3 Material Accounting policies
3.1 Property, plant and equipment
Recognition and measurement
Freehold land is carried at historical cost. For freehold land as no finite useful life can be determined, related carrying amounts are
not amortised.
Items of property, plant and equipment, are measured at cost (which includes capitalised borrowing costs, if any) less accumulated
depreciation and accumulated impairment losses, if any.
Cost of an item of property, plant and equipment includes its purchase price, duties, taxes, after deducting trade discounts and
rebates, any directly attributable cost of bringing the item to its working condition for its intended use and estimated costs of
dismantling and removing the item and restoring the site on which it is located.
The cost of a self-constructed item of property, plant and equipment comprises the cost of materials, direct labour and any other
costs directly attributable to bringing the item to its intended working condition and estimated costs of dismantling, removing and
restoring the site on which it is located, wherever applicable. If significant parts of an item of property, plant and equipment have
different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.
Items such as spare parts, stand-by equipment and servicing equipment that meet the definition of PPE are capitalised at cost and
depreciated over their useful life.
Any gain or loss on disposal of an item of property, plant and equipment is recognized in statement of profit and loss.
Subsequent expenditure
Subsequent expenditure is capitalised in the carrying amount of assets or recognized as a separate asset only if it is probable that
the future economic benefits associated with the expenditure will flow to the Company and the cost can be measured reliably.
All other repairs and maintenances are charged to the statement of profit and loss during the reporting period in which they
are incurred.
Depreciation
Depreciation on cost of fixed assets is provided on straight-line-method at estimated useful life, which is in line with the estimated
useful life as specified in Schedule II to the Act, except for second hand machineries which are depreciated basis the balance useful
life as specified in Schedule II to the Act. Leasehold building improvements are depreciated base on the management estimates of
useful life, namely 3 years.
Depreciation on additions is provided on a pro-rata basis from the date of ready to use and in case of Projects from the date of
commencement of commercial production. Depreciation on deductions/disposals is provided on a pro-rata basis up to the month
proceeding the month of deduction/disposal.
The carrying amount of an asset is written down immediately to its recoverable amount if the carrying amount of the asset is greater
than estimated recoverable amount.
The residual values, useful lives and methods of depreciation of property plant and equipment are reviewed at each financial year-
end and adjusted prospectively, if appropriate.
Derecognition
An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no
future economic benefits are expected from its use or disposal. Gains or losses arising from de-recognition of a tangible asset are
measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the
statement of profit and loss when the asset is derecognized.
Reclassification to investment property
When the use of a property changes from owner-occupied to investment property, the property is reclassified as investment
property at its carrying amount on the date of classification.
Capital work-in-progress
Capital work-in-progress includes expenditure incurred, till the assets are put into intended use. Capital work-in-progress are
measured at cost less accumulated impairment losses, if any
3.2 Intangible assets
Recognition and measurement
Intangibles are recognized when it is probable that the future economic benefits that are attributable to the asset will flow to the
enterprise and the cost of the asset can be measured reliably.
Intangible assets that are acquired by the Company which have finite useful lives, are measured at cost less accumulated
amortization and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the
intangible asset.
Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific assets to
which it relates. All other expenditures are recognized in the statement of profit and loss when incurred.
Amortization
Amortization is recognized in profit and loss on a straight-line basis over the estimated useful lives of the intangible assets from the
date that they are available for use. The estimated useful lives are as follows:
Amortization method, useful lives and residual values are reviewed at the end of each financial year and adjusted, if appropriate.
Intangible assets with finite lives are assessed for impairment whenever there is an indication that the intangible asset may be
impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least
at the end of each reporting period.
The amortization expense on intangible assets with finite lives is recognized in the statement of profit and loss unless such
expenditure forms part of carrying value of another asset.
Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the
cash-generating unit (CGU) level.
Derecognition
The carrying amount of an intangible asset is derecognised on disposal or when no future economic benefits are expected from
its use or disposal. The gain or loss arising from the derecognition of an intangible asset is measured as the difference between the
net disposal proceeds and the carrying amount of the intangible asset and is recognised in the Statement of Profit and Loss when
the asset is derecognised.
