Note 2.2: Material Accounting Policies
(A) Current vs non-current classification
The Company presents assets and liabilities in the
balance sheet based on current / non-current
classification. An asset is treated as current when
it is:
• Expected to be realised or intended to be sold or
consumed in normal operating cycle
• Held primarily for the purpose of trading
• Expected to be realised within twelve months after
the reporting period, or
• Cash or cash equivalent unless restricted from
being exchanged or used to settle a liability for
at least twelve months after the reporting period.
All other assets are classified as non-current."
A liability is current when:
• It is expected to be settled in normal operating cycle
• It is held primarily for the purpose of trading
• It is due to be settled within twelve months after
the reporting period, or
• There is no unconditional right to defer the
settlement of the liability for at least twelve
months after the reporting period
The Company classifies all other liabilities as non¬
current. Deferred tax assets and liabilities are
classified as non-current assets and liabilities.
The operating cycle is the time between the
acquisition of assets for processing and their
realisation in cash and cash equivalents. The
Company has identified twelve months as its
operating cycle.
(B) Revenue from operations
(i) Revenue from contract with customer
Revenue from contracts with customers is
recognised when control over the goods or
services are transferred to the customer at
an amount that reflects the consideration to
which the Company expects to be entitled in
exchange for those goods or services.
Sale of goods
Revenue from sale of goods is recognised at
the point in time when control of the good
is transferred to the customer, generally on
delivery of the goods. The normal credit term is
0 to 20 days upon delivery.
The Company considers whether there are
other promises in the contract that are separate
performance obligations to which a portion of
the transaction price needs to be allocated. In
determining the transaction price for the sale
of goods, the Company considers the effects
of variable consideration, the existence of
significant financing components, noncash
consideration, and consideration payable to
the customer (if any).
Variable consideration
If the consideration in a contract includes a
variable amount, the Company estimates the
amount of consideration to which it will be
entitled in exchange for transferring the goods
to the customer. The variable consideration
is estimated at contract inception and
constrained until it is highly probable that a
significant revenue reversal in the amount
of cumulative revenue recognised will not
occur when the associated uncertainty with
the variable consideration is subsequently
resolved. Some contracts for the sale of
goods provide customers with a right to return
defective / damaged products and discount
and rebates on sales. The rights to return and
discount and rebates on sales give rise to
variable consideration.
The Company provides discount and rebates on
sales to certain customers based on aggregate
sales covered by the schemes. Revenue from
sales is recognised based on the applicable
price to a given customer, net of the estimated
pricing allowances, discounts, rebates and
other incentives to customers. Accumulated
experience and judgement based on historical
experience and the specific terms of the
scheme are used to estimate and provide
for the discount and rebates on sales and
revenue is only recognised to the extent that
it is highly probable that a significant reversal
will not occur. The Company does not generally
provide a right of return on the goods supplied
to customers.
Contract balances
Trade receivables
A receivable represents the Company's
right to an amount of consideration that is
unconditional (i.e., only the passage of time is
required before payment of the consideration
is due).
Contract liabilities
A contract liability is the obligation to transfer
goods or services to a customer for which the
Company has received consideration 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. Contract liabilities
are recognised as revenue when the Company
performs its obligation under the contract.
(C) Government grants
Government grants are recognised where there
is reasonable assurance that the grant will be
received and all attached conditions have been
complied with. When the grant relates to an expense
item, it is recognised as other operating revenue on
a systematic basis over the periods that the related
costs, for which it is intended to compensate, are
expensed. When the grant relates to an asset, it is
initially recognised as deferred income at fair value
if there is reasonable assurance that they will be
received, and the Company will comply with the
conditions associated with the grant. Grants related
to the acquisition of assets are recognised in profit
or loss as other operating income on a systematic
basis over the useful life of the asset.
(D) Property, plant and equipments
Property, plant and equipment's is stated at cost,
net of accumulated depreciation and accumulated
impairment losses, if any. Cost is inclusive of freight,
duties, taxes or levies (net of recoverable taxes)
and any directly attributable cost of bringing the
assets to their working condition for intended use.
Such cost includes the cost of replacing part of the
Property, plant and equipment's and borrowing
costs for long-term construction projects if the
recognition criteria are met. When significant parts
of Property, plant and equipment's are required to
be replaced at intervals, the Company depreciates
them separately based on their specific useful lives.
