1.2 Material accounting policies:
a. System of accounting
The financial statements of the Company are prepared in accordance with Indian Accounting Standards (Ind
AS), under the historical cost convention on the accrual basis as per the provisions of Companies Act, 2013
(‘’Act”), except in case of significant uncertainties.
b. Kev accounting estimates
The preparation of the financial statements, in conformity with the recognition and measurement principles of
Ind AS, requires the management to make estimates and assumptions in the application of accounting policies
that affect the reported amounts of assets, liabilities, income, expenses and disclosure of contingent liabilities
as at the date of financial statements and the results of operation during the reported period. Although these
estimates are based upon management’s best knowledge of current events and actions, actual results could
differ from these estimates which are recognised in the period in which they are determined.
The Company based its assumptions and estimates on parameters available when the financial statements
were prepared. Existing circumstances and assumptions about future developments, however, may change
due to market changes or circumstances arising that are beyond the control of the Company. Such changes
are reflected in the financial statements in the period in which changes are made and, if material, their effects
are disclosed in the notes to the financial statements.
Estimates and judgements are regularly revisited. Estimates are based on historical experience and other
factors, including futuristic reasonable information that may have a financial impact on the Company.
c. Property, plant and equipment
(i) Property, plant and equipment are stated at historical cost of acquisition including attributable
interest and finance costs, if any, till the date of acquisition/installation of the assets less accumulated
depreciation and accumulated impairment losses, if any.
(ii) Subsequent expenditure relating to property, plant and equipment is capitalised 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. All other repairs and maintenance costs are charged to the
statement of profit and loss as incurred.
(iii) The cost and related accumulated depreciation are eliminated from the financial statements, either on
disposal or when retired from active use and the resultant gain or loss are recognised in the statement
of profit and loss.
(iv) Capital work-in-progress, representing expenditure incurred in respect of assets under development
and not ready for their intended use, are carried at cost. Cost includes related acquisition expenses,
construction cost, related borrowing cost and other direct expenditure.
(v) The Company depreciates property, plant and equipment on straight line method over the estimated
useful life prescribed in Schedule II of the Act from the date the assets are ready for intended use
after considering the residual value.
(vi) Intangible assets mainly represent implementation cost for software and other application software
acquired/developed for in-house use. These assets are stated at cost. Cost includes related acquisition
expenses, related borrowing costs, if any, and other direct expenditure. Intangible assets are amortized
over the estimated useful life.
(vii) Items of stores and spares that meet the definition of property, plant and equipment are capitalized at
cost and depreciated over their useful life. Otherwise, such items are classified as inventories.
(viii) Losses arising from the retirement of and gains or losses arising from disposal of property, plant and
equipment which are carried at cost are recognised in the Statement of Profit and Loss.
(ix) Property, plant and equipment and intangible assets are tested for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. An impairment
loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value
in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash inflows which are largely independent of the cash inflows from
other assets or groups of assets (cash-generating units).
d. Investments and financial assets
(i) Investments in subsidiaries
Investments in subsidiaries are recognised at cost and not adjusted to fair value at the end of each
reporting period. Cost represents amount paid for acquisition of the said investments.
The Company assesses at the end of each reporting period, if there is any indication that the said
investments may be impaired. If so, the Company estimates the recoverable value of the investments
and provides for impairment, if any, i.e. the deficit in the recoverable value over cost.
(ii) Financial assets
Financial assets are recognised when the Company becomes a party to the contractual provisions of
the instrument.
On initial recognition, a financial asset is recognised at fair value, in case of financial assets which are
recognised at fair value through profit and loss (FVTPL), its transaction costs are recognised in the
statement of profit or loss. In other cases, the transaction costs are attributed to the acquisition value
of financial asset. However, trade receivables that do not contain a significant financing component
are measured at transaction price.
Financial assets are subsequently classified measured at -
- amortised cost
- fair value through profit and loss (FVTPL)
- fair value through other comprehensive income (FVOCI).
Financial assets are not reclassified subsequent to their recognition except if and in the period the
Company changes its business model for managing financial assets.