3.3. Impairment
Financial assets
The Company recognizes loss allowances using the Expected Credit Loss (ECL) model for the financial assets which are not
fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an
amount equal to lifetime ECL with simplified approach. For all other financial assets, ECL are measured at an amount equal to the
12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured
at lifetime ECL. The amount of ECL (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that
is required to be recognized is recognized as an impairment gain or loss in statement of profit and loss.
Non - Financial Assets
Intangible Assets and Property, Plant and Equipment
Intangible Assets and Property, Plant and Equipment are evaluated for recoverability whenever events or changes in circumstances
indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount
(i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset
does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is
determined for the CGU to which the asset belongs. If such assets are considered to be impaired, the impairment to be recognized
in the statement of profit and loss is measured by the amount by which the carrying value of the assets exceeds the estimated
recoverable amount of the asset. An impairment loss is reversed in the statement of profit and loss if there has been a change in
the estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised recoverable
amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated
amortization or depreciation) had no impairment loss been recognized for the asset in prior years.
3.4 Leases
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to
control the use of an identified asset for a period of time in exchange for consideration.
The Company as a lessee
The Company’s lease asset classes primarily consist of leases for land and buildings. The Company assesses whether a contract
contains a lease, at inception of contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an
identified asset, the Company assesses whether:
(i) The contract involves use of identified asset;
(ii) The Company has substantially all of the economic benefit of from use of the asset through the period of the lease; and
(iii) The Company has the right to direct the use of the asset
At the date of commencement of lease, the Company recognize a Right-of-Use asset (“ROU”) and a corresponding lease liability
for all lease arrangements in which it is a lessee, except for leases with a term of twelve month or less (short-term leases) and low
value leases. For these short-term and low value leases, the Company recognizes the lease payments as operating expense on
straight-line basis over the term of lease.
Certain lease arrangements include the options to extend or terminate the lease before the end of the lease term. ROU assets and
lease liabilities includes these options when it is reasonably certain that they will be exercised
The ROU assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are
subsequently measured at cost less accumulated depreciation and impairment losses.
The Company depreciates the ROU assets on a straight-line basis from the lease commencement date to the earlier of the end
of the useful life of the ROU assets or the end of the lease term. The Company also assesses the ROU asset for impairment when
such indicators exist.
The Lease liability is initially measured at amortized cost at the present value of future lease payments. The lease payments are
discounted using the interest rate implicit in the lease, or if not readily determinable, using the incremental borrowing rates in the
country of domicile of the leases. Lease liabilities are re-measured with corresponding adjustment to the related ROU asset if
Company changes its assessment if whether it will exercise an extension or termination option.
Carrying amount of lease liability is increased by interest on lease liability and reduced by lease payments made.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as
financing cash flows.
The following is the summary of practical expedients:
1. Applied a single discount rate to portfolio of leases of similar assets in similar economic environment with similar end date.
2. Applied the exemption not to recognize ROU asset and liabilities for leases with less than twelve months of lease term of the
date of initial application.
3. Applied the practical expedient to grandfather the assessment of which transactions are leases. Accordingly, Ind AS 116, is
applied only to contracts that were previously identified as leases under Ind AS 17, Leases.
4. Excluding initial direct costs for the measurement of ROU asset at the date of initial application.
The Company as a lessor
Leases for which the Company is a lessor classified as finance or operating lease. Lease income from operating leases where
the Company is a lessor is recognized in income on a straight-line basis over the lease term unless the receipts are structured to
increase in line with expected general inflation to compensate for the expected inflationary cost increases. The respective leased
assets are included in the balance sheet based on their nature.
3.5 Inventories
Inventories are valued at the lower of cost (including prime cost, GST and other overheads incurred in bringing the inventories
to their present location and condition) and estimated net realisable value, after providing for obsolescence, where appropriate.
Taxes which are subsequently recoverable from taxation authorities are not included in the cost. The comparison of cost and net
realisable value is made on an item-by-item basis. The net realisable value of materials in process is determined with reference
to the selling prices of related finished goods. Raw materials, packing materials and other supplies held for use in production of
inventories are not written down below cost except in cases where material prices have declined, and it is estimated that the cost
of the finished products will exceed their net realisable value.
