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Accounting Policies of Smruthi Organics Ltd. Company
Mar 31, 2025
1. Corporate Information
Smruthi Organics Limited, incorporated in the year 1989, is a manufacturer of Active Pharmaceutical Ingredient (API) products in the Anti - Diabetic, Anti - Hypertension and Anti - Infectives Therapeutic categories catering to both the Indian domestic as well as rest of the world (ROW) markets, with clients spanning across the world. Its shares are listed on Bombay Stock Exchange and Metropolitan Stock Exchange of India Limited.
The company has 2 manufacturing facilities in Solapur, India. The API facility is spread across 22-acre land. The R&D Facility based in Hyderabad, India, works on developing novel synthetic routes for API and other product and process improvement.
Finished Dosage Form (FDF) Marketing
We are actively involved in the marketing of Finished Dosage Forms (FDFs) across the states of Maharashtra, Andhra Pradesh, and Telangana. Our portfolio includes a wide range of high-quality, affordable medicines across key therapeutic segments.
a. Statement of compliance
The financial statements of the Company have been prepared in accordance with and comply in all material respects with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 (amended from time to time) notified under Section 133 of Companies Act, 2013, (the ''Act'') and other relevant provisions of the Act and presentation requirement of Div II to Schedule III of the Companies Act 2013.
Accordingly, the Company has prepared these Financial Statements which comprise the Balance Sheet as at 31 March, 2025, the Statement of Profit and Loss for the year ended 31 March 2025, the Statement of Cash Flows for the year ended 31 March 2025 and the Statement of Changes in Equity for the year ended as on that date, and accounting policies and other explanatory information (together hereinafter referred to as ''financial statements''). The application of Ind ASs, with additional disclosure when necessary, is presumed to result in financial statements that present a true and fair view.
Details of the Company''s accounting policies are included in Note 3. The accounting policies set out below have been applied consistently to the years presented in these financial statements. The financial statements were authorised for issue by the Company''s Board of Directors on Monday, 05th May, 2025.
b. Basis of measurement: The financial statements have been prepared on a historical cost basis, except for certain financial assets and liabilities as explained below:
⢠Financial instruments - measured at fair value.
⢠Plan assets under defined benefit plans -measured at fair value
The accounting policies are applied consistently to all the periods presented in the Financial Statements. All assets and liabilities have been classified as current or non-current as per the normal operating cycle of the Company and other criteria as set out in the Division II of Schedule III to the Companies Act, 2013. Based on the nature of products and the time between acquisition of assets for processing and their realization 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
c. Functional and Presentation Currency
In addition, the financial statements are presented in INR which is also the Company''s functional currency and all values are rounded to the nearest Lakh (INR 00,000), except when otherwise indicated. Wherever the amount represented ''0'' (zero) construes value less than Rupees five thousand.
3. Summary of Material Accounting Policies:
3.1 Use of Estimates, Judgements and Assumptions
The preparation of the financial statements in conformity with Ind AS requires the management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Actual results could differ from those estimates according to the nature of the assumption and other circumstances.
This note provides an overview of the areas where there is a higher degree of judgment or complexity. Detailed information about each of these estimates and judgments is included in relevant notes together with information about the basis of calculation.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimates are revised and future periods are affected.
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
The following are areas involving critical estimates and judgments:
Judgements:
⢠Evaluation of recoverability of deferred tax assets, and estimation of income tax payable (Note No. 20)
⢠Provisions (Note No. 19 and 25)
⢠Contingencies (Note No. 40)
⢠Impairment (Note No 3.9 and 3.19)
⢠Accounting for Defined benefit plans (Note No. 41)
⢠Useful lives of property, plant and equipment and intangible assets (Note No. 3.7 and 3.8)
⢠Financial Instruments (Note No. 47)
⢠Fair Value of Financial Instruments (Note No. 47)
⢠Valuation of Inventories (Note No. 9)
3.2 Current versus non-current classification
The company presents assets and liabilities in the Balance Sheet based on current / non-current classification.
An asset is treated as current when it is:
⢠Expected to be realized or intended to be sold or consumed in normal operating cycle.
⢠Held primarily for the purpose of trading.
⢠Expected to be realised within twelve months after the reporting period, or
⢠Cash or Cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
A liability is current when:
⢠It is expected to be settled in normal operating cycle.
⢠It is held primarily for the purpose of trading.
⢠It is due to be settled within twelve months after the reporting period, or
⢠There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting Period.
All other assets and liabilities are classified as non-current assets and liabilities. Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The company has identified a period of twelve months as its operating cycle.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
⢠In the principal market for the asset or liability, or
⢠In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2- Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3 -Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
Trade receivables that are more than 365 days overdue are presumed to have a significantly increased credit risk. As such expected credit loss is recognized for these receivables:
These receivables are evaluated individually or as part of a specific risk segment based on customer type, days past due, and past default history.
