Note 1: Material accounting policies
This note provides a list of the significant accounting policies adopted in the preparation of these financial statements.
These policies have been consistently applied to all the years presented, unless otherwise stated.
(a) Basis of preparation
(i) Compliance with Ind AS:
The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified
under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules,
2015] and other relevant provisions of the Act.
All assets and liabilities have been classified as current or non-current as per the Company's normal operating
cycle and other criteria as set out in the Schedule III to the Act.
The accounting policies adopted in the preparation of the financial statements are consistent with those of the
previous year.
The material accounting policy information related to preparation of the financial statements have been discussed
in the respective notes.
(ii) Historical cost convention:
The financial statements have been prepared on a historical cost basis, except for the following:
• certain financial assets and liabilities (including derivative instruments) that are measured at fair value
(refer note 34);
• assets held for sale - measured at lower of its carrying amount and fair value less costs to sell
• defined benefit plans - plan assets measured at fair value (refer note 39).
(b) Segment Reporting
The Company operates in “Engineering Polymers” which in the context of IND AS 108 Operating segments constitutes
a single reportable business segment.
(c) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements are measured using the currency of the primary economic environment
in which the entity operates ('the functional currency'). The financial statements of the Company are presented
in Indian rupee (INR), which is the Company's functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the
dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions
and from the translation of monetary assets and liabilities denominated in foreign currencies at year end
exchange rates are generally recognized in Statement of profit and loss.
Foreign exchange differences regarded as an adjustment to borrowing costs are presented in the Statement of
profit and loss, within finance costs. All other foreign exchange gains and losses are presented in the Statement
of profit and loss on a net basis within other income or other expenses.
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 was determined. Translation differences on assets and liabilities carried
at fair value are reported as part of the fair value gain or loss.
(d) Revenue recognition
(i) Sale of goods
The Company is engaged in manufacturing, trading and sale of “engineering Polymers”. Sales are recognized
when control of the products has transferred, being when the products are delivered to the customer, the
customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation
that could affect the customer's acceptance of the products. Delivery occurs when the products have been
shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer,
and either the customer has accepted the products in accordance with the sales contract, the acceptance
provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been
satisfied.
Revenue from these sales is recognized based on the price agreed with the customer, net of the estimated
discounts based on discount agreements. Revenue is only recognized to the extent that it is highly probable
that a significant reversal will not occur. No element of financing is deemed present as the sales are made with
a credit term of 30-45 days, which is consistent with market practice.
Sale of goods does not involve warranty obligation or right to return.
A receivable is recognized when the goods are delivered as this is the point in time that the consideration is
unconditional because only the passage of time is required before the payment is due.
(ii) Financing components
The Company does not expect to have any contracts where the period between the transfer of the promised
goods or services to the customer and payment by the customer exceeds one year. As a consequence, the
Company does not adjust any of the transaction prices for the time value of money.
(iii) Commission Income
Commission income is recognized when the terms of the contract are fulfilled.
(iv) Rendering of services
Income from services rendered is recognized based on agreements/arrangements with the customers as the
service is performed and there are no unfulfilled obligations.
(e) Income tax
The income tax expense or credit for the period is the tax payable on the current period's taxable income based on
the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary
differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the
end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate
on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is also
not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting profit nor taxable profit (tax loss). Deferred
income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of
the reporting period and are expected to apply when the related deferred income tax asset is realized or the
deferred income tax liability is settled. Deferred tax assets are recognized for all deductible temporary differences
and unused tax losses only if it is probable that future taxable amounts will be available to utilize those temporary
differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax
liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net
basis, or to realize the asset and settle the liability simultaneously.
Current and deferred tax is recognized in profit or loss, except to the extent that it relates to items recognized in
other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive
income or directly inequity, respectively.
(f) Leases
As a lessee:
Leases are recognized as a right-of-use asset and a corresponding liability at the date at which the leased asset
is available for use by the company. Contracts may contain both lease and non-lease components. As a general
rule, the Company separates non-lease components, such as services, from lease payments except where it is
not practical to determine non-lease components.
