Lohia Corp Ltd. కంపెనీ అకౌంటింగ్ విధానాలు

a) Determining the lease term of contracts
with renewal and termination options -
Company as lessee

The Company determines the lease term as the
non-cancellable term of the lease, together with
any periods covered by an option to extend the
lease if it is reasonably certain to be exercised, or
any periods covered by an option to terminate the
lease, if it is reasonably certain not to be exercised.

For the lease contracts that includes extension
and termination options. The Company applies
judgement in evaluating whether it is reasonably
certain whether or not to exercise the option to
renew or terminate the lease. That is, it considers
all relevant factors that create an economic
incentive for it to exercise either the renewal or
termination. After the commencement date, the
Company reassesses the lease term if there is
a significant event or change in circumstances
that is within its control and affects its ability
to exercise or not to exercise the option to
renew or to terminate (e.g., construction of
significant leasehold improvements or significant
customization to the leased asset).

Leases - estimating the incremental
borrowing rate

The Company cannot readily determine the
interest rate implicit in the lease, therefore, it uses
its incremental borrowing rate (IBR) to measure
lease liabilities. The IBR is the rate of interest that
the Company would have to pay to borrow over a
similar term, and with a similar security, the funds
necessary to obtain an asset of a similar value
to the right-of-use asset in a similar economic
environment. The IBR therefore reflects what
the Company ''would have to pay’, which requires
estimation when no observable rates are available
or when they need to be adjusted to reflect the
terms and conditions of the lease. The Company
estimates the IBR using observable inputs (such
as market interest rates) when available and is
required to make certain entity-specific estimates.

b) Provisions & contingent liabilities

The Company estimates the provisions that have
present obligations as a result of past events
and it is probable that outflow of resources
will be required to settle the obligations. These
provisions are reviewed at the end of each
reporting period and are adjusted to reflect the
current best estimates.

The Company uses critical judgements to assess
contingent liabilities. Contingent liabilities are
recognised 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 the obligation or
a reliable estimate of the amount cannot be made.
Contingent assets are neither recognised nor
disclosed in the standalone financial statements.

c) Allowance for expected credit loss

The allowance for expected credit loss reflects
management’s estimate of losses inherent in
its credit portfolio. This allowance is based on
Company’s estimate of the losses to be incurred,
which derives from past experience with similar
receivables, current and historical past due
amounts, write-offs and collections, the careful
monitoring of portfolio credit quality and current
and projected economic and market conditions.
Should the present economic and financial
situation persist or even worsen, there could be
a further deterioration in the financial situation
of the Company’s debtors compared to that
already taken into consideration in calculating
the allowances recognised in the standalone
financial statements.

Refer note 13 for methodology to estimate
allowance for expected credit losses in respect
of Company’s trade receivables.

d) Allowance for obsolete and slow-
moving inventory

The allowance for obsolete and slow-moving
inventory reflects management’s estimate of the
expected loss in value and has been determined
on the basis of past experience and historical
and expected future trends. A worsening of the
economic and financial situation could cause
a further deterioration in conditions compared
to that taken into consideration in calculating
the allowances recognised in the standalone
financial statements.

Refer note 11 for disclosure of such allowance.

e) Useful lives of property, plant and
equipment and intangible assets

Management reviews its estimate of the useful
lives of depreciable/amortisable assets at each
reporting date, based on the expected utility of the
assets. Uncertainties in these estimates relate to
technical and economic obsolescence that may
change the utility of certain plant and equipments.

f) Defined benefit obligations (DBO)

Management’s estimate of the DBO is based on a
number of critical underlying assumptions such as
standard rates of inflation, mortality, discount rate
and anticipation of future salary increases. Variation
in these assumptions may significantly impact
the DBO amount and the annual defined benefit
expenses. Refer note 40 for key assumptions used
in developing estimate of DBO.

g) Provision for warranties

Provision is made for estimated warranty claims
in respect of products sold which are still under
warranty at the end of the reporting period.
These claims are expected to be settled in the
next financial year. Management estimates
the provision based on historical warranty
claim information and any recent trends that
may suggest future claims could differ from
historical amounts.

h) Impairment of financial and non¬
financial assets

The impairment provisions for financial assets
are based on assumptions about risk of default
and expected cash loss rates. The Company uses
judgement in making these assumptions and
selecting the inputs to the impairment calculation,
based on Company’s past history, existing market
conditions as well as forward-looking estimates
at the end of each reporting period.

