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Bharat Parenterals Ltd. కంపెనీ అకౌంటింగ్ విధానాలు
A. Property, Plant and Equipment:Recognition & Measurement
All items of property, plant and equipment held for use in the production or supply of goods or services or for administration
purpose are stated at acquisition cost net of accumulated depreciation and accumulated impairment losses, if any except,
freehold land which is valued at Fair Value. Historical cost includes expenditure that is directly attributable to the acquisition of
the items.
Subsequent costs are included in the carrying amount of asset 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 expenses are charged to the Statement of Profit and Loss during the
period in which they are incurred.
Spare parts, stand-by equipment and servicing equipment are recognised as property, plant and equipment if they are held for
use in the production or supply of goods or services, for rental to others, or for administrative purposes and are expected to be
used during more than one period.
Property, plant and equipment which are not ready for intended use as on the reporting date are disclosed as ''Capital work-in¬
progress''. Depreciation is not recorded on capital work-in-progress until construction and installation is complete and the asset
is ready for its intended use.
Gains or losses arising from de-recognition of a Property, Plant and Equipment are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and are recognized in the Statement of Profit and Loss when the asset is
de-recognised.
Property, Plant and Equipment (PPE) in the course of construction for production, supply or administrative purposes are carried
at cost, less any recognised impairment loss. The cost of an asset comprises its purchase price or its construction cost (net of
applicable tax credits) and any cost directly attributable to bring the asset into the location and condition necessary for it to be
capable of operating in the manner intended by the Management. It includes professional fees and, for qualifying assets,
borrowing costs capitalised in accordance with the Company''s accounting policy. Such properties are classified to the
appropriate categories of property, plant and equipment when completed and ready for intended use. Parts of an item of PPE
having different useful lives and material value and subsequent expenditure on PPE arising on account of capital improvement
or other factors are accounted for as separate components.
Advances paid towards the acquisition of PPE outstanding at each Balance Sheet date are classified as capital advances under
"Other Non-current Assets" and the cost of assets not put to use up to the year-end is disclosed under ''Capital work-in¬
progress''.
Depreciation on Property, Plant and Equipment is provided using written down value method on depreciable amount,
depreciation is provided based on useful life of the assets as prescribed in Schedule II to the Companies Act, 2013. 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.
B. Impairment of Assets
Non- Financial Assets
At each balance sheet date, the Company reviews the carrying values of its property, plant and equipment and intangible assets
to determine whether there is any indication that the carrying value of those assets may not be recoverable through continuing
use. If any such indication exists, the recoverable amount of the asset is reviewed in order to determine the extent of
impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Company
estimates the recoverable amount of the cash generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and 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 the risks specific to the asset for which the estimates of future cash flows have not been adjusted. An
impairment loss is recognised in the statement of profit and loss as and when the carrying value of an asset exceeds its
recoverable amount.
Where an impairment loss subsequently reverses, the carrying value of the asset (or cash generating unit) is increased to the
revised estimate of its recoverable amount so that the increased carrying value does not exceed the carrying value that would
have been determined had no impairment loss been recognised for the asset (or cash generating unit) in prior years. A reversal
of an impairment loss is recognised in the statement of profit and loss immediately.
At each balance sheet date, the Company assesses whether a financial asset is to be impaired. Ind AS 109 requires the Company
to apply expected credit loss model for recognition and measurement of impairment loss. In determining the allowances for
doubtful trade receivables, the Company has used a practical expedient by computing the expected credit loss allowance for
trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and is
adjusted for forward looking information. The impairment loss is based on the ageing of the receivables that are due and
allowance rates used in the provision matrix. For all other financial assets, expected credit losses are measured at an amount
equal to the 12-months expected credit losses or at an amount equal to the lifetime expected credit losses if the credit risk on
the financial asset has increased significantly since initial recognition.
Investment property comprises land or buildings held to earn rentals, for capital appreciation, or both, and not for use in the
production or supply of goods or services, administrative purposes, or sale in the ordinary course of business.
Investment properties are initially recognized at cost, including purchase price and directly attributable expenditures such as
professional fees and property transfer taxes. Costs excluded from initial measurement encompass start-up costs, operating
losses before the property achieves planned occupancy, and abnormal amounts of wasted material, labour, or other resources.
Subsequent to initial recognition, investment properties are measured using the cost model, i.e., at cost less accumulated
depreciation and any accumulated impairment losses, in accordance with Ind AS 16. Depreciation is charged on a systematic
basis over the useful life of the investment property, consistent with the depreciation policy applied to property, plant, and
equipment.
Transfers to or from investment property occur only when there is a change in use, evidenced by commencement or cessation
of owner-occupation, commencement of development with a view to sale, or inception of an operating lease to another party.
Such transfers are accounted for at the carrying amount of the property.
An investment property is derecognized upon disposal or when it is permanently withdrawn from use and no future economic
benefits are expected. Gains or losses arising from derecognition are recognized in profit or loss, calculated as the difference
between the net disposal proceeds and the carrying amount of the asset.
D. Revenue Recognition:Sale of Goods and Services
Revenue from contracts with customers involving sale of these products is recognized at a point in time when control of the
product has been transferred at an amount that reflects the consideration to which the Company expects to be entitled in
exchange for those goods or services, and there are no unfulfilled obligation that could affect the customer''s acceptance of the
products and the Company retains neither continuing managerial involvement to the degree usually associated with ownership
nor effective control over the goods sold. At contract inception, the Company assess the goods or services promised in a
contract with a customer and identify as a performance obligation each promise to transfer to the customer. Revenue from
contracts with customers is recognized when control of goods or services are transferred to customers and the Company retains
neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the
goods sold. The point of time of transfer of control to customers depends on the terms of the trade - CIF, CFR or DDP, ex-works,
etc.
Revenue is measured at the amount of consideration which the Company expects to be entitled to in exchange for transferring
distinct goods or services to a customer as specified in the contract, excluding amounts collected on behalf of third parties (for
example taxes and duties collected on behalf of the government), volume rebates etc.
Interest IncomeInterest income or expense is recognised using the effective interest method.
The ''effective interest rate'' is the rate that exactly discounts estimated future cash payments or receipts through the expected
life of the financial instrument to:
- the gross carrying amount of the financial asset; or
- the amortised cost of the financial liability.
In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when
the asset is not credit-impaired) or to the amortised cost of the liability. However, for financial assets that have become credit-
impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised
cost of the financial asset.
Insurance claims are accounted for based on claims submitted and to the extent that there is no uncertainty in receiving the
claims.
Government grants, including subsidies received from governmental authorities, are recognized in accordance with Indian
Accounting Standard (Ind AS) 20 - Accounting for Government Grants and Disclosure of Government Assistance.