Likewise, when a major inspection is performed, its
cost is recognised in the carrying amount of the
Property, plant and equipment's as a component if
the recognition criteria are satisfied.
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 the statement of profit and loss during the
reporting period in which they are incurred.
Property, plant and equipment which are not ready
for intended use as on the date of Balance Sheet are
disclosed as "Capital work-in-progress".
Items of stores and spares that meet the definition
of property, plant and equipments are capitalised at
cost and depreciated over their useful life. Otherwise,
such items are classified as inventories.
An item of property, plant and equipments and any
significant part initially recognised is derecognised
upon disposal or when no future economic benefits
are expected from its use or disposal. Any gain or loss
arising on derecognition of the asset (calculated as
the difference between the net disposal proceeds
and the carrying amount of the asset) is included
in the statement of profit and loss when the asset
is derecognised.
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.
Depreciation on property, plant and equipments is
calculated on a straight line method over estimated
useful lives of the assets. The management has
estimated the below useful life based on its estimate
regarding the period over which the assets are
expected to be used and the same is supported by
technical evaluation:
*These assets have life different from those mentioned in
Schedule II of the Companies Act, 2013 (the 'Act').
On Transition to Ind AS, the Company elected to
continue with the carrying value of all of its property,
plant and equipment recognised as at April 1, 2016
measured as per the previous GAAP and use that
carrying value as the deemed cost of the property,
plant and equipment.
Depreciation on additions/(disposals) is provided on
a pro-rata basis i.e. from/ (upto) the date on which
asset is ready for use/ (disposed off).
Intangible assets acquired separately are measured
on initial recognition at cost. The cost of intangible
assets acquired in a business combination is their
fair value at the date of acquisition. Following initial
recognition, intangible assets are carried at cost less
any accumulated amortisation and accumulated
impairment losses.
The useful lives of intangible assets are assessed as
either finite or indefinite.
Intangible assets with finite lives are amortised
on straight line basis over the useful economic
life and assessed for impairment whenever there
is an indication that the intangible asset may
be impaired. The amortisation period and the
amortisation method for an intangible asset with
a finite useful life are reviewed at least at the end
of each reporting period. Changes in the expected
useful life or the expected pattern of consumption
of future economic benefits embodied in the asset
are considered to modify the amortisation period
or method, as appropriate, and are treated as
changes in accounting estimates. The amortisation
expense on intangible assets with finite lives is
recognised in the statement of profit and loss unless
such expenditure forms part of carrying value of
another asset.
Goodwill being an Intangible asset with indefinite
useful lives is not amortised, but tested for impairment
annually, either individually or at the cash¬
generating unit level. The assessment of indefinite
life is reviewed annually to determine whether the
indefinite life continues to be supportable. If not, the
change in useful life from indefinite to finite is made
on a prospective basis.
Gains or losses arising from derecognition of an
intangible asset are measured as the difference
between the net disposal proceeds and the
carrying amount of the asset and are recognised
in the statement of profit or loss when the asset
is derecognised.
A summary of amortisation policies applied to the
Company's intangible asset is as below:
Amortisation methods, useful lives and residual
values are reviewed at each reporting date and
adjusted if appropriate.
(f) Impairment of non-financial assets
At each reporting date, the Company reviews the
carrying amounts of its non-financial assets (other
than inventories, contract assets and deferred tax
assets) to determine whether there is any indication
of impairment. If any such indication exists, then the
asset's recoverable amount is estimated. Goodwill
is tested annually for impairment.
For impairment testing, assets are grouped
together into the smallest group of assets that
generates cash inflows from continuing use that
are largely independent of the cash inflows of other
assets or CGUs. Goodwill arising from a business
combination is allocated to CGUs or groups of CGUs
that are expected to benefit from the synergies of
the combination.
The recoverable amount of an individual asset or
CGU is the greater of its value in use and its fair
value less costs of disposal. Value in use is based
on the estimated future cash flows, discounted to
their present value using a pre-tax discount rate
that reflects current market assessments of the time
value of money and the risks specific to the asset
or CGU.
An impairment loss is recognised if the carrying
amount of an asset or CGU exceeds its
recoverable amount.
Impairment losses are recognised in profit or loss.
