4. Summary of material accounting policies
The financial statements have been prepared using the material accounting policies and measurement bases summarised below.
These were used throughout all years presented in the financial statements.
4.1 Current versus non-current classification
For the purpose of Current / Non-Current classification, the Company has reckoned its normal operating cycle as twelve months based
on the nature of products and the time between the acquisition of assets or inventories for processing and their realisation in cash
and cash equivalents.
4.2 Property, plant and equipment (PPE)
Recognition and initial measurement
Property, plant and equipment are stated at their cost of acquisition. The cost comprises purchase price, borrowing cost if capitalization
criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discount
and rebates are deducted in arriving at the purchase price. 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. All other repair and maintenance costs are recognised in statement of profit and loss as incurred.
Subsequent measurement (depreciation and useful lives)
Depreciation on property, plant and equipment is provided on the straight-line method, computed on the basis of useful lives (as set
out below) prescribed in Schedule II to the Companies Act, 2013.
The residual values, useful lives and method of depreciation of are reviewed at the end of each financial year.
De-recognition
An item of property, plant and equipment initially recognised is de-recognised upon disposal or when no future economic benefits are
expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset) is recognised in statement of profit and loss when the asset is derecognised.
4.3 Intangible assets
Recognition and initial measurement
Intangible assets (softwares) are stated at their cost of acquisition. The cost comprises purchase price, borrowing cost if capitalization
criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discount
and rebates are deducted in arriving at the purchase price.
Subsequent measurement (amortisation)
The cost of capitalized software is amortized over a period four years (4 years) from the date of its acquisition.
Exchange differences arising on monetary items on settlement, or restatement as at reporting date, at rates different from those at
which they were initially recorded, are recognized in the statement of profit and loss in the year in which they arise.
4.4 Impairment of non-financial assets
At each reporting date, the Company assesses whether there is any indication that an asset may be impaired, based on internal or
external factors. If any such indication exists, the Company estimates the recoverable amount of the asset or the cash generating
unit. If such recoverable amount of the asset or cash generating unit to which the asset belongs is less than its carrying amount,
the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the
statement of profit and loss. If, at the reporting date there is an indication that a previously assessed impairment loss no longer exists,
the recoverable amount is reassessed and the asset is reflected at the recoverable amount. Impairment losses previously recognized
are accordingly reversed in the statement of profit and loss.
4.5 Financial instruments
Financial assets
Recognition and initial measurement
All financial assets are recognised initially at fair value and transaction cost that is attributable to the acquisition of the financial asset
is also adjusted.
Subsequent measurement
i. Debt instruments at amortised cost - A 'debt instrument' is measured at the amortised cost if both the following conditions are
met:
• The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
• Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest
(SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate
(EIR) method.
ii. Equity instruments - All equity investments in scope of 'Ind AS 109 Financial Instruments' ('Ind AS 109') are measured at fair
value. Equity instruments which are held for trading are generally classified as at fair value through profit and loss (FVTPL). For
all other equity instruments, the Company decides to classify the same either as at fair value through other comprehensive
income (FVOCI) or fair value through profit and loss (FVTPL).
iii. Mutual funds - All mutual funds in scope of Ind AS 109 are measured at fair value through profit and loss (FVTPL).
De-recognition of financial assets
A financial asset is primarily de-recognised when the rights to receive cash flows from the asset have expired or the Company has
transferred its rights to receive cash flows from the asset.
Financial liabilities
Recognition and initial measurement - amortised cost
All financial liabilities are recognised initially at fair value and transaction cost that is attributable to the acquisition of the financial
liabilities is also adjusted.
Subsequent measurement - Amortised cost
Subsequent to initial measurement, all financial liabilities are measured at amortised cost using the effective interest method.
Recognition and initial and subsequent measurement - fair value
A financial liability is classified as fair value through profit and loss ('FVTPL') if it is designated as such upon initial recognition.
Financial liabilities at FVTPL are measured (initial and subsequent) at fair value and net gains/losses, including any interest expense
are recognised in statement of profit and loss.
De-recognition of financial liabilities
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires. When an existing
financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition
of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
Compound financial instrument
Optionally convertible debentures are separated into liability and equity components based on the terms of the contract. On
issuance of the said instrument, the liability component is arrived by discounting the gross sum at a market rate for an equivalent
non-convertible instrument. This amount is classified as a financial liability measured at amortised cost until it is extinguished on
conversion or redemption. The remainder of the proceeds is recognised as equity component of compound financial instrument. This
is recognised and included in shareholders' equity, net of income tax effects, and not subsequently re-measured. Such instruments
are classified as current financial liability if the conversion option vests with the holder.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable
legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the
liabilities simultaneously.
4.6 Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment
loss for financial assets. The Company factors historical trends and forward looking information to assess expected credit losses
associated with its assets and impairment methodology applied depends on whether there has been a significant increase in credit
risk.
Trade receivables
In respect of trade receivables, the Company applies the simplified approach of Ind AS 109, which requires measurement of loss
allowance at an amount equal to lifetime expected credit losses. Lifetime expected credit losses are the expected credit losses that
result from all possible default events over the expected life of a financial instrument.
Other financial assets
In respect of its other financial assets, the Company assesses if the credit risk on those financial assets has increased significantly
since initial recognition. If the credit risk has not increased significantly since initial recognition, the Company measures the loss
allowance at an amount equal to 12-month expected credit losses, else at an amount equal to the lifetime expected credit losses. The
Company assumes that the credit risk on a financial asset has not increased significantly since initial recognition, if the financial asset
is determined to have low credit risk at the balance sheet date.
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