The carrying amounts of the Company’s non¬
financial assets, other than deferred tax assets,
are reviewed at the end of each reporting period
to determine whether there is any indication of
impairment. If any such indication exists, then the
asset’s recoverable amount is estimated.

The recoverable amount of an asset or cash¬
generating unit (''CGU’) is the greater of its
value in use and its fair value less costs to sell.
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 or CGU. For
the purpose of impairment testing, assets that
cannot be tested individually are grouped together
into the smallest group of assets that generates
cash inflows from continuing use that are largely
independent of the cash inflows of other assets
or groups of assets (''CGU’). Market related
information and estimates are used to determine
the recoverable amount. Key assumptions on
which management has based its determination

of recoverable amount include estimated long
term growth rates, weighted average cost of
capital and estimated operating margins. Cash
flow projections take into account past experience
and represent management’s best estimate about
future developments.

1.05 Current/non-current classification

All assets and liabilities have been classified as current
or non-current as per the Company’s normal operating
cycle and other criteria set out in the Schedule III to the
Companies Act, 2013. Based on the nature of business
and the time between the acquisition of assets for
processing and their realisation in cash and cash
equivalents, the Company has ascertained its operating
cycle as 12 months for the purpose of current or non¬
current classification of assets and liabilities.

Assets

An asset is classified as current when it satisfies any
of the following criteria:

1) It is expected to be realised in, or is intended to
be sold or consumed in, the Company’s normal
operating cycle;

2) It is held primarily for the purpose of being traded;

3) It is expected to be realised within twelve months
after the reporting date; or

4) It is cash or cash equivalent unless it is restricted
from being exchanged or used to settle a liability
for at least twelve months after the reporting date.

Current assets include the current portion of non¬
current financial assets. All other assets are classified
as non-current.

Liabilities

A liability is classified as current when it satisfies any
of the following criteria:

1) I t is expected to be settled in the Company’s
normal operating cycle;

2) It is held primarily for the purpose of being traded;

3) It is due to be settled within twelve months after
the reporting date; or

4) It does not have the right at the end of the reporting
period to defer settlement of the liability for at
least twelve months after the reporting period.

Current liabilities include current portion of non-current
financial liabilities. All other liabilities are classified as
non-current.

Deferred tax assets and liabilities are classified as non¬
current assets and liabilities.

1.06 Foreign currency transactions and
translations

Monetary and non-monetary transactions in foreign
currencies are initially recorded in the functional
currency of the Company at the exchange rates at the
date of the transactions. Monetary foreign currency
assets and liabilities remaining unsettled on reporting
date are translated at the rates of exchange prevailing
on reporting date. Gains / (losses) arising on account
of realization /settlement of foreign exchange
transactions and on translation of monetary foreign
currency assets and liabilities are recognised in the
Statement of profit and loss. Financial instruments
designated as hedge instruments are mark to market
using the valuation given by the bank on the reporting
date. Exchange differences arising on settlement of
monetary items on actual payments / realisations and
year end translations including on forward contracts
are dealt with in the statement of profit and loss.

1.07 Property, plant and equipment

Recognition and measurement

Items of property, plant and equipment are stated at
historical cost less accumulated depreciation and
accumulated impairment loss, if any. The cost of assets
comprises of purchase price and directly attributable
cost of bringing the assets to working condition for its
intended use including borrowing cost and incidental
expenditure during construction incurred upto the
date when the assets are ready to use. Capital work in
progress includes cost of assets at sites, construction
expenditure and interest on the funds deployed less
any impairment loss, if any. At the point, when asset is
operating at management’s intended use, the cost of
construction is transferred to the appropriate category
of property, plant and equipment.