Government grants are recognized when there is reasonable assurance that the Company will comply with the conditions
attached to them and that the grants will be received.
Grants related to income are recognized in the Statement of Profit and Loss on a systematic basis over the periods in which the
Company recognizes as expenses the related costs for which the grants are intended to compensate. Such grants are presented
as part of profit or loss, either separately under a general heading such as ''Other Income'' or deducted in reporting the related
expense.
Grant related to acquisition of fixed assets is recognised as a deduction from the cost of acquisition of such fixed asset.
In cases where a government grant is received as compensation for expenses or losses already incurred or for the purpose of
giving immediate financial support to the Company with no future related costs, the grant is recognized in profit or loss of the
period in which it becomes receivable.
If a government grant becomes repayable, the repayment is accounted for as a change in accounting estimate. Repayment of a
grant related to income is applied first against any unamortized deferred credit recognized in respect of the grant, and any
excess is recognized immediately in profit or loss.
Export benefits are accounted for in the year of exports based on eligibility and when there is no uncertainty in receiving the
same.
F. Leases - Company as a Lessor
Initial Recognition: Leases for which the Company is a lessor are classified as either finance leases or operating leases based on
the substance of the arrangement and the extent to which risks and rewards incidental to ownership of the underlying asset
remain with the Company. Leases in which substantially all the risks and rewards incidental to ownership of the asset are not
transferred to the lessee are classified as operating leases in accordance with IND AS 116 - Leases.
Asset Presentation: Assets given under operating leases are presented under the relevant category of property, plant and
equipment or investment property in the Balance Sheet. Such assets are depreciated over their useful lives on a basis consistent
with the Company''s normal depreciation policy.
Income Recognition: Lease income from operating leases is recognised in the Statement of Profit and Loss on a straight-line
basis over the lease term or on another systematic basis where such basis is more representative of the pattern in which benefit
derived from the use of the underlying asset is diminished. Income from operating leases is disclosed under "Other Income" or
"Revenue from Operations", as appropriate.
Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset
and recognised as an expense over the lease term on the same basis as lease income.
Amounts received towards security deposits are recognised as financial liabilities and measured in accordance with applicable
provisions of IND AS 109 - Financial Instruments.
The Company assesses at each reporting date whether there is any indication that the leased assets may be impaired and
recognises impairment loss, if any, in accordance with IND AS 36 - Impairment of Assets.
The Company provides disclosures relating to leasing arrangements, lease income, and other information as required under
IND AS 116 in the notes forming part of the financial statements.
G. Financial Guarantee Contracts
⢠Initial Recognition: Financial guarantee contracts are recognized as a financial liability at the time the guarantee is
issued. The liability is initially measured at fair value.
⢠Subsequent Measurement: The financial guarantee liability is subsequently measured at the higher of the amount of the
loss allowance determined in accordance with the Expected Credit Loss (ECL) model under Ind AS 109; and the amount
initially recognised less cumulative amount of income recognised over the period of the guarantee contract, where
applicable.
⢠Amortization of Commission: The guarantee commission (initial fair value) is amortized and recognized as "Other
Income" over the tenure of the guarantee on a systematic basis in accordance with the substance of the arrangement.
⢠Fair Value Changes: Any change in the carrying amount of the financial guarantee liability, including the impact of
reassessment of expected credit losses, is recognised in the Statement of Profit and Loss.
⢠Derecognition: Financial guarantee contracts are derecognised when the Company''s obligations under the contract
expire, are discharged, or are cancelled.
Where financial guarantee contracts are issued to subsidiaries, associates, joint ventures, or other related parties
without adequate consideration, the difference between the fair value of the guarantee and consideration received, if
any, is recognised as an investment or distribution, as appropriate, in accordance with the applicable IND AS
requirements.
H. Research and Development (R&D) Costs
⢠Research Phase: All expenditure related to the research phase is recognized in the Statement of Profit and Loss as
incurred.
⢠Development Phase: Expenditure is capitalized as an intangible asset only if it meets the criteria of technical feasibility,
intention to complete, and ability to generate future economic benefits.
⢠Amortization: Capitalized development costs are amortized over their estimated useful life, typically aligned with patent
protection or market exclusivity periods.
I. Financial Instruments:
i) Financial AssetsClassification:
The Company classifies its financial assets in the following measurement categories:
⢠Those to be measured subsequently at fair value (either through other comprehensive income, or
through Statement of Profit and Loss), and
⢠Those measured at amortized cost.
The classification depends on the Company''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
Statement of Profit and Loss or other comprehensive income. For investments in debt instruments, this will
depend on the business model in which the investment is held. For investments in equity instruments, 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 other comprehensive income.
The Company reclassifies debt or equity investments when and only when its business model for managing those
assets changes.
At initial recognition, in the case of a financial asset at fair value through profit and loss, the Company measures a
financial asset at its fair value plus, transaction costs that are directly attributable to the acquisition of the financial
asset. Transaction costs of financial assets carried at fair value through Statement of Profit and Loss are expensed
in Statement of Profit and Loss.
(a) 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 at amortized cost.
(b) Fair Value through Other Comprehensive Income (FVOCI): Assets that are held for collection of contractual
cash flows and for selling the financial assets, where the assets cash flows represent solely payments of
principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through Other
Comprehensive Income (OCI), except for the recognition of impairment gains or losses, interest revenue
and foreign exchange gains and losses which are recognized in Statement of Profit and Loss. When the
financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from
equity to profit and loss and recognized in other gains/ losses. Interest income from these financial assets is
included in other income using the effective interest rate method.
(c) Fair value through profit and loss: Assets that do not meet the criteria for amortized cost or FVOCI are
measured at fair value through Statement of Profit and Loss. Interest income from these financial assets is
included in other income.
A financial asset is derecognized only when
(a) The Company has transferred the rights to receive cash flows from the financial asset or
(b) 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.
ii) Financial LiabilitiesMeasurement:
The Company''s financial liabilities include trade and other payables, loans and borrowings. All financial liabilities are
recognised initially at fair value and in the case of loans, borrowings and payables recognised net of directly attributable
transaction costs.
Subsequent MeasurementThe measurement of financial liabilities depends on their classification, as described below:Financial Liability at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is held for trading or are designated upon initial
recognition as FVTPL. Gains or losses on financial liabilities held for trading are recognized in the Statement of Profit and
Loss.
Other Financial Liabilityi. Classification as debt or equity:
Financial liabilities and equity instruments issued by the Company are classified according to the substance of the
contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
ii. Initial recognition and measurement:
Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the
instrument. Financial liabilities are initially measured at the fair value.
Financial liabilities are subsequently measured at amortised cost using the effective interest rate method.
