2.7 Summary of Significant Accounting Policies
a) Revenue Recognition
Revenue is recognized to the extent 11 is probable that economic benefits will flow to the Company and revenues can reliably be measured, regardless of when the payment is being made. Revenue is measured al the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and reduced for estimated customer renirns, rebates, taxes or duties collected on behalf of the government and other similar allowances.
Interest Income . .
Interest income is recognised on a time proportion basis taking into account die amount outstanding and die applicable interest rate. Interest income is included
under the head “other income” in the statement of profit and loss.
Interest on financial assets subsequently measured a: fair value through profit or loss (FYTPL) is recognised at die contractual rate of interest Net gain on fair value changes
Financial assets arc subsequently measured, at fair value through profit or loss (FYTPL) or fair value through other comprehensive income (P\ < X-I). as applicable The Company recognises gains/losses on fan value change of financial assets measured as FYTPL and realised gains/losses on derecognition of financial asset measured at FVTPLand FVOCI.
Vll other revenues arc accounted on accrual basis.
b) Expenses
All expenses are accounted for on accrual basis.
c) Properly. Plant & Equipment
Property Plant & Equipments are stated ai cost net of recoverable taxes, trade discounts and rebates and include amounts added on revaluation, less accumulated depreciation and impairment loss if any. The cost of properly, plant & equipment's comprises its purchase price, borrowing cost and any other cost directly attributable to bringing the asset to its working condition for us intended use. Subsequent expending is capitalised only if u is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the ilem can be measured reliably.
I depreciable amount for property, plant and equipment is the cost of property, plant and equipment less its estimated residual value.
Depreciation is provided on Straight Line Method over the estimated useful lives of the property, plant and equipment, except Leasehold Improvements, prescribed under Schedule II to the Companies Act, 2013 on pro rata basis. In cases, where the useful lives are different from that prescribed in Schedule II, they are based on internal technical evaluation.
Leasehold Improvements are amortized over the primary period of lease.
The estimated useful lives, residual values and depreciation methods are reviewed by the management at each reporting date and adiusted if appropriate.
Property, plant and equipment arc derecognised either on disposal or when no economic benefits are expected from its use or disposal I he gam or loss arising from disposal of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and recognised in the Statement of Profit and Loss in the year of occurrence.
d) Impairment of noil-financial assets
\t the end of each reporting period, the Company reviews the carrying amounts of us tangible anil intangible assets to determine whether there is any indication that the assets have suffered an impairment loss. If am such indication exists, the recoverable 'amount of the asset is estimated in order to determine the extent of impairment loss (if any' .
If the recoverable amount of asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expenses in the Statement of Profit and Loss.
Vilien an impairment loss subsequently reverses, the carrying amount of an asset is ...creased to the revised estimate of ns recoverable amount, so that die ...creased earning amount docs not exceed the carrying amount il.at would have been determined had no impairment loss been recognised tor the asset m prior years A reversal ot an impairment loss is recognised immediately in the Statement of Profit and Loss
e) Depreciation
Depreciation on fixed assets (including investment property) except leasehold improvements is provided on straight line method in the manner and rates prescribed in Schedule II to the Companies Act, 2013. Depreciation is charged on a pro-rata basis for assets purchased / sold during the year.
Leasehold improvements are amortized over the primary period of lease.
f) Income Tax
'' Current Income Tax is measured at the amount expected to be paid to the tax authorities in accordance with Indian Income Tax Act, 1961
tij Deferred tax ts recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and art-capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantially enacted as at the reporting date Deferred tax liabilities arc recognised for all timing differences Deferred tax assets in respect ol unabsorbed depreciation and earn- forward of losses are recognised only if there is \ irtual certainty that there will be sufficient fitnire taxable income available to realise such assets. Deferred tax assets are recognised far timing differences of odier items only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised. Deferred tax assets anti liabilities are offset if such items relate to taxes on income levied by the same governing tax law s and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each Balance Sheet date for their reahsability.
g) Bp.rrovvingCoHS
Borrowing costs are interest and other costs that the Company incurs in connection with the borrowing of funds and is measured with reference to the effective interest rate applicable to the respective borrowing. Borrowing costs, allocated to qualifying assets, pertaining to the period from commencement of activities relating to construction / development of the qualifying asset are capitalized upto the time all the activities necessary to prepare the qualifying asset for its intended use or sale are complete. A qualifying asset is an asset that necessarily requires a substantial period of tunc to get ready to its intended use or sale. All other borrowing costs arc recognised as an expense in the period in which they are incurred.
It) Financial Instruments
\ financial instrument is any contract that gives rise to financial asset of one entity and financial liability or equity instrument of another entity.
- I'imndil Ast-us
Financial assets arc recognised when tlte Company becomes a party to the contractual provisions of the instrument,
i) Initial lecoimiiion and measurement
Ml financial assets are recognized at fair value on initial recognition, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition of financial assets, which are not at fair value through profit or loss, are added to the fair value chi initial recognition.
li) Subsequent measurement and classification
For the purpose of subsequent measurement, the financial assets are classified into three categories:
- Financial assets at amortised cost
• Financial assets at fair value through Other Comprehensive Income {FA’TOO
- Financial assets at fair value through profit or loss (FVTP1.) on the basis of its business model for managing the financial assets.
iii) Financial asftt?.AtaniL»,i:.tia‘A.CQ£i
A financial asset is subsequently measured at amortised cost if it is held within a business model whose objective is to hold assets for collecting contractual cash flows and the contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method, less impairment, if any. Hie FIR amortisation ts included in finance income in the Statement of Profit and Loss. The losses arising from impairment are recognised m the Statement of Profit and Loss.
iv) Financial asset ai Fair Value ihromdi other comprehensive income IA I O' 1
A financial asset is measured at fair value through other comprehensive income (FVTOCI) it 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 financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the pruicipal amount outstanding.
Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements arc recognized in the other comprehensive income (OCI).
Interest income measured using the EIR method and impairment losses, if any are recognised in the Statement of Profit and Loss. On derecognition, cumulative gam or loss previously recognised in OCI is reclassified from the equity to ‘other income’ in the Statement of Profit and Loss
V) Financial asset at Fair Value through profit or loss TATPi .i
A financial asset which arc nor classified in any of the above categories are measured at l-VTt’l.. Such financial assets are measured at fair value with all changes in fair value, including interest income and dividend income if any, recognised as ‘other income’ in die Statement of Profit and Loss.
vi) Financial assets as Equity Investments
All equity instruments odier than investment in subsidiaries and associate are initially measured at fair value: the Company may, on mittal recognition, irrevocably elect to measure the same cither at FA'OCI or FVTPL.
The Company makes such election on an instrument-by-instrument basis. A lair value change on an equity instrument is recognised as other income in the Statement of Profit and Loss unless the Company has elected to measure such instrument at FVOCT. Fair value changes excluding dividends, on an equity instrument measured at FVOCI arc recognised in OCI. Amounts recognised in OCI are not subsequently reclassified to the Statement of Profit anil Loss. Dividend income on the investments ui equity instruments are recognised as ‘other income’ in the Statement of Profit and Loss.
vii) Derecognition
A financial asset (or. where applicable, a part of a financial asset or part of a groxip of similar financial assets) is derecognised (i.e. removed from the Company’s balance sheet) when:
- The rights to receive cash flows from the asset have expired, or
- The Company has transferred its rights to receive cash flows from the asset ami either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
viii) Impairmyiu/jf financial-as^te
The Company applies ‘Simplified Approach' for measurement and recognition of impairment loss on the following financial assets and credit exposure.
- Financial assets that are debt instruments and are measured at amortised cost e g. loans, deposits and bank balance
- Trade receivables
'flie application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime expected credit loss at each reporting date, right from its initial recognition.
Financial assets where no significant increase in credit risk has been observed arc considered to be in ‘stage 1* and for which a 12 month ECL is recognised. Financial assets that are considered to have significant increase in credit risk are considered to be in ‘stage X and those which are in default or for which there is ail objective evidence of impairment arc considered to be in ‘stage 3*. Lifetime ECL Is recognised for stage 2 and stage 3 financial assets.
At initial recognition, allowance (or provision in the case of loan commitments) is required for ECL towards default events that are possible in the next 12 months, or less, where the remaining life is less than 12 months. In die event of a significant increase in credit risk, allowance (or provision) is required for KCL towards/all possible default events over the expected life of tlu financial instrument (lifetime ELI.;. Financial assets 'and the related impairment loss allowances) are written off in full, when there is no realistic prospect of recover)*.
Interest income is recognised by applying the EIR to the net amortised cost amount i.e. gross carrying amount less ECL allowance.
— Financial Liabilities
0
The Company classifies all financial liabilities as subsequently measured at amortised cost, in .1 mini). andjmairmau
\11 financial liabilities are recognised initially at fair value and. in case of loans and borrowings and payables, net of directly attributable transaction costs.
*ii) Lmm.andJtorriwun;s
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the Effective Interest Rate (EIR- method.
\mortised cost is calculated bv taking into account any discount or premium on acquisition and transactions costs. The EIR amortisation is included as finance costs .
in the Statement of Profit and Loss. Gams and losses are recognised in Statement of Profit and Loss when the liabilities are derecognised.
iv) Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced b) another from the same lender oil substantially different terms, or die terms of an existing liability arc substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Profit and Loss.
— » offsetting of Financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet if there is a currently enforceable legal right to offset the recognised amounts ami there is an intention to settle on a net basis or to realize the assets and settle the liabilities simultaneously.
i) fair value measurement /
The Company measures its qualifying financial instruments at fair value on each Balance Sheet date.
Fair value is the price that would be received against sale of 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 asset or transfer the liability takes place in the accessible principal market or the most advantageous accessible market as applicable.
The Company uses valuation techniques that are appropriate ui the circumstances and for which sufficient data is available to measure fair value, maximising die use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy into Level I, Level II and Uwcl III based on the lowest level input that is significant to the fair value measurement as a whole For a detailed information on the fair value hierarchy, refer note no. 31.
For assets and liabilities that are fair valued in the financial statements on a recurring basis, the Company determines whether Transfers have occurred between levels in the hierarchy by re assessing categorisation -based on the lowest level input that .issignificant to the fair value measurement as a whole) at the end of eacli reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy.
j) Earnings Per Share
Hisic earnings per share are calculated bv dividing the no. profit or loss for the period attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstandmg duruig the pctiotl. For the purpt.se of calculating diluted earnings per share, the net profit or loss tor the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
k) Cash and Cash Equivalents , , , , , , • ,
Cash and cash equivalents ... the balance sheet comprise cash a. bank and on hand and short term deposits with an original mammy of three months or less, which are subject to an insignificant rtsk of changes in value. For the purpose of the statement of cash flow, cash and cash equivalents consists of cash and short term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the (.ompany s cash management
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