II) SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies applied by the Company in the preparation of its financial
statements are listed below. Such accounting policies have been applied consistently to all the periods
presented in these financial statements.
(A) BASIS OF PREPARATION OF FINANCIAL STATEMENTS:
(i) Compliance with Ind AS
The standalone financial statements are prepared in accordance with Indian Accounting
Standards (Ind AS) prescribed under Section 133 of the Companies Act, 2013 read with the
Companies (Indian Accounting Standards) Rules, 2015 as amended from time to time, the
provisions of the Companies Act, 2013 (“the Companies Act”) as applicable and guidelines
issued by the Securities and Exchange Board of India (“SEBI”).
The accounting policies have been consistently applied except where a newly issued accounting
standard is initially adopted or a revision to an existing accounting standard requires a change
in the accounting policy hitherto in use
(ii) Historical cost convention
These standalone financial statements have been prepared on a historical cost convention basis,
except for the following material items which have been measured at fair value as required by
relevant Ind AS;
• The defined benefit asset (liability) is as the present value of defined benefit obligation less
fair value of plan assets and
• Financial instruments classified as fair value through other comprehensive income.
(iii) Current and 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 realized or intended to be sold or consumed in normal operating cycle
• Held primarily for the purpose of trading
• Expected to be realized 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.
All other liabilities are classified 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
realization in cash and cash equivalents. Based on the nature of products / services and time
between acquisition of assets for processing / rendering of services and their realization in cash
and cash equivalents, operating cycle is less than 12 months. However, for the purpose of
current/non-current classification of assets & liabilities period of 12 months has been considered
as normal operating cycle.
(iv) Rounding of amounts
All amounts disclosed in the financial statements and notes have been rounded off to the nearest
lakhs as per the requirement of Schedule III except number of shares and per share data, unless
otherwise stated. Due to rounding off, the numbers presented throughout the document may not
add up precisely to the totals and percentages may not precisely reflect the absolute figures.
(v) Use of estimates and judgment
The preparation of the financial statements in conformity with Ind AS requires the Management
to make estimates, judgements and assumptions. These estimates, judgements and assumptions
affect the application of accounting policies and the reported amounts of assets and liabilities,
the disclosures of contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the period. Accounting estimates could
change from period to period. Actual results could differ from those estimates. Appropriate
changes in estimates are made as the Management becomes aware of changes in circumstances
surrounding the estimates. Changes in estimates 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
standalone financial statements.
In particular, information about significant areas of estimation, uncertainty and critical judgment
in applying accounting policies that have the most significant effect on the amounts recognized
in standalone financial statements are included in the following notes:
• Useful lives of Property, plant and equipment
• Measurement of defined benefit obligations
• Provision for inventories
• Measurement and likelihood of occurrence of provisions and contingencies
• Deferred taxes
(B) Inventories: [Ind AS 2]
Inventories are assets:
• Held for sale in the ordinary course of business
• In the process of production for such sale
• In the form of materials or supplies to be consumed in the production process or in the rendering
of services.
Measurement of Inventory
Inventories consist of raw materials, stores & spares, work-in-progress, finished goods, Stock-in¬
trade are stated ‘at lower of cost and net realizable value’ except for raw materials which is valued
at cost.
Cost of Inventories
Cost comprises of all cost of purchase, cost of conversion and other costs incurred in bringing the
inventories to their present location and condition. Cost formulae/ method for valuation used is
'Weighted Average cost'. Due allowance is estimated and made for defective and obsolete items,
wherever necessary.
Net Realisable Value
Net realisable value (NRV) 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. Estimate of net
realisable value must be based on the most reliable evidence available and take into account
fluctuations of price or cost after the end of the period, if this is evidence of conditions existing at
the end of the period.
The Cost and net realisable value has been compared for each separately identifiable item of
inventory, or group of similar inventories, rather than for inventory in total.
(C) Cash flow statement [Ind AS 7]
Cash flows are reported using the Indirect Method, as set out in Ind AS 7 ‘Statement of Cash Flow’,
whereby profit for the year is adjusted for the effects of transaction of non-cash nature, any deferrals
or accruals of past or future operating cash receipts or payments and item of income or expenses
associated with investing or financing cash flows. The cash flows from operating, investing and
financing activities of the Company are segregated.
(D) Income Taxes (Ind AS 12)
Tax expenses for the period, comprising current and deferred income tax. Income tax expense is
recognized in net profit in the Standalone Statement of Profit and Loss except to the extent that it
relates to items recognized directly in equity, in which case it is recognized in other comprehensive
income.
Current income tax for current and prior periods is recognized at the amount expected to be paid to
or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or
substantively enacted by the Balance Sheet date. Provision for current tax is made based on tax
liability computed after considering tax allowances and exemptions in accordance with the
provisions of the Income Tax Act, 1961.
Deferred income tax assets and liabilities are recognized for all temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the financial statements
except when the deferred income tax arises from the initial recognition of goodwill or an asset or
liability in a transaction that is not a business combination and affects neither accounting nor taxable
profit or loss at the time of the transaction.