Financial liabilities carried at fair value through profit or loss are measured at fair value with all changes in fair
value recognized in the Statement of Profit and Loss.
A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or
expires.
The Company subsequently measures all equity investments at fair value. Where the Company''s management has
elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair
value gains and losses to Statement of Profit and Loss. Dividends from such investments are recognized in Statement of
Profit and Loss as other income when the Company''s right to receive payment is established.
Changes in the fair value of financial assets at fair value through profit and loss are recognized in other gain/losses in the
Statement of Profit and Loss. Impairment losses (and reversal of impairment losses) on equity investments measured at
FVOCI are not reported separately from other changes in fair value.
The Company classifies the fair value of its financial instruments in the following hierarchy, based on the inputs used in
their valuation: Level 1 - The fair value of financial instruments quoted in active markets is based on their quoted closing
price at the balance sheet date.
Level 2 - The fair value of financial instruments that are not traded in an active market is determined by using valuation
techniques using observable market data. Such valuation techniques include discounted cash flows, standard valuation
models based on market parameters for interest rates, yield curves or foreign exchange rates, dealer quotes for similar
instruments and use of comparable arm''s length transactions.
Level 3 - The fair value of financial instruments that are measured on the basis of entity specific valuations using inputs
that are not based on observable market data (unobservable inputs).
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. Gains and
losses are recognized in Statement of Profit and Loss when the liabilities are derecognized as well as through the Effective
Interest rate (EIR) amortization process.
OFF-SETTING 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 recognised amounts and there is an intention to settle on a net basis or realised the asset
and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be
enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the
counterparty.
Cash and cash equivalents in the balance sheet comprise cash at banks and on hand and highly liquid investments with an
original maturity of three months or less, which are subject to an insignificant risk of changes in value.
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a
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 the operating, investing and financing activities of the
company segregated.
In the Cash-flow statement, cash and cash equivalents are shown net of bank overdrafts, which are included as current
borrowings in liabilities on the balance sheet.
Inventories which comprise raw materials, packing materials, work-in-progress, finished goods, stores and spares are carried at
the lower of cost and net realizable value.
Cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to
their present location and condition.
In determining the cost, Weighted Average cost method in used. Finished goods progress include appropriate proportion of
costs of conversion. Fixed production overheads are allocated on the basis of normal capacity of production facilities. Valuation
of work-in-progress is based on weighted average valuation of raw material used in the process and no cost of conversion are
allocated.
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.
The net realizable value of work-in-progress is determined with reference to the selling prices of related finished products. Raw
materials and other supplies held for use in the production of finished products are not written down below cost except in cases
where material prices have declined and it is estimated that the cost of the finished products will exceed their net realizable
value. The comparison of cost and net realizable value is made on an item-by-item basis.
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.
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 in India. 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 tax assets and liabilities are recognized using the balance sheet approach 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
tax arises from the initial recognition of an asset or liability that effects neither accounting nor taxable profit or loss at the time of
transition.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the
related tax benefit will be realized.
Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted at
the balance sheet date and are expected to apply to taxable income in the year in which those temporary differences are
expected to be recovered or settled.
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 hat 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 utilized.
Unrecognized 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 Asset has not been
recognized on Brought Forward Losses and Fair Value Loss on Equity Instrument carried through Other Comprehensive Income
(FVTOCI) as there is no reasonable certainty of Income against which such Deferred Tax Asset can be recognised.
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 items are recognised in correlation to the underlying transaction either in
OCI or directly 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.
1. COMPANY OVERVIEW:
1.1 Description of Business
The Company is a Public Limited Company domiciled in India and is incorporated under the provisions of the Companies Act applicable in India. Its shares are listed on one recognised stock exchanges in India. The registered office of the Company is located at Vill.- Haripura, Savli, Baroda - 389 330. The Company is dealing in Manufacturing of Pharmaceutical Formulations.
1.2 Basis of Preparation of Financial Statements
i. Compliance with Ind AS
The Financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) as prescribed under Section 133 of the Act to be read with Rule 3 of the Companies (Indian Accounting Standards) Rules/ 2015 and the relevant amendment rules issued thereafter.
ii. Historical cost convention
The financial statements have been prepared on a historical cost basis, except the following:
⢠Certain financial assets and liabilities that are measured at fair value;
⢠Defined benefit plans - plan assets measured at fair value,
iii. Functional and presentation currency
These financial statements are presented in Indian Rupees, which is the Company''s functional currency, and all values are rounded to the nearest lakhs, except otherwise indicated.
iv. Composition of Financial Statements
The financial statements comprise:
- Balance Sheet
- Statement of Profit and Loss
- Statement of Changes in Equity
- Statement of Cash Flow
- Notes to Financial Statements
1.3 Key Accounting Judgments, Estimates and Assumptions
In preparing these financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Any change in these estimates and assumptions will generally be reflected in the financial statements in current period or prospectively, unless they are required to be treated retrospectively under relevant accounting standards.
2.1 Material Accounting Policies and Other Explanatory Notes
A. Property, Plant and Equipment:
L Recognition and measurement
Freehold land is carried at cost and not depreciated. All other items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items.
Income and expenses related to the incidental operations, not necessary to bring the item to the location and condition necessary for it to be capable of operating in the manner intended by management, are recognized in the Statement of Profit and Loss.
If significant parts of an item of property, plant and equipment have different useful life, then they are accounted and depreciated for as separate items (major components) of property, plant and equipment.
An Item of Property, Plant and Equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss on disposal of an item of property, plant and equipment is recognized in the Statement of Profit and Loss.
ii. Subsequent Expenditure
Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
iii. Depreciation
Depreciation is recognised so as to write off the cost of the assets (other than freehold land) less their residual values over their useful lives, using the Written Down Value Method on the basis of useful lives specified in part C of Schedule II to the Companies Act, 2013. The Estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in the estimated accounted for on a prospective basis.
B. Capital Work-in-Progress
Plant and properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognized impairment loss. Cost includes professional fees and borrowing costs (for qualifying asset) capitalized in accordance with the Company''s accounting policies. Such plant and Properties are classified and capitalized to the appropriate categories of Property, Plant and Equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the asset are ready for their intended use.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capital advances under "Other Non Current Assets" and the cost of assets not put to use before such date are disclosed under ''Capital work-in-progress''.
C. Investment Properties
Property that is held for long-term rental yields or for capital appreciation or both, is classified as investment property. Investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. Subsequent expenditure is capitalised to the asset''s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is de-recognised. Though the Company measures investment property using cost based measurement, the fair value of investment property is disclosed in the notes. The Company has used government registration rates for the purpose of determining fair value of Land and Buildings.