The provision for inventory obsolescence is assessed regularly based on estimated usage and shelf life of products.
Raw materials, packing materials and stores and spares are valued at cost computed on weighted average basis. The cost includes
purchase price, inward freight and other incidental expenses net of refundable duties, levies and taxes, where applicable.
Work-in-progress is valued at input material cost plus conversion cost as applicable.
Finished goods are valued at the lower of net realisable value and cost (including prime cost and other overheads incurred in
bringing the inventories to their present location and condition), computed on weighted average basis.
3.6 Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cheques on hand, demand deposits with banks and other short-term, highly
liquid investments with original maturities of three months or less, that are readily convertible to known amounts of cash and which
are subject to an insignificant risk of change in value. Short-term and liquid investments being subject to more than insignificant risk
of change in value, are not included as part of cash and cash equivalents.
3.7 Trade Receivable
Trade receivable are amounts due from customers for goods sold or services performed in the ordinary course of business and
reflects Company unconditional right to consideration.
3.8 Trade and other payable
These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year which are
unpaid. Trade payables are presented as current unless payment is not due within twelve months after the reporting period. They
are recognized initially at the fair value and subsequently measured at amortized cost using the effective interest method.
3.9 Financial instruments
Recognition and initial measurement
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of
another entity
The Company initially recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of
the instrument. All financial assets and liabilities are measured at fair value on initial recognition. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities that are not at fair value through profit or loss are
added to the fair value on initial recognition. However, trade receivables that do not contain a significant financing component are
measured at transaction price. Regular way purchase and sale of financial assets are accounted for at trade date.
Classification and subsequent measurement
Financial assets
Financial assets carried at amortized cost
A debt instrument is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the
asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash
flows that are solely payments of principal and interest on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate (EIR)
method. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an
integral part of the EIR. The EIR amortization is included in finance income in the statement of profit and loss. The losses arising
from impairment are recognized in the statement of profit and loss
Financial assets at Fair Value Through Other Comprehensive Income (FVOCI)
A debt instrument is subsequently measured at FVOCI if it is held within a business model whose objective is achieved by both
collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified
dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Debt instruments included within the FVOCI category are measured initially as well as at each reporting date at fair value. Fair value
movements are recognized in the Other Comprehensive Income (OCI). On de-recognition of the asset, cumulative gain or loss
previously recognized in OCI is reclassified from the equity to the statement of profit and loss. Interest earned whilst holding FVOCI
debt instrument is reported as interest income using the EIR method
In case, the Company’s management has made an irrevocable election at the time of initial recognition to account for the equity
investment (Other than Investments in equity instruments of Subsidiary) FVOCI. This election is not permitted if the equity
investment is held for trading. The classification is made on initial recognition and is irrevocable.
Investment in subsidiaries
Investment in subsidiary is carried at cost less impairment wherever applicable in the financial statements.
Financial assets at Fair Value Through Profit or Loss (FVTPL)
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss.
Financial liabilities at Fair Value Through Profit or Loss (FVTPL )
Financial liabilities at FVTPL include financial liabilities held for trading and financial liabilities designated upon initial recognition
as at FVTPL. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near
term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging
instruments in hedge relationships as defined by Ind AS 109, Financial Instruments. Separated embedded derivatives are also
classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognized in the statement of profit and loss.
Financial liabilities designated upon initial recognition at FVTPL are designated as such at the initial date of recognition, and only
if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own
credit risk are recognized in OCI. These gains/ losses are not subsequently transferred to the standalone statement of profit and
loss. However, the Company may transfer the cumulative gain or loss within equity All other changes in fair value of such liability are
recognized in the statement of profit and loss. The Company has not designated any financial liability as at FVTPL.
Financial liabilities at amortised cost
Financial liabilities are subsequently carried at amortized cost using the effective interest method. For trade and other payables
maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of
these instruments.
Derecognition
Financial assets
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it
transfers the right to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of
ownership of the financial assets are transferred or in which the Company neither transfers nor retains substantially all of the risks
and rewards of ownership and does not retain control of the financial asset.