A provision rate of 2.5% to 7.5% is typically applied, unless there is objective evidence to support a different expected recovery.
For other assets, the Company uses 12 month ECL to provide for impairment loss where there is no significant increase in credit risk. If there is significant increase in credit risk full lifetime ECL is used.
At each reporting date, the Management analyses the movements in the values of assets and liabilities which are required to be re-measured or re-assessed as per the company''s accounting policies. For this analysis, the Management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents.
The Management also compares the change in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable. On an annual basis, the Management presents the valuation results to the Audit Committee and the Company''s independent auditors. This includes a detailed discussion of the major assumptions used in the valuations.
For the purpose of fair value disclosures, the company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.
3.4 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 Company operates (functional currency). The Financial Statements of the Company are presented in Indian currency INR, which is also the functional currency of the Company.
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gain/(loss) resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognised in the Statement of Profit and Loss. Foreign exchange differences regarded as an adjustment to borrowing costs are presented in the Statement of Profit and Loss, within finance costs. All other foreign exchange gain/(loss) presented in the Statement of Profit and Loss are on a net basis.
Revenue from contract with customer 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.
Revenue is measured at the transaction price of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government. The Company has generally concluded that it is the principal in its revenue arrangements because it typically controls the goods or services before transferring them to the customer.
a. Revenue from Sale of Goods:
Revenue from sale of goods is recognised at the point in time when control of the goods is transferred to the customer, generally on dispatch/delivery of the goods or terms as agreed with the customer. The normal credit term is 60 to 90 days from the date of dispatch. In determining the transaction price for the sale of goods, the company considers the effects of variable consideration, the existence of significant financing components, non-cash consideration, and consideration payable to the customer (if any).
b. Interest Income:
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principle outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset''s net carrying amount on initial recognition.
c. Export benefits:
Export incentives are recognized as income when the right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
A contract asset is the right to consideration in exchange for goods transferred to the customer. If the Company performs its obligation by transferring goods to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.
A receivable represents the Company''s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due).
Refer Note No. 3.19 to accounting policies of financial assets in (Financial instruments - initial recognition and subsequent measurement.) Refer to accounting policies of financial assets in Financial instruments - initial recognition and subsequent measurement.
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Company performs under the contract.
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 for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from ''profit before tax'' as reported in the Statement of Profit and Loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible.
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries where the company operates and generates taxable income.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred tax is provided using the liability method on temporary differences between
the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences, except:
⢠When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
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 that 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 utilised, except:
⢠When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction affects neither the accounting profit nor taxable profit or loss.
The carrying amount of deferred 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 tax asset to be utilised. Unrecognised 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 assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
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.
c. Minimum alternate tax (MAT)
Minimum alternate tax (MAT) paid as per Indian Income Tax Act, 1961 is in the nature of unused tax credit which can be carried forward and utilised when the Company will pay normal income tax during the specified period. The same is not applicable to the company as it has exercised the option to pay tax under Section 115BAA of The Income Tax Act, 1961.
3.7 Property, Plant and Equipment (PPE)
Property, plant and equipment (PPE) and capital work in progress is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost of acquired property, plant and equipment comprises its purchase price net of any trade discounts and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure on making the asset ready for its intended use, including relevant borrowing costs for qualifying assets and any expected costs of decommissioning. When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
The cost of a self-constructed asset comprises the comprises the cost of materials , direct labour, borrowing cost, any other costs directly attributable to bringing the item to working condition for its intended use, and estimated costs of dis mantling and removing the item and restoring the site where it is located.
Property, plant and equipment that are not ready for intended use as on the date of Balance Sheet are disclosed as ''capital work-in-progress. Items of stores and spares that meet the definition of Property, plant and equipment are capitalized at cost and depreciated over their useful life. Otherwise, such items are classified as inventories.
Depreciation is calculated on written-down value basis over the estimated useful lives of the assets as prescribed under Part C of Schedule II of the Companies Act 2013 except for assets where management believes and based on independent technical evaluation, assets estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used. Leasehold land is amortized over the lease period on a straightline basis.
The residual values are not more than 5% of the original cost of the item of Property, Plant and Equipment.
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. The depreciation rates charged are over following estimated useful lives:
|
Asset class |
Useful life |
|
Office Equipment |
5 Years |
|
Computers |
3 Years |
|
Buildings |
30 Years |
|
Vehicles |
8 Years |
|
Furniture & Fixtures |
10 Years |
|
Laboratory Equipment |
10 Years |
|
Plant and Machinery and Other |
23 Years* |
|
Factory Equipment |
|
|
Research and Development |
23 Years* |
*Useful life of Plant and Machinery, Other Factory Equipment and Research and Development Equipment has been estimated by the management supported by technical advice.