D. Impairment:
i. Non - financial assets
At each balance sheet date, the Company assesses whether there is any indication that any property, plant and equipment with finite life may be impaired. If any such impairment exists, the recoverable amount of an asset is estimated to determine the extent of impairment, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair valueless costs of disposal and value in use. If the recoverable amount of the asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in statement of Profit and Loss.
E. Leases
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.
Company as a lessee
(A) Lease Liability
At the commencement date, the Company measures the lease liability at the present value of the lease payments that are not paid at that date. The lease payments shall be discounted using incremental borrowing rate.
(B) Right-of-use assets
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.
Subsequent measurement
(A) Lease Liability
Company measure the lease liability by (a) increasing the carrying amount to reflect interest on the lease liability; (b) reducing the carrying amount to reflect the lease payments made; and (c) remeasuring the carrying amount to reflect any reassessment or lease modifications.
(B) Right-of-use assets
Subsequently measured at cost less accumulated depreciation and impairment losses. Right-of-use assets are depreciated from the commencement date on a straight line basis over the shorter of the lease term and useful life of the under lying asset.
Impairment
Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
Short term Lease:
Short term lease is that, at the commencement date, has a lease term of 12 months or less. A lease that contains a purchase option is not a short-term lease. If the company elected to apply short term lease, the lessee shall recognise the lease payments associated with those leases as an expense on either a straight-line basis over the lease term or another systematic basis. The lessee shall apply another systematic basis if that basis is more representative of the pattern of the lessee''s benefit.
As a lessor
Leases for which the company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
Lease income is recognised in the statement of profit and loss on straight line basis over the lease term.
F. Inventories:
Inventories are measured at the lower of Cost and Net Realizable Value. The cost of inventories includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their present location and condition. In the case of manufactured inventories and work in progress, costs include an appropriate share of fixed production overheads based on normal operating capacity.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The net realisable value of work in progress is determined with reference to the selling prices of related finished products.
Raw materials, components and other supplies held for use in the production of finished products are not written down value below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realisable value.
G. 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 (either through other comprehensive income, or through Statement of Profit and Loss), and
⢠Those measured at amortized cost.
The classification depends on the Company''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 Statement of Profit and Loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, 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 other comprehensive income.
The Company reclassifies debt or equity investments when and only when its business model for managing those assets changes.
ii. Measurement
At initial recognition, in case of a financial asset not at fair value through profit and loss, the Company measures a financial asset at its fair value plus, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through Statement of Profit and Loss are expensed in Statement of Profit and Loss.
(a) 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 at amortized cost.
(b) Fair Value through Other Comprehensive Income (FVOCI): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through Other Comprehensive Income (OCI), except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognized in Statement of Profit and Loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit and loss and recognized in other gains/ losses. Interest income from these financial assets is included in other income using the effective interest rate method.
(c) Fair value through profit and loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair value through Statement of Profit and Loss. Interest income from these financial assets is included in other income.
Trade Receivables:
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business and reflects Company''s unconditional right to consideration (that is, payment is due only on the passage of time). Trade receivables are recognised initially at the transaction price as they do not contain significant financing components. The Company holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method, less loss allowance.
iii. Equity Instruments
The Company subsequently measures all equity investments at fair value. Where the Company''s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to Statement of Profit and Loss. Dividends from such investments are recognized in Statement of Profit and Loss as other income when the Company''s right to receive payment is established.
Changes in the fair value of financial assets at fair value through profit and loss are recognized in other gain/Iosses in the Statement of Profit and Loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
iv. De-recognition
A financial asset is derecognized only when
(a) The Company has transferred the rights to receive cash flows from the financial asset or
: -1,if
(b) 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.
H. Cash and Cash Equivalents:
Cash and cash equivalents in the balance sheet comprise cash at banks and on hand and highly liquid investments with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a 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 the operating, investing and financing activities of the company segregated.
In the Cash-flow statement, cash and cash equivalents are shown net of bank overdrafts, which are included as current borrowings in liabilities on the balance sheet
I. Financial Liabilities:
i. Measurement
All financial liabilities are recognized initially at fair value and in the case of loans, borrowings and payables recognized net of directly attributable transaction costs.
The Company''s financial liabilities include trade and other payables, loans and borrowings.
ii. De-recognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. Gains and losses are recognized in Statement of
Profit and Loss when the liabilities are derecognized as well as through the Effective Interest rate (EIR) amortization process.
J. Foreign Currency Translation:
Initial Recognition:
Foreign currency transactions are recorded in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Conversion:
Foreign currency monetary items are reported using the closing rate. 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 the transaction and nonmonetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
K. Revenue recognition:
Revenue from contracts with customers is recognised when control of 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. The Company assesses promises in the contract that are separate performance obligations to which a portion of transaction price is allocated.
Revenue from the sale of goods is recognized at the point in time when control of the asset is transferred to the customer, generally on the delivery of the goods.
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, the Company considers the effects of variable consideration, the existence of significant financing component and consideration payable to the customer like return and trade discounts.
Sales are disclosed excluding net of sales returns and Goods and Service Tax (GST).
i. Interest income
Interest income from the financial assets is recognized on a time basis, by reference to the principle outstanding using the effective interest method provided it is probable that the economic benefits associated with the interest will flow to the Company and the amount of interest can be measured reliably. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of that financial asset.
ii. Export Benefits
Export incentives are recognized when the right to receive them as per the terms of the entitlement is established in respect of exports made.
The benefits accrued under the duty drawback scheme and Merchandise Export from India Scheme (MEIS) as per the Import and export Policy in respect of exports under the said scheme are recognised when there is a reasonable assurance that the benefit will be received and the company will comply with all attached conditions. The above benefits has been included under the head ''Export Incentives.''
iii. Dividend income:
Revenue is recognised when the Company''s right to receive the payment is established.
iv. Other Income:
Other income is accounted for on accrual basis except where the receipt of income is uncertain in which case it is accounted for on receipt basis.
Claims/ Insurance Claim etc are accounted for when no significant uncertainties are attached to their eventual receipts.
L. Employee benefits: i. Short-term obligations:
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employee''s services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
ii. Provident Fund:
Contribution towards provident fund for employees is made to the regulatory authorities, where the Company has no further obligations. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from the contributions made on a monthly basis.
iii. Gratuity:
The Company provides for gratuity, a defined benefit plan (the "Gratuity Plan") covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee''s salary and the tenure of employment. The gratuity plan in Company is funded through annual contributions to ICICI Prudential life insurance under its Company''s Gratuity Scheme. The liability or asset recognised in the balance sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The Company''s liability is actuarially determined (using the Projected Unit Credit method) at the end of the year. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds. Re-measurement gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. They are included in retained earnings in the statement of changes in equity and in the balance sheet. Past-service costs are recognised immediately in profit or loss.
iv. Compensated Absences:
Entitlement of employees accumulating earned leave and eligibility of compensation or encashment of the same is also a defined benefit obligation and is treated as long term in nature in terms of the policies of the Company for the same. The value of obligation towards the same is provided for on the basis of actuarial valuation using projected unit credit method as at the balance sheet date. Actuarial gain / losses are immediately taken to the Statement of Profit and Loss and are not deferred.
v. Share based Payment
The grant date fair value of options granted to employees is recognised as an employee expense, with a corresponding increase in equity, on a straight line basis, over the vesting period, based on the Company''s estimate of equity instruments that will eventually vest. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserves.