If the Company enters into transactions whereby it transfers assets recognized on its balance sheet, but retains either all or
substantially all of the risks and rewards of the transferred assets, the transferred assets are not derecognized.
Financial liabilities
The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire.
The Company also derecognizes a financial liability when its terms are modified and the cash flows under the modified terms are
substantially different. In this case, a new financial liability based on the modified terms is recognized at fair value. The difference
between the carrying amount of the financial liability extinguished and a new financial liability with modified terms is recognized in
the statement of profit and loss.
Off-setting
Financial assets and financial liabilities are offset and the net amount presented in the balance sheet when, and only when, the
Company currently has a legally enforceable right to set-off the amounts and it intends either to settle them on a net basis or realise
the asset and settle the liability simultaneously
3.10 Revenue recognition
The Company is engaged in the business of procurement of cow milk and undertakes processing of milk and manufacture of
various value-added products from milk. The Company derives revenues primarily from sale of milk and value-added products
made from milk. The Company recognizes Ind AS 115, Revenue from contracts with customers, based on a five-step model as set
out in the Standard:
Step 1: Identify contract(s) with a customer: A contract is defined as an agreement between two or more parties that creates
enforceable rights and obligations and sets out the criteria for every contract that must be met.
Step 2: Identify performance obligations in the contract: A performance obligation is a promise in a contract with a customer to
transfer a good or service to the customer.
Step 3: Determine the transaction price: The transaction price is the amount of consideration to which the Company expects
to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of
third parties.
Step 4: Allocate the transaction price to the performance obligations in the contract: For a contract that has more than one
performance obligation, the Company allocates the transaction price to each performance obligation in an amount that depicts
the amount of consideration to which the Company expects to be entitled in exchange for satisfying each performance obligation.
Step 5: Recognize revenue when (or as) the Company satisfies a performance obligation.
Revenue is recognized on satisfaction of performance obligation upon transfer of control of promised products or services to
customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services
(“transaction price”).
Revenue is measured on the basis of transaction price, after deduction of any discounts and any taxes or duties collected on behalf
of the Government such as goods and services tax, etc. Discounts are recognised in accordance with the schemes implemented
by the Company. Revenue is only recognised to the extent that it is highly probable a significant reversal will not occur.
Variable consideration is estimated using the expected value method or most likely amount as appropriate in a given circumstance.
Payment terms agreed with a customer are as per business practice and the financing component, if significant, is separated from
the transaction price and accounted as interest income.
Other operational revenue represents income earned from the activities incidental to the business and is recognised when the
performance obligation is satisfied and right to receive the income is established as per the terms of the contract.
Processing charges is recognized as per the terms of the contract when the related services are rendered.
3.11 Other Income
Other items of income are accounted as and when the right to receive such income arises and it is probable that the economic
benefits will flow to the Company and the amount of income can be measured reliably.
Dividend income is recognized when the Company’s right to receive the payment is established, which is generally when
shareholders approve the dividend.
Interest Income on Bank Deposits is accrued on time proportionate basis and at the applicable interest rate.
3.12 Government grant and incentives
Government incentives are recognized at fair value when there is reasonable assurance that the Company will comply with the
relevant conditions and the grant will be received. The Government incentives are recognized in profit and loss on a systematic
basis over the period in which the Company recognizes the related costs for which the incentives are intended to compensate as
expense or immediately if the costs have already been incurred.
Eligible export incentives and Bio-Gas subsidy are recognized in the year in which the conditions precedents are met and there is
no significant uncertainty about the collectability
3.13 Share-based payment
Employees of the Company receive remuneration in the form of share-based payment in consideration of the services rendered.
Under the equity settled share-based payment, the fair value on the grant date of the award given to employees is recognized as
'employee benefit expense’ with a corresponding increase in equity over the vesting period. The fair value of the options at the
grant date is calculated by an independent valuer using Black Scholes model. At the end of each reporting period, apart from the
non-market vesting condition, the expense is reviewed and adjusted to reflect changes to the level of options expected to vest.