A deferred tax liability is recognized based on the expected manner of realization or settlement of
the carrying amount of assets and liabilities, using tax rates enacted, or substantively enacted, by the
end of the reporting period.
A deferred income tax asset is recognized to the extent that it is probable that future taxable profit
will be available against which the deductible temporary differences and tax losses can be utilized.
Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer
probable that the related tax benefit will be realized.
(E) Property, Plant and Equipment (PPE): [Ind AS 16]
Recognition and Measurement
Items of Property, plant and equipment acquired or constructed are initially recognized at historical
cost net of recoverable taxes, duties, trade discounts and rebates, less accumulated depreciation and
impairment loss, if any. Costs directly attributable to acquisition are capitalized until the property,
plant and equipment are ready for use, as intended by the Management.
The historical cost of Property, plant and equipment comprises of its
• purchase price including import duties and non-refundable purchase taxes,
• borrowing costs directly attributable to the qualifying asset in accordance with accounting policy
on borrowing cost,
• the cost of dismantling, removing the item and restoring the site on which it is located and
• Adjustment arising for exchange rate variations attributable to the assets, including any cost
directly attributable to bringing the assets to their working condition for their intended use.
Subsequent Expenditure
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. All other repairs and maintenance
are charged to the Standalone Statement of Profit and Loss during the reporting period in which they
are incurred.
Advances paid towards the acquisition of PPE outstanding at each Balance Sheet date is classified
as capital advances under 'Other non-current assets' and cost of assets not put to use before such date
are disclosed under 'Capital work-in progress'. The Company identifies and determines cost of each
component of the plant and equipment separately, if the component/part has a cost which is
significant to the total cost of the plant and equipment and has useful lives that is materially different
from that of the remaining plant and equipment.
Machinery spares which meet the criteria of PPE is capitalised and depreciated over the useful life
of the respective asset.
Depreciation methods, estimated useful lives and residual values
Depreciation is provided on written down value method based on the respective estimate of useful
lives.
Depreciation is provided based on useful life of the assets as prescribed in Schedule II to the
Companies Act, 2013. Management believes that useful lives of assets are same as those prescribed
in Schedule II to the Act.
Depreciation methods, useful lives and residual values are reviewed periodically, including at each
financial year end, taking into account commercial and technological obsolescence as well as normal
wear and tear and adjusted prospectively, if appropriate.
Disposal
An item of property, plant and equipment is derecognised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the
disposal or retirement of an item of property, plant and equipment is determined as the difference
between the sales proceeds and the carrying amount of the asset and is recognised in Standalone
Statement of Profit and Loss. The carrying amount of any component accounted for as a separate
asset is derecognised when replaced.
(F) Employee Benefits: [Ind AS 19]
Short-term employee benefits
These are liabilities for wages and salaries, including non-monetary benefits that are expected to be
settled wholly within twelve months after the end of the period in which the employees render the
related employee service. The undiscounted amount of short-term employee benefits expected to be
paid in exchange for that service is recognised as a liability (accrued expense), after deducting any
amount already paid. If the amount already paid exceeds the undiscounted amount of the benefits, an
entity shall recognise that excess as an asset (prepaid expense). Or else recognised as an expense,
unless another Standard requires or permits the inclusion of the benefits in the cost of an asset.
Post-employment obligations
The Company operates the following postemployment schemes:
(a) defined benefit plans such as gratuity and pension; and
(b) defined contribution plans such as provident fund etc.
(a) Defined Benefit Plans
In accordance with the Payment of Gratuity Act, 1972, applicable for Indian companies, the
Company provides for a lump sum payment to eligible employees, at retirement or
termination of employment based on the last drawn salary and years of employment with
the Company. The Company’s obligation in respect of the gratuity plan, which is a defined
benefit plan, is provided for based on actuarial valuation using the projected unit credit
method. Remeasurement gains and losses arising from experience adjustments and changes
in actuarial assumptions are recognised in the period in which they occur, directly in other
comprehensive income.
(b) Defined contribution plans
Contributions to defined contribution schemes such as employees’ state insurance, provident
fund, 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. The Company is
a member of recognized Provident Fund scheme established under The Provident Fund &
Miscellaneous Act, 1952 by the Government of India. The contribution paid or payable
under the scheme is recognized during the period under which the employee renders the
related services. The above benefits are classified as Defined Contribution Schemes as the
Company has no further defined obligations beyond the monthly contributions. Thus, the
amount of the post-employment benefits received by the employee is determined by the
amount of contributions paid by an entity (and perhaps also the employee) to a post¬
employment benefit plan or to an insurance company, together with investment returns
arising from the contributions; and actuarial risk and investment risk falls on the employee.
Other Employee Benefits
Other employee benefit obligations are measured on an undiscounted basis and are recorded as
expense as the related service is provided.
Defined Benefit Plan - Gratuity
The Company has a defined benefit gratuity plan in India (unfunded). The company’s defined benefit
gratuity plan is a final salary plan for employees. Gratuity is paid from company as and when it
becomes due and is paid as per company scheme for Gratuity.