M. Borrowing costs:
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised 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 capitalisation.
Other borrowing costs are expensed in the period in which they are incurred.
N. 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.
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 in India. 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 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.
Deferred income 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 unused tax losses can be utilised.
The carrying amount of deferred income 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 income tax asset to be utilised.
Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled.
O. Provisions and Contingencies: i. Provisions
Provisions for legal claims, product warranties and make good obligations are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Long-term provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money. Short term provisions are carried at their redemption value and are not offset against receivables from reimbursements.
Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
ii. Contingent Liabilities
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.
iii. Contingent Assets
Contingent Assets are not recognised as but are disclosed in the notes to the financial statements.
P. Earnings per Share:
i. Basic earnings per share
Basic earnings per share are calculated by dividing:
- The profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares.
- By the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year.
ii. Diluted earnings per share
Diluted earnings per share adjust the figures used in the determination of basic earnings per share to take into account:
- The after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
- The weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
Q. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting to the Chief Operating Decision Maker "CODM" of the Company. The CODM is responsible for allocating resources and assessing performance of the operating segment. The Company has monthly review and forecasting procedure in place and CODM reviews the operations of the Company as a whole.
R. Exceptional items:
Certain occasions, the size, type or incidence of an item of income or expense, pertaining to the ordinary activities of the Company is such that its disclosure improves the understanding of the performance of the Company, such income or expense is classified as an exceptional item and accordingly, disclosed in the notes accomDanvine to the financial statements.
2.2 Recent pronouncements
Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. For the year ended March 31, 2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Company.
1. COMPANY OVERVIEW:
1.1 Description of Business
The Company is a Public Limited Company domiciled in India and is incorporated under the provisions of the Companies Act applicable in India. Its shares are listed on one recognised stock exchanges in India. The registered office of the Company is located at Vill. - Haripura, Savli, Baroda - 389 330. The Company is dealing in Manufacturing of Pharmaceutical Formulations.
1.2 Basis of Preparation of Financial Statements
i. Compliance with Ind AS
The Financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) as prescribed under Section 133 of the Act to be read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and the relevant amendment rules issued thereafter.
ii. Historical cost convention
The financial statements have been prepared on a historical cost basis, except the following:
⢠Certain financial assets and liabilities that are measured at fair value;
⢠Defined benefit plans - plan assets measured at fair value.
iii. Functional and presentation currency
These financial statements are presented in Indian Rupees, which is the Companyâs functional currency, and all values are rounded to the nearest lakhs, except otherwise indicated.
iv. Composition of Financial Statements
The financial statements comprise:
- Balance Sheet
- Statement of Profit and Loss
- Statement of Changes in Equity
- Statement of Cash Flow
1.3 Key Accounting Judgments, Estimates and Assumptions
In preparing these financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Any change in these estimates and assumptions will generally be reflected in the financial statements in current period or prospectively, unless they are required to be treated retrospectively under relevant accounting standards.
2.1 Significant Accounting Policies and Other Explanatory Notes
A. Property, Plant and Equipment:
i. Recognition and measurement
Freehold land is carried at cost and not depreciated. All other items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items.
Income and expenses related to the incidental operations, not necessary to bring the item to the location and condition necessary for it to be capable of operating in the manner intended by management, are recognized in the Statement of Profit and Loss.
If significant parts of an item of property, plant and equipment have different useful life, then they are accounted and depreciated for as separate items (major components) of property, plant and equipment.
An Item of Property, Plant and Equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss on disposal of an item of property, plant and equipment is recognized in the Statement of Profit and Loss.
ii. Subsequent Expenditure
Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
iii. Depreciation
Depreciation is recognised so as to write off the cost of the assets (other than freehold land) less their residual values over their useful lives, using the Written Down Value Method on the basis of useful lives specified in part C of Schedule II to the Companies Act, 2013. The Estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in the estimated accounted for on a prospective basis.
B. Capital Work-in-Progress
Plant and properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognized impairment loss. Cost includes professional fees and borrowing costs (for qualifying asset) capitalized in accordance with the Companyâs accounting policies. Such plant and Properties are classified and capitalized to the appropriate categories of Property, Plant and Equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the asset are ready for their intended use.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capital advances under âOther Non Current Assetsâ and the cost of assets not put to use before such date are disclosed under âCapital work-in-progressâ.
C. Investment Properties
Property that is held for long-term rental yields or for capital appreciation or both, is classified as investment property. Investment property is measured initially at its cost,including related transaction costs and where applicable borrowing costs. Subsequent expenditure is capitalised to the assetâs carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised. Though the Company measures investment property using cost based measurement, the fair value of investment property is disclosed in the notes. The Company has used government registration rates for the purpose of determining fair value of Land and Buildings.
D. Impairment:
i. Non - financial assets
At each balance sheet date, the Company assesses whether there is any indication that any property, plant and equipment with finite life may be impaired. If any such impairment exists, the recoverable amount of an asset is estimated to determine the extent of impairment, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair valueless costs of disposal and value in use. If the recoverable amount of the asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in statement of Profit and Loss.
E. Leases
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.
Company as a lessee
(A) Lease Liability
At the commencement date, the Company measures the lease liability at the present value of the lease payments that are not paid at that date. The lease payments shall be discounted using incremental borrowing rate.
(B) Right-of-use assets
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.
Subsequent measurement
(A) Lease Liability
Company measure the lease liability by (a) increasing the carrying amount to reflect interest on the lease liability; (b) reducing the carrying amount to reflect the lease payments made; and (c) remeasuring the carrying amount to reflect any reassessment or lease modifications.
(B) Right-of-use assets
Subsequently measured at cost less accumulated depreciation and impairment losses. Right-of-use assets are depreciated from the commencement date on a straight line basis over the shorter of the lease term and useful life of the under lying asset.
Impairment
Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
Short term Lease:
Short term lease is that, at the commencement date, has a lease term of 12 months or less. A lease that contains a purchase option is not a short-term lease. If the company elected to apply short term lease, the lessee shall recognise the lease payments associated with those leases as an expense on either a straight-line basis over the lease term or another systematic basis. The lessee shall apply another systematic basis if that basis is more representative of the pattern of the lessee''s benefit.
