or credit recognised in other comprehensive income in the period in which they occur.
Re-measurement recognised in other comprehensive income is reflected immediately in retained
earnings and is not reclassified to Statement of profit and loss.
The number of employees are below the minimum threshold for applicability of Payment of Gratuity
Act, 1972 and in such circumstances no additional liability is created and the cost will be determined
based on actuarial valuations only if the additional liability is required to be made.
1.2.3 Borrowing costs
Borrowing costs directly attributable to the acquisition or construction of an asset (Qualifying Asset)
that necessarily takes a substantial period of time to get ready for its intended use are capitalized
as part of the cost of the asset until such time that the assets are substantially ready for their intended
use.
Where funds are borrowed specifically to finance a project, the amount capitalized represents the
actual borrowing costs incurred. Where surplus funds are available out of money borrowed
specifically to finance project, the income generated from such current investments is deducted from
the total capitalized borrowing cost.
Where the funds use to finance a project form part of general borrowings, the amount capitalized is
calculated using a weighted average of rates applicable to relevant general borrowings of the
company during the period/year. Capitalization of borrowing costs is suspended and charged to profit
and loss during the extended periods when the active development on the qualifying assets is
interrupted.
Borrowing cost includes interest expense as per Effective Interest Rate (EIR). Borrowing cost that are
not directly attributable to a qualifying asset is recognized in the statement of Profit-/Loss using the
EIR method.
EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected
life of the financial liability or a shorter period, where appropriate, to the amortized cost of a financial
liability after considering all the contractual terms of the financial instrument.
1.2.4 Income Taxes
Income tax expense comprises current tax expense and the net change in the deferred tax asset or
liability during the year. Current and deferred tax are recognized in Statement of profit or loss, except
when they relate to items that are recognized in other comprehensive income or directly in equity, in
which case, the current and deferred tax are also recognized in other comprehensive income or
directly in equity, respectively.
Current tax
Current Income Tax expenses comprise taxes on income from operations in India. Income tax
payable in India is determined in accordance with the provisions of the Income Tax Act, 1961.
Current Tax expenses are accounted in the same period to which the revenue and expenses relate.
Provision for current income tax is made for the tax liability payable on taxable income after
considering tax allowances, deductions and exemptions determined in accordance with the applicable
tax rates and the prevailing tax laws.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to
set off the recognised amounts and there is an intention to settle the asset and the liability on a net
basis.
Deferred tax
Deferred Tax is recognized on temporary differences between the carrying amounts of assets and a
liability in the financial statements and the corresponding tax base used in the computation of taxable
profit and is accounted for using the balance sheet method. Deferred tax liabilities are generally
recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all
deductible temporary differences to the extent that it is probable that taxable profits will be available
against which those deductible temporary differences can be utilized.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and
reduced to the extent that is no longer probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
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 realized, based on tax rates (and tax laws) that
have been enacted or substantively enacted by the end of the reporting period.
Minimum Alternative Tax (“MAT”) credit is recognized as an asset only when and to the extent there
is convincing evidence that the Company will pay normal income tax during the specified period. Such
asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is
written down to the extent there is no longer convincing evidence to the effect that the Company will
pay normal income tax during the specified period.
1.2.5 Property, Plant and Equipment.
Freehold land is carried at historical cost and not depreciated.
All other items of property, plant and equipment are stated at historical cost less accumulated
depreciation and accumulated impairment losses. Historical cost includes purchase price and any
attributable cost of bringing the asset for its intended use. It also includes expenditure that is directly
attributable to the acquisition of the items.
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. The carrying amount of any
component accounted for as a separate asset is derecognised when replaced. All other repairs and
maintenance are charged to profit or loss during the reporting period in which they are incurred.
On transition to Ind AS, the company has elected to continue with the carrying value of all of its
property, plant and equipment recognised as at 1 April 2016 measured as per the previous GAAP
and use that carrying value as the deemed cost of the property, plant and equipment.
Property, Plant and equipment which are not ready for intended use as on the balance sheet date
are disclosed as Capital Work in progress.
Depreciation methods, estimated useful lives and residual value
Depreciation is calculated on pro data basis using the Written down value method to allocate their
cost, net of their residual values, over their estimated useful lives or, in the case of certain leased
furniture, fittings and equipment, the shorter lease term.
The Company provides Depreciation based on the useful lives as prescribed under Schedule II of
companies Act, 2013.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's
carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals
are determined by comparing proceeds with carrying amount. These are included in profit or loss
within other gains/(losses).
De-recognition of assets
An item of property, plant and equipment is derecognized upon disposal or when no future economic
benefits are expected to arise from the continuous use of the asset.
Any gain or loss arising from such disposal, retirement or de-recognition of an item of property, plant
and equipment is measured as the difference between the net disposal proceeds and the carrying
amount of the item. Such gain or loss is recognized in the statement of profit and loss.
In case of de-recognition of a revalued asset, the corresponding portion of the revaluation surplus
as is attributable to that asset is transferred to retained earnings on such de-recognition. Such
transfers to retained earnings are made through Other Comprehensive Income and not routed
through profit or loss.
Impairment of Property plant and equipment
The carrying values of assets/cash generating units are assessed for impairment at the end of every
reporting period. If the carrying amount of an asset exceeds the estimated recoverable amount, an
impairment is recognized as expense in the statement of profit and loss. The recoverable amount
is the higher of the fair value less costs of disposal and its value in use. Value in use is arrived at
by discounting the estimated future cash flows to their present value based on an appropriate
present value factor.
An impairment loss recognized in prior periods for an asset other than goodwill is reversed if, and
only if, there has been a change in the estimates used to determine the asset's recoverable amount
since the last impairment loss was recognized. In that case, the carrying amount of the asset is
increased to its recoverable amount and reversal of an impairment loss is recognized immediately
in Statement of Profit and Loss.
1.2.6 Inventories
Cost of Materials, stores, spares and traded goods comprises cost of purchases and included taxes
and duties and is net of eligible Goods and Service Tax (GST) Input tax credits. Cost of inventories
also includes all other related costs incurred in bringing the inventories to their present location and
condition.
Net Realisable Value represents the estimated selling price for inventories less all estimated costs
of completion cost necessary to make the sale.
Cost of inventories are determined as follows:
Traded goods - Valued at moving average cost
Stores and Spares- Valued at moving average cost
Due allowance is estimated and made by Management for slow moving / non- Moving items of inventories,
wherever necessary, based on the technical assessment and such allowances are adjusted against the
closing inventory value.
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