Financial asset is derecognised only when the Company has transferred the rights to receive cash
flows from the financial asset. Where the entity has transferred the asset, the Company evaluates
whether it has transferred substantially all risks and rewards of ownership of the financial asset. In
such cases, financial asset is derecognised.
In accordance with Ind AS 109, the Company applies the expected credit loss (”ECL”) model for
measurement and recognition of impairment loss on financial assets and credit risk exposures. The
Company follows ‘simplified approach’ for recognition of impairment loss allowance on trade
receivables. Simplified approach does not require the Company to track changes in credit risk.
Rather, it recognises impairment loss allowance based on lifetime ECL at each reporting date, right
from its initial recognition. For recognition of impairment loss on other financial assets and risk
exposure, the Company determines that whether there has been a significant increase in the credit
risk since initial recognition.
e. Inventories
(i) Raw materials and stores and spares are valued at weighted average cost including all charges in
bringing the materials to the present location.
(ii) Finished and semi-finished goods are valued at the cost plus direct expenses and appropriate value
of overheads or net realizable value, whichever is lower.
(iii) Obsolete, slow moving and defective inventories are written off/valued at net realisable value during
the year as per policy consistently followed by the Company.
f. Cash and bank balances
Cash and equivalents:
Cash and cash equivalents in the balance sheet comprises of balance with banks and cash on hand and short
term deposits with an original maturity of three month or less, which are subject to insignificant risks of
changes in value.
Other bank balances:
Other bank balances include deposits with maturity less than twelve months but greater than three months and
balances and deposits with banks that are restricted for withdrawal and usage.
g. Trade receivables
A receivable is classified as a trade receivable if it is in respect of the amount due on account of goods sold
or services rendered in the normal course of business. Trade receivables are recognised initially at their
transaction price and subsequently measured net of any expected credit losses.
h. Financial liabilities
(i) Financial liabilities are recognised when the Company becomes a party to the contractual provisions
of the instrument. Financial liabilities are initially measured at the amortised cost unless at initial
recognition, they are classified as fair value through profit and loss.
(ii) Financial liabilities are subsequently measured at amortised cost using the Effective Interest Rate
(EIR) method. Financial liabilities carried at fair value through profit and loss are measured at fair
value with all changes in fair value recognised in the statement of profit and loss.
(iii) Financial liabilities are derecognised when the obligation specified in the contract is discharged,
cancelled or expires.
i. Trade payables
A payable is classified as a trade payable if it is in respect of the amount due on account of goods purchased
in the normal course of business. These amounts represent liabilities for goods provided to the Company prior
to the end of the financial year which are unpaid. These amounts are unsecured and are usually settled as per
the payment terms. Trade and other payables are presented as current liabilities unless payment is not due
within 12 months after the reporting period.
j. Revenue recognition
(i) Revenue shall be recognised to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those
goods and services.
(ii) Revenue is measured based on transaction price, which is the fair value of the consideration received
or receivable, stated net of discounts, return and goods & service tax. Transaction price is recognised
based on the price specified in the contract, net of the estimated sales incentives/discounts.
(iii) Accumulated experience is used to estimate and provide for the discounts/rights of return, using the
expected value method.
(iv) The Company recognises as an asset, the incremental costs of obtaining a contract with a customer,
if the Company expects to recover those costs. The said asset is amortised on a systematic basis
consistent with the transfer of goods or services to the customers.
(vi) Export incentives are accounted for on export of goods if the entitlements can be estimated with
reasonable accuracy and conditions precedent to claim are reasonably expected to be fulfilled.
(vii) Revenue in respect of other income is recognised on accrual basis. However, where the ultimate
collection of the same lacks reasonable certainty, revenue recognition is postponed to the extent of
uncertainty.
k. Mining expenses
Expenses incurred on mining including removal of overburden of mines are charged to the statement of profit
& loss as mining cost on the basis of quantity of minerals mined during the year, overburden of removal
and mining being carried out concurrently and relatively within a short period of time. Mining restoration
expenses are annually reviewed and provided for.
l. Foreign currency transactions
(i) Items included in the financial statements are measured using the currency of primary economic
environment in which the company operates (“the functional currency”). The financial statements
are presented in Indian Rupee (INR), which is the company’s functional and presentation currency.
