Material Accounting Policy
3.2 Revenue recognition
Revenue is recognized based on the nature of activity when consideration can be reasonably measured and
recovered with reasonable certainity. Revenue is measured at the fair value of the consideration received or
receivable and is reduced for estimated customer returns, rebates and similar allowances.
Other operational revenue represents income earned from the activities incidental to the business and is
recognised when the right to receive the income is established as per the terms of the contract.
Dividend Income on Investments is accounted for when the right to receive the payment is established.
Interest on investments/ loans are recognised on time proportion basis taking into account the amounts invested
and the rate of interest.
Profit / (Loss) on Sale of Current Investments, being the difference between the contracted rate and the cost
(determined on weighted average basis) of the investments is recognised on sale.
3.3 Property, plant and equipment
i) Recognition and measurement: Property, plant and equipment including bearer assets are carried at
historical cost of acquisition or deemed cost less accumulated depreciation and accumulated impairment
loss, if any.
Historical cost includes its purchase price, including import duties and non-refundable purchase taxes
after deducting trade discounts and rebates and any cost directly attributable to bringing the asset to the
location and condition necessary for it to be capable of operating in the manner intended by management.
Subsequent expenditure related to an asset is added to its book value 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 the replaced part is derecognized. All repairs and maintenance are charged to the
statement of profit and loss during the financial year in which they are incurred.
ii) Depreciation: Depreciation is provided on assets to get the initial cost down to the residual value.
Depreciation is provided on a written down value basis over the estimated useful life of the asset or as
prescribed in Schedule II to the Companies Act, 2013 or based on a technical evaluation of the asset. Cost
incurred on assets under development are disclosed under capital work in progress and not depreciated till
asset is ready to use i.e. when it is in the location and condition necessary for it to be capable of operating
in the manner intended by management. Estimated useful life of items of Property, Plant and Equipment
are as follows:
The residual values and useful lives for depreciation of property, plant and equipment are reviewed at each
financial year end and adjusted prospectively, if appropriate.
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. Recoverable amount is higher of the value in use
or exchange.
Gains and losses on disposals are determined by comparing the sale proceeds with the carrying amount
and are recognised in the statement of profit and loss.
3.4 Impairment of tangible and intangible assets carried at cost
The carrying amounts of assets are reviewed at each balance sheet date for any indication of impairment
based on internal / external factors. If any indication exists, or when annual impairment testing for an asset is
required, the Company estimates the asset’s recoverable amount. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the
asset’s or cash-generating units (CGU) recoverable value and its value in use. An asset’s recoverable amount
is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs of disposal and its value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre¬
tax discount rate that reflects current market assessments of the time value of money and risks specific to the
asset.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining
useful life. A previously recognized impairment loss is increased or reversed depending only for change in
assumptions or internal/external factors. However, the carrying value after reversal is not increased beyond the
carrying value that would have prevailed by charging usual depreciation if there was no impairment.
3.5 Current versus 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.
3.6 Investments in subsidiaries, associates and joint ventures
The investments in subsidiaries, associates and joint ventures are carried in these financial statements at
historical ‘cost’, except when the investment, or a portion thereof, is classified as held for sale, in which case it
is accounted for as Non-current assets held for sale and discontinued operations. Where the carrying amount of
an investment in greater than its estimated recoverable amount, it is written down immediately to its recoverable
amount and the difference is transferred to the Statement of Profit and Loss. On disposal of investment, The
difference between the net disposal proceeds and the carrying amount is charged or credited to the Statement
of Profit and Loss.
3.7 Fair Value Measurement
Fair value is the price that would be received to sell 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 either:
- In the principal market for the asset or liability; or
- In the absence of a principal market, in the most advantageous market for the asset or liability.
- The principal or the most advantageous market must be accessible by the Company. The fair value of an
asset or a liability is measured using the assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate
economic benefits by using the asset in its highest and best use of selling it to another market participant that
would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the cirucumstances and for which sufficient
data are available to measure fair value, maximising the 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 categorissed
within the fair value hierachy, described as follows, based on the lowest level input that is significant to the fair
value measurement as a whole:
> Level 1- Quoted (unadjusted) market price in active markets for identical assets or liabilities.
> Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable
> Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable
For assets and liabilites that are recognized in the financial statements on a recurring basis, the Company
determines whether transfers have occured between levels in the hirerachy by re-assessing categorisation
(based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each
reporting period.
The Company’s management determines the policies and procedures for both recurring fair value measurement,
such as investments and deposits measured at fair value, and for non-recuring measurement.
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 hirerachy as
explained above.
This note summarizes accounting policy for fair value. Other fair value related disclosures are given in the
relavant notes to the financial statements.
3.8 Inventories
Inventories are valued at the lower of cost and net realisable value.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of
completion and estimated costs necessary to make the sale.
3.9 Borrowings and Borrowing costs
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently
stated at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption
value is recognised in the income statement over the period of the borrowings using the effective interest rate
method. Borrowings are classified as current liabilities unless the Company has an unconditional right to defer
settlement of the liability for at least 12 months after the reporting date.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added
to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
3.10 Employee benefits
Employee benefits include provident fund, gratuity and compensated absences.
a. Short-term obligations
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the
services rendered by employees are recognised during the year when the employees render the service.
These benefits include performance incentive and compensated absences which are expected to occur
within twelve months after the end of the period in which the employee renders the related service..
The cost of short-term compensated absences is accounted as under:
(a) in case of accumulated compensated absences, when employees render the services that increase
their entitlement of future compensated absences; and
(b) in case of non-accumulating compensated absences, when the absences occur
b. Long-term employee benefit obligations
Compensated absences which are not expected to occur within twelve months after the end of the period
in which the employee renders the related service are recognised as a liability at the present value of
expected future payments to be made in respect of services provided by employees up the end of the
reporting period using the projected unit credit method. The benefit are discounted using the market yields
at the end of the reporting period that have terms approximating to the terms of the related obligation.
Remeasurements as a result of experience adjustments and changes in actuarial assumptions are
recognised in Statement of Profit and Loss.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an
unconditional right to defer the settlement for at least twelve months after the reporting period, regardless
of when the actual settlement is expected to occur.
c. Post-employment obligations
The Group operates the following postemployment schemes:
i. Defined Contribution Plan:
The Company’s contribution to provident fund is considered as defined contribution plan and is
charged as an expense based on the amount of contribution required to be made. The Company has
no further payment obligations once the contributions have been paid.
ii. Defined Benefit Plan:
The liability or assets recognised in the Balance Sheet in respect of defined benefit gratuity plan is
the present value of the defined benefit obligation at the end of the reporting period less the fair value
of the plan assets. The defined benefit obligation is calculated by actuaries using the projected unit
credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future
cash outflows by reference to market yields at the end of the reporting period on government bonds
that have terms approximating to the terms of the related obligation.
The net interest cost is calculated applying the discount rate to the net balance of the defined benefit
obligation and the fair value of plan assets. This cost is included in the employee benefit expenses in
the Statement of Profit and Loss. Remeasurement gains and loss arising from experience adjustments
and changes in actuarial assumptions are recognised in the“period in which they occur, directly in
Other Comprehensive Income. They are included in retained earnings in the Statement of Changes
in Equity and in the Balance Sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or
curtailments are recognised immediately in Statement of Profit and Loss as past service cost.
3.11 Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
3.11.1 Current tax
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 in the country where the Company operates and generates taxable
income. Current income tax relating to items recognised outside profit or loss is recognised outside profit or
loss (either in other comprehensive income or in equity). Management periodically evaluates positions taken
in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and
establishes provisions where appropriate.
3.11.2 Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets
and liabilities and their carrying amounts for Financial reporting purposes at the reporting date.
When the deferred tax liability arises from an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax
credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that
taxable profit will be available against which the deductible temporary differences, and the carry forward of
unused tax credits and unused tax losses can be utilised, except:
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it
is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to
be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the
extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when
the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in
other comprehensive income or in equity). Deferred tax assets and deferred tax liabilities are offset if a legally
enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate
to the same taxable entity and the same taxation authority.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when
the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date. Deferred tax assets and deferred tax liabilities are offset if a legally
enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate
to the same taxable entity and the same taxation authority.
3.12 Cash and Cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits
with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term
deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the
Company’s cash management.
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