As a lessor
Leases for which the company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
Lease income is recognised in the statement of profit and loss on straight line basis over the lease term.
F. Inventories:
Inventories are measured at the lower of Cost and Net Realizable Value. The cost of inventories includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their present location and condition. In the case of manufactured inventories and work in progress, costs include an appropriate share of fixed production overheads based on normal operating capacity.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The Net realisable value of work in progress is determined with reference to the selling prices of related finished products.
Raw materials, components and other supplies held for use in the production of finished products are not written down value below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realisable value.
G. 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 (either through other comprehensiveincome, or through Statement of Profit and Loss), and
⢠Those measured at amortized cost.
The classification depends on the Companyâs 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 Statement of Profit and Loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, 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 other comprehensive income.
The Company reclassifies debt or equity investments when and only when its business model for managing those assets changes.
ii. Measurement
At initial recognition, in case of a financial asset not at fair value through profit and loss, the Company measures a financial asset at its fair value plus, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through Statement of Profit and Loss are expensed in Statement of Profit and Loss.
(a) 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 at amortized cost.
(b) Fair Value through Other Comprehensive Income (FVOCI): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through Other Comprehensive Income (OCI), except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognized in Statement of Profit and Loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit and loss and recognized in other gains/ losses. Interest income from these financial assets is included in other income using the effective interest rate method.
(c) Fair value through profit and loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair value through Statement of Profit and Loss. Interest income from these financial assets is included in other income.
Trade Receivables:
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. However, trade receivables that do not contain a significant financing component are measured at transaction price. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
iii. Equity Instruments
The Company subsequently measures all equity investments at fair value. Where the Companyâs management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to Statement of Profit and Loss. Dividends from such investments are recognized in Statement of Profit and Loss as other income when the Companyâs right to receive payment is established.
Changes in the fair value of financial assets at fair value through profit and loss are recognized in other gain/losses in the Statement of Profit and Loss. Impairment losses
(and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
iv. Derecognition
A financial asset is derecognized only when
(a) The Company has transferred the rights to receive cash flows from the financial
asset or
(b) 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.
H. Cash and Cash Equivalents:
Cash and cash equivalents in the balance sheet comprise cash at banks and on hand and highly liquid investments with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a 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 the operating, investing and financing activities of the company segregated.
In the Cash-flow statement, cash and cash equivalents are shown net of bank overdrafts, which are included as current borrowings in liabilities on the balance sheet
I. Financial Liabilities:
i. Measurement
All financial liabilities are recognized initially at fair value and in the case of loans, borrowings and payables recognized net of directly attributable transaction costs.
The Companyâs financial liabilities include trade and other payables, loans and borrowings.
ii. Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. Gains and losses are recognized in Statement of Profit and Loss when the liabilities are derecognized as well as through the Effective Interest rate (EIR) amortization process.
J. Foreign Currency Translation:
Initial Recognition:
Foreign currency transactions are recorded in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Conversion:
Foreign currency monetary items are reported using the closing rate. 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 the transaction and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
K. Revenue recognition:
Revenue from contracts with customers is recognised when control of 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. The Company assesses promises in the contract that are separate performance obligations to which a portion of transaction price is allocated.
Revenue from the sale of goods is recognized at the point in time when control of the asset is transferred to the customer, generally on the delivery of the goods.
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, the Company considers the effects of variable consideration, the existence of significant financing component and consideration payable to the customer like return and trade discounts.
Sales are disclosed excluding net of sales returns and Goods and Service Tax (GST).
i. Interest income
Interest income from the financial assets is recognized on a time basis, by reference to the principle outstanding using the effective interest method provided it is probable that the economic benefits associated with the interest will flow to the Company and the amount of interest can be measured reliably. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of that financial asset.
ii. Export Benefits
Export incentives are recognized when the right to receive them as per the terms of the entitlement is established in respect of exports made.
The benefits accrued under the duty drawback scheme and Merchandise Export from India Scheme (MEIS) as per the Import and export Policy in respect of exports under the said scheme are recognised when there is a reasonable assurance that the benefit will be received and the company will comply with all attached conditions. The above benefits has been included under the head âExport Incentives.â
iii. Dividend income:
Revenue is recognised when the Companyâs right to receive the payment is established
iv. Income from Wind Operated Power generators
Income from Sale of Wind Operated Power is accounted on accrual basis on confirmation of units generated and supplied to the State Electricity Board as per the agreement.
v. Rent Income
Income is recorded on accrual basis per terms of agreement,
vi. Other Income:
Other income is accounted for on accrual basis except where the receipt of income is uncertain in which case it is accounted for on receipt basis.
Claims/Insurance Claim etc are accounted for when no significant uncertainties are attached to their eventual receipts.
L. Employee benefits:
i. Short-term obligations:
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employeeâs services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
ii. Provident Fund:
Contribution towards provident fund for employees is made to the regulatory authorities, where the Company has no further obligations. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from the contributions made on a monthly basis.
iii. Gratuity:
The Company provides for gratuity, a defined benefit plan (the âGratuity Planâ) covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employeeâs salary and the tenure of employment. The gratuity plan in Company is funded through annual contributions to ICICI Prudential life insuranceunder its Companyâs Gratuity Scheme. The liability or asset recognised in the balance sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The Companyâs liability is actuarially determined (using the Projected Unit Credit method) at the end of the year. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds. Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. They are included in retained earnings in the statement of changes in equity and in the balance sheet. Past-service costs are recognised immediately in profit or loss.
iv. Compensated Absences:
Entitlement of employees accumulating earned leave and eligibility of compensation or encashment of the same is also a defined benefit obligation and is treated as long term in nature in terms of the policies of the Company for the same. The value of obligation towards the same is provided for on the basis of actuarial valuation using projected unit credit method as at the balance sheet date. Actuarial gain / losses are immediately taken to the Statement of Profit and Loss and are not deferred.
v. Share based Payment
The grant date fair value of options granted to employees is recognised as an employee expense, with a corresponding increase in equity, on a straight line basis, over the vesting period, based on the Companyâs estimate of equity instruments that will eventually vest. At the end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserves.
M. Borrowing costs:
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised 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 capitalisation.
Other borrowing costs are expensed in the period in which they are incurred.
N. Income tax:
The income tax expense or credit for the period is the tax payable on the current periodâs taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences.
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 in India. 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 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.
Deferred income 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 unused tax losses can be utilised.
The carrying amount of deferred income 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 income tax asset to be utilised.
Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be received or settled.