They are allocated first to reduce the carrying
amount of any goodwill allocated to the CGU, and
then to reduce the carrying amounts of the other
assets in the CGU on a pro rata basis.
An impairment loss in respect of goodwill is not
subsequently reversed. In respect of other assets for
which impairment loss has been recognised in prior
periods, the Company reviews at each reporting
date whether there is any indication that the loss has
decreased or no longer exists. An impairment loss is
reversed if there has been a change in the estimates
used to determine the recoverable amount. Such a
reversal is made only to the extent that the asset's
carrying amount does not exceed the carrying
amount that would have been determined, net of
depreciation or amortisation, if no impairment loss
had been recognised.
(G) Inventories
Raw materials, packing materials, stores, spares and
other consumables are valued at lower of cost and
net realisable value. However, materials and other
items held for use in the production of inventories are
not written down below cost if the finished products
in which they will be incorporated are expected to be
sold at or above cost. Cost of raw materials, packing
materials, stores, spares and other consumables are
determined on a moving weighted average basis.
Stores and spares which do not meet the definition
of property, plant and equipment are accounted
as inventories.
Finished goods are valued at lower of cost and net
realisable value. Cost includes direct materials,
labour and proportionate manufacturing overheads
based on normal operating capacity.
Traded goods are valued at lower of cost and net
realisable value. Cost includes cost of purchase
and other costs incurred in bringing the inventories
to their present location and condition. Cost is
determined on moving weighted average basis.
Net realisable value is the estimated selling price
in the ordinary course of business, less estimated
costs of completion and estimated cost necessary
to make the sale.
(H) Leases
The company's leases mainly comprises of land,
buildings and facilities. The Company assesses
whether a contract is, or contains, a lease at
inception of a contract. A contract is, or contains,
a lease 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 lessee
The Company applies a single recognition and
measurement approach for all leases, except
for short-term leases and leases of low-value
assets. The Company recognises lease liabilities
to make lease payments and right-of-use assets
representing the right to use the underlying assets.
The Company recognises right-of-use assets at
the commencement date of the lease. The right-
of-use assets are initially recognised 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, if any. Right-of-use assets
are depreciated on a straight-line basis over
the shorter of the lease term and the estimated
useful lives of the assets as follows:
If ownership of the leased asset transfers to the
Company at the end of the lease term or the
cost reflects the exercise of a purchase option,
depreciation is calculated using the estimated
useful life of the asset. The right-of-use assets
are also subject to impairment.
ii) Lease Liabilities
At the commencement date of the lease,
the Company recognises lease liabilities
measured at the present value of lease
payments to be made over the lease term.
The lease payments include fixed payments
(including in substance fixed payments) less
any lease incentives receivable, variable lease
payments that depend on an index or a rate,
and amounts expected to be paid under
residual value guarantees. The lease payments
also include the exercise price of a purchase
option reasonably certain to be exercised
by the Company and payments of penalties
for terminating the lease, if the lease term
reflects the Company exercising the option to
terminate. Variable lease payments that do not
depend on an index or a rate are recognised as
expenses (unless they are incurred to produce
inventories) in the period in which the event or
condition that triggers the payment occurs.
In calculating the present value of lease
payments, the Company uses its incremental
borrowing rate at the lease commencement
date if the interest rate implicit in the lease is not
readily determinable. After the commencement
date, the amount of lease liabilities is increased
to reflect the accretion of interest and reduced
for the lease payments made. In addition,
the carrying amount of lease liabilities is
remeasured if there is a modification, a
change in the lease term, a change in the lease
payments (e.g., changes to future payments
resulting from a change in an index or rate
used to determine such lease payments) or
a change in the assessment of an option to
purchase the underlying asset.
iii) Short-term leases and leases of low-value
assets
The Company applies the short-term lease
recognition exemption to its short-term leases of
building (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 that are
considered to be low value. Lease payments
of short-term leases and leases of low-value
assets are recognised as expense on a straight¬
line basis over the lease term.
(I) Segment reporting
The Company is engaged in the business of
snacks good. The Chief Operating Decision Maker
review the operating results of the Company
as a whole for purposes of making decisions
about resources to be allocated and assess its
performance. The entire operations are classified
as a single segment, namely 'Snacks food'.
The Company prepares its segment information in
conformity with the accounting policies adopted for
preparing and presenting the financial statements
of the Company as a whole.
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