The cost of a self-constructed item of property, plant and
equipment comprises the cost of materials and direct
labour, any other cost directly attributable to bringing
the item to working condition for its intended use.

The cost of improvements to leasehold premises,
if recognition criteria are met, are capitalised and
disclosed separately under leasehold improvement.

If significant parts of an item of property, plant and
equipment have different useful lives, then they are
accounted for as a separate items (major components)
of property, plant and equipment. As per the
assessment made by the management, property plant
and equipment does not comprises any significant
components with different useful life.

De-recognition

An item of property, plant and equipment and any
significant part initially recognised is derecognised
upon disposal or when no future economic benefits

are expected from its use or disposal. Any gain or
loss arising on derecognition of property, plant and
equipment (calculated as the difference between the net
disposal proceeds and the carrying amount of property,
plant and equipment) is included in the Statement of
profit and loss when such asset is derecognised.

Subsequent measurement

Subsequent costs are included in the asset’s carrying
amount or recognised as a separate asset, as appropriate,
only when it is probable that the future economic benefits
associated with expenditure will flow to the Company and
the cost of the item can be measured reliably. All other
subsequent cost are charged to the Statement of profit
and loss at the time of incurrence.

Depreciation

Depreciation on property, plant and equipment
is provided on the straight-line method over their
estimated useful lives, as determined by the
management. Depreciation is charged on a pro-rata
basis for assets purchased/sold during the year.

Based on technical assessment made by technical
expert and management estimate, the Company have
assessed the estimated useful lives of certain property,
plant and equipment that are different from the useful
life prescribed in Schedule II to the Companies Act,
2013. The management believes that these estimated
useful lives are realistic and reflect fair approximation
of the period over which the assets are likely to be used.

The estimated useful lives of items of property, plant
and equipment are as follows:

Freehold land is not depreciated.

Depreciation on additions to or on disposal of assets
is calculated on pro-rata basis. Leasehold land is being
amortised over the period of lease tenure Depreciation
methods, useful lives and residual values are reviewed
in each financial year end and changes, if any, are
accounted for prospectively.

1.08 Intangible assets

Intangible assets that are acquired are recognised only if
it is probable that the expected future economic benefits
that are attributable to the asset will flow to the Company
and the cost of assets can be measured reliably. The

intangible assets are recorded at cost of acquisition
including incidental costs related to acquisition and
installation and are carried at cost less accumulated
amortisation and impairment losses, if any.

De-recognition

Gain or losses arising from derecognition of an
intangible asset are measured as the difference
between the net disposal proceeds and the carrying
amount of the intangible asset and are recognised
in the Statement of profit and loss when the asset
is derecognised.

Subsequent cost

Subsequent costs is capitalized only when it increases
the future economic benefits embodied in the specific
asset to which it relates. All the subsequent expenditure
on intangible assets is recognized in Statement of
profit and loss, as incurred.

Amortisation

Amortisation of intangible assest is calculated over
their estimated useful lives as stated below using
straight-line method. Amortisation is calculated on a
pro-rata basis for assets purchased /disposed during
the year. Amortisation has been charged based on the
following useful lives;

Amortisation method, useful lives and residual values
are reviewed at each reporting date and adjusted
prospectively, if appropriate.

1.09 Leases

The Company assesses if a contract is or contains
a lease at inception of the contract. A contract is, or
contains, a lease if the contract conveys the right to
control the use of an identified asset for a period time
in exchange for consideration.

The Company recognizes a right-of-use asset and a
lease liability at the commencement date, except for
short-term leases of twelve months or less and leases
for which the underlying asset is of low value, which are
expensed in the statement of operations on a straight¬
line basis over the lease term.