O. Provisions and Contingencies: i. Provisions
Provisions for legal claims, product warranties and make good obligations are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Long-term provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money. Short term provisions are carried at their redemption value and are not offset against receivables from reimbursements.
Provisions are measured at the present value of managementâs best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
ii. Contingent Liabilities
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.
iii. Contingent Assets
Contingent Assets are not recognised as but are disclosed in the notes to the financial statements.
P. Earnings per Share: i. Basic earnings per share
Basic earnings per share are calculated by dividing:
- The profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares.
- By the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year.
ii. Diluted earnings per share
Diluted earnings per share adjust the figures used in the determination of basic earnings per share to take into account:
- The after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
- The weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
Q. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting to the Chief Operating Decision Maker "CODM" of the Company. The CODM is responsible for allocating resources and assessing performance of the operating segment. The Company has monthly review and forecasting procedure in place and CODM reviews the operations of the Company as a whole.
R. Exceptional items:
Certain occasions, the size, type or incidence of an item of income or expense, pertaining to the ordinary activities of the Company is such that its disclosure improves the understanding of the performance of the Company, such income or expense is classified as an exceptional item and accordingly, disclosed in the notes accompanying to the financial statements.
2.2 Recent pronouncements
⢠On March 31, 2023, the Ministry of Corporate Affairs (MCA) has notified Companies (Indian Accounting Standards) Amendment Rules, 2023. This notification has resulted into following amendments in the existing Accounting Standards which are applicable from April 1, 2023.
⢠Indian Accounting Standard (Ind AS) 101 - First time adoption of Ind AS -
modification relating to recognition of deferred tax asset by a first-time adopter associated with (a) right to use assets and related liabilities and (b) decommissioning, restoration and similar liabilities and corresponding amounts recognised as cost of the related assets.
⢠Indian Accounting Standard (Ind AS) 102 - Share-based Payment - Modification relating to adjustment after vesting date to the fair value of equity instruments granted.
⢠Indian Accounting Standard (Ind AS) 103 - Business Combination - Modification relating to disclosures to be made in the first financial statements following a business combination.
⢠Indian Accounting Standard (Ind AS) 107 - Financial Instruments Disclosures -
modification relating to disclosure of material accounting policies including information about basis of measurement of financial instruments.
⢠Indian Accounting Standard (Ind AS) 109 - Financial Instruments - Modification relating to reassessment of embedded derivatives.
⢠Indian Accounting Standard (Ind AS) 1- Presentation of Financials Statements -
Modification relating to disclosure of âmaterial accounting policy informationâ in place of âsignificant accounting policiesâ.
⢠Indian Accounting Standard (Ind AS) 8- Accounting Policies, Change in Accounting Estimates and Errors - Modification of definition of âaccounting estimateâ and application of changes in accounting estimates.
⢠Indian Accounting Standard (Ind AS) 12 - Income Taxes - Modification relating to
recognition of deferred tax liabilities and deferred tax assets.
⢠Indian Accounting Standard (Ind AS) 34- Interim Financial Reporting -
Modification in interim financial reporting relating to disclosure of âmaterial accounting policy informationâ in place of âsignificant accounting policiesâ.
⢠The Company is evaluating the amendments and the expected impact, if any, on the Companyâs financial statements on application of the amendments for annual reporting periods beginning on or after 1 April 2023.
1. Significant Accounting Policies and Other Explanatory Notes
A. Property, Plant and Equipment:
i. Recognition and measurement
Freehold land is carried at cost and not depreciated. All other items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items.
Income and expenses related to the incidental operations, not necessary to bring the item to the location and condition necessary for it to be capable of operating in the manner intended by management, are recognized in the Statement of Profit and Loss.
If significant parts of an item of property, plant and equipment have different useful life, then they are accounted and depreciated for as separate items (major components) of property, plant and equipment.
An Item of Property, Plant and Equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss on disposal of an item of property, plant and equipment is recognized in the Statement of Profit and Loss.
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment recognized as at April 1, 2016 measured as per the Previous GAAP and use that carrying value as the deemed cost (except to the extent of any adjustment permissible under other accounting standard) of the property, plant and equipment.
ii. Subsequent Expenditure
Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.
iii. Depreciation
Depreciation is recognised so as to write off the cost of the assets (other than freehold land) less their residual values over their useful lives, using the Written Down Value Method on the basis of useful lives specified in part C of Schedule II to the Companies Act, 2013. The Estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in the estimated accounted for on a prospective basis.
B. Impairment:
i. Non - financial assets
At each balance sheet date, the Company assesses whether there is any indication that any property, plant and equipment with finite life may be impaired. If any such impairment exists, the recoverable amount of an asset is estimated to determine the extent of impairment, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs of disposal and value in use. If the recoverable amount of the asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in statement of Profit and Loss.
C. Inventories:
Inventories are measured at the lower of Cost and Net Realizable Value. The cost of inventories includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their present location and condition. In the case of manufactured inventories and work in progress, costs include an appropriate share of fixed production overheads based on normal operating capacity.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The Net realisable value of work in progress is determined with reference to the selling prices of related finished products.
Raw materials, components and other supplies held for use in the production of finished products are not written down value below cost except in cases where material prices have declined and it is estimated that the cost ofthe finished products will exceed their net realisable value.
D. 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 (either through other comprehensive income, or through Statement of Profit and Loss), and
- Those measured at amortized cost.
The classification depends on the Company''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 Statement of Profit and Loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, 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 other comprehensive income.
The Company reclassifies debt or equity investments when and only when its business model for managing those assets changes.
ii. Measurement
At initial recognition, in case of a financial asset not at fair value through profit and loss, the Company measures a financial asset at its fair value plus, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through Statement of Profit and Loss are expensed in Statement of Profit and Loss.
(a) 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 at amortized cost.
(b) Fair Value through Other Comprehensive Income (FVOCI): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through Other Comprehensive Income (OCI), except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognized in Statement of Profit and Loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit and loss and recognized in other gains/ losses. Interest income from these financial assets is included in other income using the effective interest rate method.
(c) Fair value through profit and loss: Assets that do not meet the criteria for amortized cost or FVOCI are measured at fair value through Statement of Profit and Loss. Interest income from these financial assets is included in other income.
iii. Equity Instruments
The Company subsequently measures all equity investments at fair value. Where the Company''s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to Statement of Profit and Loss. Dividends from such investments are recognized in Statement of Profit and Loss as other income when the Company''s right to receive payment is established.
Changes in the fair value of financial assets at fair value through profit and loss are recognized in other gain/losses in the Statement of Profit and Loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
iv. Derecognition
A financial asset is derecognized only when
(a) The Company has transferred the rights to receive cash flows from the financial asset or
(b) 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.