Assets and liabilities arising from a lease are initially measured on present value basis. Lease liabilities include the
net present value of the following lease payments:
- fixed payments (including in substances fixed payments), less any lease incentive receivable
- variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the
commencement date
- payments of penalties for terminating the lease, if the lease term reflects the company exercising that option
Lease payments to be made under reasonably certain extension option are also included in the measurement of
the liability. The lease payments are discounted using the lessee's incremental borrowing rate, being the rate that
lessee would have to pay to borrow the fund necessary to obtain an asset of similar value to the right-of-use asset
in a similar economic environment with similar term, security and conditions.
The Company is exposed to potential future increases in variable lease payments based on index or rate, which
are not included in the lease liability until they take effect. When adjustment to lease payments based on index or
rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Lease payments are allocated between principal and finance cost. Finance cost is charged to profit or loss over
the lease period so as to produce a constant periodical rate of interest on the remaining balance of the liability for
each period.
Variable lease payments other than those based on index or rate are recognized in profit or loss in the period in
which the condition that triggers those payments occurs.
Right-of-use assets are measured at cost comprising the following:
- the amount of initial measurement of lease liability,
- any lease payments made at or before the commencement date less any lease incentives received,
- any initial direct costs, and
- restoration costs
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a
straight line basis.
Payments associated with short-term leases of equipment and all leases of low-value assets are recognized on a
straight-line basis in the Statement of profit and loss. Short term leases are leases with a lease term of 12 months
or less. Low value asset comprise IT equipment and Office Equipment.
As a lessor:
The Company does not have any lease arrangements where the entity is a lessor.
(g) Impairment of assets
The carrying amounts of assets are reviewed at each balance sheet date for any indication of impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss
is recognized 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). Non¬
financial assets that suffered an impairment are reviewed for possible reversal of the impairment at the end of each
reporting period.
(h) Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand,
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 changes in value, and bank overdrafts.
Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.
(i) Trade receivables
Trade receivables are recognized initially at fair value and subsequently measured at amortized cost, less provision
for impairment.
(j) Inventories
Raw materials, packing materials, stores and spares, work in progress, traded and finished goods are stated at
the lower of cost and net realizable value. Cost of raw materials and traded goods comprises cost of purchases.
Cost of work-in progress and finished goods comprises direct materials, direct labour and an appropriate proportion
of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity.
Cost of inventories also include all other costs incurred in bringing the inventories to their present location and
condition.
Costs are assigned to individual items of inventory on the basis of weighted average cost basis. Costs of purchased
inventory are determined after deducting rebates and discounts. Net realizable value is the estimated selling price
in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to
make the sale.
(k) Investments and other financial assets
(i) Classification
The Company classifies its financial assets in the following measurement categories:
• those to be measured subsequently at fair value through profit or loss and
• those measured at amortized cost.
The classification depends on the entity's business model for managing the financial assets and the contractual
terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive
income as the case may be. For investments in equity instruments and mutual funds, this will depend on
whether the Company has made an irrevocable election at the time of initial recognition to account for the
equity investment at fair value through Statement of profit and loss.
(ii) Measurement
At initial recognition, the Company measures a financial asset at its fair value. Transaction costs of acquisition
of financial assets carried at fair value through profit and loss are expensed in the Statement of profit and loss.
Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent
solely payments of principal and interest are measured subsequently at amortized cost. Interest income from
these financial assets is included in finance income using the effective interest rate method.
Equity instruments and investment in mutual funds: The Company subsequently measures all investments at
fair value through Statement of Profit and Loss. Dividends and Gain or loss from such investments are recognized
in profit or loss as other income when the Company's right to receive payments is established.
(iii) Impairment of financial assets
The Company assesses on a forward looking basis the expected credit losses associated with its financial
assets carried at amortized cost. The impairment methodology applied depends on whether there has been
an increase in credit risk (Refer note 35).
For trade receivables only, the Company applies the simplified approach permitted by Ind AS 109 Financial
Instruments, which requires expected lifetime losses to be recognized from initial recognition of the receivables.