The lease liability is initially measured at the present
value of the lease payments that are not paid at the
commencement date, discounted using the interest
rate implicit in the lease, or, if not readily determinable,
the incremental borrowing rate specific to the country,
term and currency of the contract.

Lease payments can include fixed payments, variable
payments that depend on an index or rate known at
the commencement date, as well as any extension
or purchase options, if the Company is reasonably
certain to exercise these options. The lease liability
is subsequently measured at amortized cost using
the effective interest method and remeasured with a
corresponding adjustment to the related right-of-use
asset when there is a change in future lease payments
in case of renegotiation, changes of an index or rate or
in case of reassessments of options.

The right-of-use asset comprises, at inception, the
initial lease liability, any initial direct costs and, when
applicable, the obligations to refurbish the asset, less
any incentives granted by the lessors. The right-of-use
asset is subsequently depreciated, on a straight-line
basis, over the lease term, if the lessor transfers the
ownership of the underlying asset to the Company at
the end of the lease term or, if the cost of the right-
of-use asset reflects that the lessee will exercise a
purchase option, over the estimated useful life of the
underlying asset. Right-of-use assets are also subject
to testing for impairment if there is an indicator for
impairment. Variable lease payments not included in
the measurement of the lease liabilities are expensed
to the statement of operations in the period in
which the events or conditions which trigger those
payments occur.

When the Company is an intermediate lessor, it
accounts for its interests in the head lease and the
sublease separately. The sublease is classified as a
finance or operating lease by reference to the right-of-
use asset arising from the head lease.

1.10 Impairment of non-financial assets

The Company, at each balance sheet date, reviews
carrying values of its non-financial assets and assesses
whether there is an indication that an asset may be
impaired. If any indication exists, the recoverable
amount, being higher of fair value less costs of
disposal and value in use of the assets, is estimated to
determine the impairment losses and are recognised in
the statement of profit and loss. Recoverable amount
is determined for an individual asset, unless the
asset does not generate cash inflows that are largely
independent of those from other assets or groups
of assets. If this is the case, recoverable amount is
determined for the cash-generating unit (CGU) to
which the asset belongs unless either the asset’s fair
value less costs of disposal is higher than its carrying
amount; or the asset’s value in use can be estimated to
be close to its fair value less costs of disposal and fair
value less costs of disposal can be measured.

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. In determining fair value less
costs of disposal, recent market transactions are taken
into account. If no such transactions can be identified,
an appropriate valuation model is used. These
calculations are corroborated by valuation multiples
or other available fair value indicators. For assets, an
assessment is made at each balance sheet date to
determine whether there is an indication that previously
recognised impairment losses no longer exist or have
decreased. If such indication exists, the Company
estimates the asset’s or CGU’s recoverable amount. A
previously recognised impairment loss is reversed only
if there has been a change in the assumptions used
to determine the asset’s recoverable amount since the
last impairment loss was recognised. The reversal is
limited so that the carrying amount of the asset does
not exceed its recoverable amount, nor exceed the
carrying amount that would have been determined,
net of depreciation, had no impairment loss been
recognised for the asset in prior years. Such reversal
is recognised in the statement of profit and loss.

1.11 Employee benefits

Short term employee benefits

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 employees’ 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.

Defined contribution plans

The Company pays contribution under provident fund
scheme, employee state insurance to Government
administered schemes, superannuation scheme
and part of the pension fund scheme for eligible
employees. The Company recognises contribution
payable to the respective employee benefit fund
scheme as an expenditure, as and when they are due.
The Company has no obligations other than to make the
specified contributions.

Gratuity

The liability or asset recognised in the balance sheet in
respect of defined benefit gratuity plans are the present
value of the defined benefit obligation at the end of the
reporting period less the fair value of plan assets. The
defined benefit obligation is calculated annually by
actuaries using the projected unit credit method.