E. Cash and Cash Equivalents:
Cash and cash equivalents in the balance sheet comprise cash at banks and on hand and highly liquid investments with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
F. Financial Liabilities:
i. Measurement
All financial liabilities are recognized initially at fair value and in the case of loans, borrowings and payables recognized net of directly attributable transaction costs.
The Company''s financial liabilities include trade and other payables, loans and borrowings.
ii. Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. Gains and losses are recognized in Statement of Profit and Loss when the liabilities are derecognized as well as through the Effective Interest rate (EIR) amortization process.
G. Foreign Currency Translation:
Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (''the functional currency''). The Indian Rupee (INR) is the functional and presentation currency of the Company.
Foreign currency transactions are recorded on initial recognition in the functional currency, using the exchange rate at the date of the transaction. At each balance sheet date, foreign currency monetary items are reported using the closing exchange rate. Exchange differences that arise on settlement of monetary items or on reporting at each balance sheet date of the Company''s monetary items at the closing rate are recognized as income and expenses in the Statement of Profit and Loss, in the period in which they arise.
H. Revenue recognition:
Revenue is recognized to the extent that it is possible that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable, taking into the account contractually defined terms of payment and excluding taxed or duties collected on behalf of the government.
i. Sale of Goods
Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognized when all the significant risks and rewards of ownership in the goods are transferred to the buyer as per the terms of contracts and no significant uncertainty exist regarding the amount of the consideration that will be derived from the sale of the goods.
ii. Interest income
Interest income from the financial assets is recognized on a time basis, by reference to the principle outstanding using the effective interest method provided it is probable that the economic benefits associated with the interest will flow to the Company and the amount of interest can be measured reliably. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of that financial asset.
iii. Other Income:
i) Export incentives are recognized when the right to receive them as per the terms of the entitlement is established in respect of exports made.
ii) Other income is accounted for on accrual basis except where the receipt of income is uncertain in which case it is accounted for on receipt basis.
iii) Claims/Insurance Claim etc are accounted for when no significant uncertainties are attached to their eventual receipts.
I. Employee benefits:
i. Short-term obligations:
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employee''s services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
ii. Provident Fund:
Contribution towards provident fund for employees is made to the regulatory authorities, where the Company has no further obligations. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from the contributions made on a monthly basis.
iii. Gratuity:
The Company provides for gratuity, a defined benefit plan (the âGratuity Planâ) covering eligible employees in accordance with the Payment of Gratuity Act, 1972. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee''s salary and the tenure of employment. The gratuity plan in Company is funded through annual contributions to ICICI Prudential life insurance under its Company''s Gratuity Scheme. The liability or asset recognised in the balance sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The Company''s liability is actuarially determined (using the Projected Unit Credit method) at the end of the year. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds. Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. They are included in retained earnings in the statement of changes in equity and in the balance sheet. Past-service costs are recognised immediately in profit or loss.
iv. Compensated Absences:
Entitlement of employees accumulating earned leave and eligibility of compensation or encashment of the same is also a defined benefit obligation and is treated as long term in nature in terms of the policies of the Company for the same. The value of obligation towards the same is provided for on the basis of actuarial valuation using projected unit credit method as at the balance sheet date. Actuarial gain / losses are immediately taken to the Statement of Profit and Loss and are not deferred
J. Borrowing costs:
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised 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.
K. 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.
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 in India. 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 standalone financial statements. Deferred income tax is 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 nor taxable profit nor 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 realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for all deductible temporary differences only if it is probable that future taxable amounts will be available to utilise those temporary differences.
Deferred tax liabilities are not recognised for temporary differences between the carrying amount and tax bases of investments in subsidiaries, branches and associates and interest in joint arrangements where the Company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets are not recognised for temporary differences between the carrying amount and tax bases of investments in subsidiaries, branches and associates and interest in joint arrangements where it is not probable that the differences will reverse in the foreseeable future and taxable profit will not be available against which the temporary difference can be utilised.
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 realise the asset and settle the liability simultaneously
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
L. Provisions and Contingencies:
i. Provisions
Provisions for legal claims, product warranties and make good obligations are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Long-term provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money. Short term provisions are carried at their redemption value and are not offset against receivables from reimbursements.
Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense.
ii. Contingent Liabilities
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.
iii. Contingent Assets
Contingent Assets are not recognised as but are disclosed in the notes to the financial statements.
M. Earnings per Share:
i. Basic earnings per share
Basic earnings per share are calculated by dividing:
- The profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares.
- By the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year.
ii. Diluted earnings per share
Diluted earnings per share adjust the figures used in the determination of basic earnings per share to take into account:
- The after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
- The weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
N. Leases:
Lease in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified as operating leases.
,4s a lessee
Payments made under operating leases (net of incentives received from the lessor) are charged to Statement of Profit and Loss on a straight line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost increases.
4s a lessor
Lease income from operating leases where the Company is a lessor is recognized in income on a straight line basis over the lease term unless the receipts are structured to increase in line with expected general inflation to compensate for the expected inflationary cost increases.
The respective leased assets are included in the balance sheet based on their nature.
O. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting to the Chief Operating Decision Maker "CODM" of the Company. The CODM is responsible for allocating resources and assessing performance of the operating segment. The Company has monthly review and forecasting procedure in place and CODM reviews the operations ofthe Company as a whole.
P. Exceptional items:
Certain occasions, the size, type or incidence of an item of income or expense, pertaining to the ordinary activities of the Company is such that its disclosure improves the understanding of the performance of the Company, such income or expense is classified as an exceptional item and accordingly, disclosed in the notes accompanying to the financial statements.
1.4 Key Accounting Judgments, Estimates and Assumptions
In preparing these financial statements, management has made judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates
Estimates and underlying assumptions are reviewed on an ongoing basis. Any change in these estimates and assumptions will generally be reflected in the financial statements in current period or prospectively, unless they are required to be treated retrospectively under relevant accounting standards.
2. RECENT ACCOUNTING PRONOUNCEMENTS:
Ind AS 115: Revenue from contracts with Customers
On 28th March, 2018, Ministry of Corporate Affairs (MCA) has notified the Ind AS 115, Revenue from contracts with Customers. The core principal of new standard is that an Entity should recognise the revenue to depict the transfer of promised goods or services to Customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. Further, the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flow arising from the entity''s contracts with customers. The effective date for adoption of In AS 115 is financial period beginning on or after 1st April, 2018. The Company will adopt the standard on 1st April, 2018 using cumulative catch up transition method and accordingly comparative for the year ending or ended 31st March, 2018 will not be retrospectively adjusted. The effect on adoption of In AS 115 on the operation of the Company is being assessed by the Company.
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