(ii) Foreign currency transactions are initially recorded in the reporting currency at foreign exchange
rate on the date of the transaction.
(iii) Monetary items of current assets and current liabilities denominated in foreign currencies are
reported using the closing rate at the reporting date. Non-monetary items which are carried in terms
of historical cost denominated in a foreign currency are reported using the exchange rate at the date
of the transaction.
(iv) The gain or loss on decrease/increase in reporting currency due to fluctuations in foreign exchange
rates are recognised in the statement of profit or loss.
m. Employee benefit expenses
(i) Contributions to defined contribution schemes such as provident fund, employees’ state insurance,
labour welfare fund etc. are charged as an expense based on the amount of contribution required to
be made as and when services are rendered by the employees. These benefits are classified as defined
contribution schemes as the Company has no further obligations beyond the monthly contributions.
(ii) The Company provides for gratuity which is a defined benefit plan, the liabilities of which are
determined based on valuations, as at the reporting date, made by an independent actuary using the
projected unit credit method. Re-measurement comprising of actuarial gains and losses, in respect
of gratuity are recognised in the other comprehensive income in the period in which they occur.
The classification of the Company’s obligation into current and non-current is as per the actuarial
valuation report.
(iii) The employees are entitled to accumulate leave subject to certain limits, for future encashment and
availment, as per the policy of the Company. The liability towards such unutilised leave as at the end
of each balance sheet date is determined based on independent actuarial valuation and recognised in
the statement of profit and loss.
n. Leases
Company as lessee
The Company applies the short-term lease recognition exemption to its short-term leases of machinery and
equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do
not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases
of office equipment that are considered to be low value. Lease payments on short-term leases and leases of
low-value assets are recognised as expense on a straight-line basis over the lease term.
Company as lessor
Leases in which the Company does not transfer substantially all the risks and rewards incidental to ownership
of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis
over the lease terms. Initial direct costs incurred in negotiating and arranging an operating lease are added to
the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income.
o. Borrowing costs
Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing
of funds. Also, the effective interest rate amortisation is included in finance costs. Borrowing costs relating
to acquisition, construction or production of a qualifying asset which takes substantial period of time to get
ready for its intended use are added to the cost of such asset to the extent they relate to the period till such
assets are ready to be put to use. All other borrowing costs are expensed in the statement of profit and loss in
the period in which they occur.
p. Impairment of non financial assets
As at each reporting date, the Company assesses whether there is an indication that a non-financial asset may
be impaired and also whether there is an indication of reversal of impairment loss recognised in the previous
periods. If any indication exists, or when annual impairment testing for an asset is required, the Company
determines the recoverable amount and impairment loss is recognised when the carrying amount of an asset
exceeds its recoverable amount. If the amount of impairment loss subsequently decreases and the decrease
can be related objectively to an event occurring after the impairment was recognised, then the previously
recognised impairment loss is reversed through the statement of profit and loss.
q. Taxes on income
Income tax expense comprises current tax expense and the deferred tax during the year. Current and deferred
taxes are recognised in the statement of profit and loss, except when they relate to items that are recognised
in other comprehensive income or directly in equity, in which case, the current and deferred tax are also
recognised in other comprehensive income or directly in equity, respectively.
Current income tax is recognised based on the estimated tax liability computed after taking credit for
allowances and exemptions in accordance with the Income Tax Act, 1961. Current income tax assets and
liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The
tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the
reporting date.
Deferred tax is recognised on temporary differences between 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 liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are
recognized for unused tax losses, unused tax credits and deductible temporary differences to the extent that it
is probable that future taxable profits will be available against which they can be used. In case of uncertainty
of reversal of the deferred tax assets or when it is no longer probable that sufficient taxable profits will be
available in the foreseeable future, deferred tax assets, as a matter of prudence, are not recognised.
The carrying amount of deferred tax is reviewed at each reporting date and measured at the tax rates that are
expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively
enacted at the reporting date. The measurement of deferred tax reflects the tax consequences that would
follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying
amount of its assets and liabilities.
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