3.14 Foreign currency translation
Initial Recognition
On initial recognition, transaction in foreign currencies entered into by the Company are recorded in the functional currency, by
applying to the foreign currency amount, the spot exchange rate between the functional currency and the foreign currency at the
date of the transaction. Exchange differences arising on foreign exchange transactions settled during the year are recognized in
the statement of profit and loss.
Measurement of foreign currency items at reporting date
Foreign currency monetary items of the Company are translated at the closing exchange rates. Non-monetary items that are
measured at historical cost in foreign currency are translated using the exchange rates at the date of the transaction. 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.
Exchange differences arising out of these translations are recognized in the statement of profit and loss except exchange
differences on long term foreign currency monetary items related to acquisition of fixed assets prior to transition to Ind AS, which
are included in the cost of fixed assets.
3.15 Income tax
Income tax comprises current and deferred tax. It is recognized in statement of profit and loss except to the extent that it relates to
a business combination or to an item recognized directly in equity or in Other Comprehensive Income (OCI).
Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to
the tax payable or receivable in respect of previous years. The amount of current tax reflects the best estimate of the tax amount
expected to be paid or received after considering the uncertainty if any related to income taxes. It is measured using tax rates (and
tax laws) enacted or substantively enacted by the reporting date.
Tax on income for the current period is determined on the basis of taxable income and tax credits computed in accordance with
the provisions of the Income Tax Act, 1961 and using estimates and judgments based on the expected outcome of assessments/
appeals and the relevant rulings in the areas of allowances and disallowances.
Current tax assets and liabilities are offset only if:
i) there is a legally enforceable right to set-off current tax assets against current tax liabilities and when they relate to income
taxes levied by the same taxation authority; and
ii) there is intention either to settle on a net basis, or to realise the asset and settle the liability simultaneous.
Deferred tax
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the corresponding tax bases used for computation of taxable profits. Deferred tax is also recognized in
respect of carried forward tax losses and tax credits. Deferred tax is not recognized for:
- temporary differences arising on the initial recognition of assets or liabilities in a transaction that is not a business combination
and that affects neither accounting nor taxable profit or loss at the time of transaction.
- temporary differences related to investments in subsidiaries, associates and interests in joint ventures, when the timing of the
reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in
the foreseeable future.
Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which those
deductible temporary difference can be utilized.
Deferred tax assets recognized or unrecognized are reviewed at each reporting date and are recognized / reduced to the extent
that it is probable / no longer probable respectively that the related tax benefit will be realised.
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled,
based on the laws that have been enacted or substantively enacted by 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.
The Company offsets, the current tax assets and liabilities (on a year-on-year basis) and deferred tax assets and liabilities, where it
has a legally enforceable right and where it intends to settle such assets and liabilities on a net basis.
The Government of India, on 20th September, 2019, vide the Taxation Laws (Amendment) Ordinance 2019, inserted a new Section
115BAA in the Income Tax Act, 1961, which provides an option to the Company for paying Income Tax at reduced rates as per the
provisions/conditions defined in the said section. The Company has decided to take benefit of the reduced tax rate as permitted
in the said section.
Presentation of current and deferred tax
Current and deferred tax are recognized as income or an expense in the statement of profit and loss, except when they relate to
items that are recognized in OCI, in which case, the current and deferred tax income/ expense are recognized in OCI.
The Company offsets current tax assets and current tax liabilities, where it has legally enforceable right to set-off the recognized
amounts and where it intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously In case
of deferred tax assets and deferred tax liabilities, the same are offset if the Company has 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.
3.16 Borrowings
Borrowings are initially recognized at net of transaction costs incurred and measured at amortized cost. Any difference between
the proceeds (net of transaction costs) and the redemption amount is recognized in the statement of profit and loss over the period
of the borrowings using the effective interest method.
3.17 Borrowing costs
Borrowing costs consist of interest, ancillary costs and other costs in connection with the borrowing of funds and exchange
differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to interest costs.
Interest and other borrowing costs attributable to qualifying assets are capitalised up to the date such assets are ready for their
intended use. Other interest and borrowing costs are charged to statement of profit and loss.
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