The Company’s obligation in respect of the gratuity plan is provided for based on actuarial valuation
using the projected unit credit method. The Company recognizes actuarial gains and losses
immediately in other comprehensive income, net of taxes. Gratuity is applicable only to employees
drawing a salary in Indian rupees and there are no other foreign defined benefit gratuity plans.
The sensitivity analysis has been determined based on reasonably possible changes of the respective
assumptions occurring at the end of the reporting period, while holding all other assumptions
constant.
The sensitivity analysis presented above may not be representative of the actual change in the defined
benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one
another as some of the assumptions may be correlated.
Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit
obligation has been calculated using the projected unit credit method at the end of the reporting
period, which is the same method as applied in calculating the defined benefit obligation as
recognised in the balance sheet.
There was no change in the methods and assumptions used in preparing the sensitivity analysis from
prior years.
Risks associated with defined benefit plan
Gratuity is a defined benefit plan and company is exposed to the Following Risks:
Interest rate risk: A fall in the discount rate which is linked to the G.Sec. Rate will increase the
present value of the liability requiring higher provision.
Salary Risk: The present value of the defined benefit plan liability is calculated by reference to the
future salaries of members. As such, an increase in salary of the members more than assumed level
will increase the plan’s liability.
Asset Liability Matching Risk: The plan faces the ALM risk as to the matching cash flow. Company
has to manage pay- out based on pay as you go basis from own funds.
Mortality risk: Since the benefits under the plan is not payable for life time and payable till
retirement age only, plan does not have any longevity risk.
(G) Foreign Currency: [Ind AS 21]
Functional and presentation currency
The financial statements are presented in Indian Rupees (INR), which is the company’s functional
and presentation currency.
Foreign currency transactions
• Foreign currency transactions are translated into the functional currency using the exchange
rates at the dates of the transactions. Realised gains and losses on settlement of foreign currency
transactions are recognised in the Standalone Statement of Profit and Loss.
• Monetary foreign currency assets and liabilities at the year-end are translated at the year-end
exchange rates and the resultant exchange differences are recognised in the Standalone
Statement of Profit and Loss.
• 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 transaction.
• Exchange difference arising on settlement of monetary items or reporting monetary items at
rates different from those at which they were initially recorded during the year, or reported in
previous financial statements, are recognized as income or as expense in the year in which they
arise.
(H) Finance Cost: [Ind AS 23]
Borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset
are capitalized as part of the cost of such asset. A Qualifying asset is one that necessarily takes
substantial period of time to get ready for its intended use. Interest income earned on the temporary
investment of specific borrowing pending their expenditure on qualifying asset is deducted from the
borrowing cost eligible for capitalization. All Other borrowing costs are charged to statement of
profit and loss for the period in which they are incurred.
(I) Related parties [Ind AS 24]
As per Ind AS-24 issued by the Institute of chartered Accountants of India, the company’s related
parties are disclosed below:
i. Enterprises where control exists:
Sumeet Global PTE Ltd. - 100% Owned subsidiary
ii. Enterprises over which Key Management Personnel or relatives of such personnel
exercise significant influence or control and with whom transactions have taken place
during the year
Ý Somani Overseas Pvt Ltd. - Director’s wife is Director
Ý Durga Transport Company - Director’s Son-in-law is proprietor
iii. Key Management Personnel (KMP):
a) Executive Director
Ý Shankarlal Somani
Ý Sumeet Somani
b) Non-Executive Director
Ý Zeel Suresh Kumar Modi
Ý Manoj Kumar Jain
Ý Vikashkumar Kamalsingh Chandaliya
Ý Saurav Santosh Duggar
c) Company Secretary
Ý Anil Kumar Jain
d) Chief Financial Officer
Ý Abhishek Prasad
e) Relatives of Key Management Personnel
Ý Ganga Devi Somani
iv. Other related parties - NIL
(J) Separate Financial Statements: [Ind AS 27]
Measurement Options:
Ind AS 27 allows a parent company to account for its investments in subsidiaries, joint ventures,
and associates in its separate financial statements either:
-At Cost, or
-At Fair Value through Profit or Loss (FVTPL) or Fair Value through Other Comprehensive
Income (FVOCI)(As per Ind AS 109).
Disclosure:
The method used (Cost or fair value) must be consistently applied and disclosed in the separate
financial statements.
Note: Company accounts its investments in subsidiaries at cost.
(K) Earnings Per Share: [Ind AS 33]
Basic and Diluted earnings/(loss) per share are calculated by dividing the net profit / (loss) for the
period attributable to equity shareholders (after deducting preference dividends and attributable
taxes) by the weighted average number of equity shares outstanding during the period. The weighted
average numbers of equity shares outstanding during the period are adjusted for any share splits and
bonus shares issues including for changes effected prior to the approval of the financial statements
by the board of directors.
*The fair value of cash and cash equivalents, trade receivables, borrowings, trade payables, other
current financial assets and liabilities approximate their carrying amount largely due to the short¬
term nature of these instruments. The Company's long-term debt and investment in fixed deposit
have been contracted at market rates of interest. Accordingly, the carrying value of such
instruments approximates their fair value.
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