The present value of the defined benefit obligation
denominated in INR is determined by discounting the
estimated future cash outflows by reference to market

yields at the end of the reporting period on government
bonds that have terms approximating to the terms of
the related obligation. The estimated future payments
which are denominated in a currency other than INR,
are discounted using market yields determined by
reference to high-quality corporate bonds that are
denominated in the currency in which the benefits will
be paid, and that have terms approximating to the terms
of the related obligation.

The net interest cost is calculated by applying the
discount rate to the net balance of the defined benefit
obligation and the fair value of plan assets. This cost is
included in employee benefit expense in the statement
of profit and loss. The gratuity plan is a funded plan and
the Company makes contributions to Group Gratuity
Trust cum Life Assurance Schemes administered by
the LIC of India.

Remeasurement gains and losses arising from
experience adjustments and changes in actuarial
assumptions are recognised in the period in which they
occur, directly in other comprehensive income. They
are included in retained earnings in the statement of
changes in equity and in the balance sheet.

Changes in the present value of the defined benefit
obligation resulting from plan amendments or
curtailments are recognised immediately in profit or
loss as past service cost.

Compensated absences

The liabilities for compensated absences that are not
expected to be settled wholly within 12 months after
the end of the period in which the employees render
the related service. These obligations are therefore
measured as the present value of expected future
payments to be made in respect of services provided
by employees up to the end of the reporting period
using the projected unit credit method. The benefits are
discounted using the appropriate market yields at the end
of the reporting period that have terms approximating
to the terms of the related obligation. Remeasurements
as a result of experience adjustments and changes
in actuarial assumptions are recognised in profit or
loss. The Compensated absences is a funded plan
and the Company makes contributions to Group Leave
Encashment Schemes administered by the LIC of India.

1.12 Revenue recognition

Sale of goods

Sales are recognised when control of the products
is transferred, which happens when the products
are delivered to the customer, the customer has
full discretion over the channel and price to sell the
products, and there is no unfulfilled obligation that could
affect the acceptance of the products by the customer.

Revenue is recognised based on the price specified in
the contract, net of the estimated volume discounts and
incentive schemes and the revenue is only recognised
to the extent that it is highly probable that a significant
reversal in the revenue will not occur. Revenue is net
of sales returns. The validity of assumptions used to
estimate variable consideration and expected return of
products is reassessed annually.

A receivable is recognised when the goods are delivered
as this is the point in time when the consideration is
unconditional because only passage of time is required
before the payment is due.

Service revenue

Service income is recognised on accrual basis in the
accounting period in which the services are rendered
as per the contractual terms with the customers.

Sale of scrap

Sale of scrap is recognised upon transfer of control of
products to the customers which coincides with their
delivery to customer.

Interest income

Interest income is recognized on time proportion basis
using the effective interest rate method.

Export incentive

Export incentive is recognized when it is reasonably
certain that the collection will be made.

1.13 Government grants

Government grant is recognized only when there is a
reasonable assurance that the entity will comply with
the conditions attached to them and the grants will be
received. Subsidy related to assets is recognized as
deferred income which is recognized in the standalone
statement of profit and loss on systematic basis over
the useful life of the assets. Grants related to income
are treated as other operating income in standalone
statement of profit and loss subject to due disclosure
about the nature of grant.

Inventories

Raw materials and stores, work in progress, stock-
in-trade and finished goods are stated at the lower of
cost and net realisable value. Cost of raw materials
and stock-in-trade comprises cost of purchases and
also include all other costs incurred in bringing the
inventories to their present location and condition. Cost
is ascertained on a weighted average basis. Materials
and other supplies held for use in the production of
inventories are not written down below cost if the

finished products in which they will be incorporated
are expected to be sold at or above cost.

Cost of work-in-progress and finished goods comprises
direct materials, direct labour and an appropriate
proportion of variable and fixed overhead expenditure,
the latter being allocated on the basis of normal
operating capacity.

Costs of purchased inventory are determined after
deducting rebates and discounts. Net realisable 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. Spare
parts including other items are carried on weighted
average basis.