(iv) Derecognition of financial assets
A financial asset is derecognized only when
• The Company has transferred the rights to receive cash flows from the financial asset or
• Retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual
obligation to pay the cash flows to one or more recipients.
Where the entity has transferred an asset, the Company evaluates whether it has transferred substantially all
risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognized.
Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the
financial asset is not derecognized.
Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of
ownership of the financial asset, the financial asset is derecognized if the Company has not retained control
of the financial asset. Where the group retains control of the financial asset, the asset is continued to be
recognized to the extent of continuing involvement in the financial asset.
(v) Income recognition
Interest income
Interest income on financial assets at amortized cost is calculated using the effective interest method is
recognized in the statement of profit and loss as part of other income. Interest income is calculated by
applying the effective interest rate to the gross carrying amount of a financial asset.
Dividends
Dividends are received from financial assets at fair value through profit or loss. Dividends are recognized as
other income in profit or loss when the right to receive payment is established.
(l) Derivatives
Derivatives are taken as the hedging instrument by the Company.
For derivatives taken against underlying asset/liability or that are used to hedge forecast transactions, the Company
generally designates only the change in fair value of the forward contract related to the spot component and aligned
forward element on reporting date.
Gains or losses relating to the effective portion of the change in the spot component and aligned forward element
of the forward contracts are recognized in Statement of profit and loss.
(m) Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where there is a
legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or
realize the asset and settle the liability simultaneously.
(n) Property, plant and equipment
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical
cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the
items.
Subsequent costs are included in the asset's carrying amount or recognized 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 derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the
reporting period in which they are incurred.
Depreciation methods and estimated useful lives:
Depreciation is calculated using the straight-line method over useful lives of assets as follows:
(*) Based on technical evaluation, the management believes that the useful life given above best represent the
period over which management expects to use these assets. Hence, the useful lives for these assets are different
from the useful lives as prescribed under Part C of Schedule II of the Companies Act, 2013.
Useful life of Leasehold Improvements is considered based on lease term.
Depreciation and amortization methods and useful lives are reviewed periodically, including at each financial year
end.
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.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included
in the Statement of profit and loss.
(o) Non-Current Assets Classified as Held for sale
Non-current Assets are classified as held for sale if their carrying amount will be recovered principally through a
sale transaction rather than through continuing use and a sale is considered highly probable. They are measured
at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax
assets, assets arising from employee benefits, financial assets and contractual rights under insurance contracts,
which are specifically exempt from this requirement.
An impairment loss is recognized for any initial or subsequent write-down of the asset to fair value less costs to
sell. A gain is recognized for any subsequent increases in fair value less costs to sell of an asset, but not in excess
of any cumulative impairment loss previously recognized. Again or loss not previously recognized by the date of
the sale of the asset is recognized at the date of de-recognition.
Assets are not depreciated or amortized while they are classified as held for sale. Interest and other expenses
attributable to the liabilities of a disposal group classified as held for sale continue to be recognized.
Assets classified as held for sale are presented separately from the other assets in the balance sheet.
(p) Trade and other payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of financial
year which are unpaid or not due for payment. The amounts are unsecured and are usually paid as per the agreed
payment terms. Trade and other payables are presented as current liabilities unless payment is not due within 12
months after the reporting period. They are recognized initially at their fair value and subsequently measured at
amortized cost using the effective interest method.
(q) Borrowings
Borrowings are initially recognized at fair value and are subsequently measured at amortized cost. In case of
foreign currency loan, any difference between the proceeds received and repayment amount is recognized in the
Statement of profit and loss.
Borrowings are derecognized from the balance sheet when the obligation specified in the contract is discharged,
cancelled or expired.
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 period. Where there is a breach of a material provision of a
long-term loan arrangement on or before the end of the reporting period with the effect that the liability becomes
payable on demand on the reporting date, the entity does not classify the liability as current, if the lender agreed,
after the reporting period and before the approval of the financial statements for issue, not to demand payment as
a consequence of the breach.
(r) Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are
capitalized during the period of time that is required to complete and prepare the asset for its intended use or sale.
Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use
or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying
assets is deducted from the borrowing costs eligible for capitalization.
Other borrowing costs are expensed in the period in which they are incurred.
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