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 the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.
Parts of an item of PPE having different useful lives and significant value and subsequent expenditure on Property, Plant and Equipment arising on account of capital improvement or other factors are accounted for as separate components 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.
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses, if any. Cost includes acquisition and other incidental cost related to acquiring the intangible asset. Administrative and other general overhead expenses that are specifically attributable to acquisition of intangible assets are allocated and capitalised as a part of the cost of the intangible assets.
The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method
for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. A summary of the policies applied to the Company''s intangible assets is as follows:
|
Asset class |
Useful life |
|
Trademarks |
5 Years |
|
Software |
10 Years |
Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates.
The amortization expense on intangible assets with finite lives is recognised in the statement of profit and loss. Gains 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 asset and are recognised in the Statement of Profit and Loss when the asset is derecognized.
The Company has elected to continue with the carrying value for all of its intangible assets as recognised in the financial statements on transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition.
Research and Development Cost:
Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the Company can demonstrate:
⢠The technical feasibility of completing the intangible asset so that the asset will be available for use or sale,
⢠Its intention to complete and its ability and intention to use or sell the asset
⢠How the asset will generate future economic benefits
⢠The availability of resources to complete the asset
⢠The ability to measure reliably the expenditure during development
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortization and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation expense is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset. During the period of development, the asset is tested for impairment annually.
Intangible assets under development:
Expenditure incurred on acquisition/development of intangible assets which are not ready for their intended use at balance sheet date are disclosed under intangible assets under development.
At the end of each reporting year, the Company reviews the carrying amounts of its property, plant and equipment and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (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. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cashgenerating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
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.
If the recoverable amount of an asset (or cashgenerating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cashgenerating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the Statement of Profit and Loss
Inventories comprise of raw materials, spares and stores, consumables, supplies and loose tools are valued at the lower of the cost or net realizable value after providing for obsolescence and other losses. Cost includes all the charges in bringing the goods to the present location and conditions.Net realizable value is determined based on estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated cost of necessary to make the sale.
Cost of work-in-progress and finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead
expenditure. Fixed overheads are allocated on the basis of normal operating capacity or more appropriate factor. Cost of inventories also include all other costs incurred in bringing the inventories to their present location and condition and non-refundable taxes paid. 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. Costs of inventories are determined on First in First out (FIFO) basis.
The Company assesses whether a contract contains a lease, at the 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 of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether (i) the contract involves the use of identified asset; (ii) the Company has substantially all of the economic benefits from the use of the asset through the period of lease and (iii) the Company has right to direct the use of the asset
a. The company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
b. The right-of-use asset is measured by applying cost model i.e. right-of-use asset at cost less accumulated depreciation and cumulative impairment, if any
c. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
d. 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 that rate cannot be readily determined, the company''s incremental borrowing rate. Generally, the company uses its incremental borrowing rate as the discount rate
e. Lease payments included in the measurement of the lease liability comprise fixed payments, including in-substance fixed payments, amounts expected to be payable under a residual value guarantee
f. The nature of lessee''s leasing activities is as follows:
i. Leasing of Immovable Property for Office Use
g. Short-term leases and leases of low-value assets:
The company has elected not to recognise right-of-use assets and lease liabilities for short-term leases of real estate properties that have a lease term of 12 months. The company recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term
Provisions are recognised when the company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Provisions are measured at the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.
The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimates.
Employee benefits include salaries, wages, contribution to provident fund, gratuity, leave encashment towards un-availed leave, post-retirement medical benefits and bonus.
Short-terms Employee Benefits:
Employee benefits such as salaries, wages, cost of bonus, ex-gratia and performance linked rewards falling due wholly within twelve months of rendering the service are classified as short-term employee benefits and are expensed in the period in which the employee renders the related service. The obligations are presented as current liability in the balance sheet if the entity does not have an unconditional right to defer the settlement for atleast 12 months after reporting date.
⢠Defined contribution plan
The Company''s state governed provident fund scheme, employee state insurance scheme and employee pension scheme are defined contribution plans. The contribution paid/ payable under the schemes is recognised during the period in which the employee renders the related service.
⢠Defined benefit plan
Defined benefit plans comprising of gratuity are recognized based on the present value of defined benefit obligations which is computed using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. These are accounted either as current employee cost or, included in cost of assets as permitted in para 121 of Ind AS 19.
The Projected Unit Credit method (PUC) is used to assess the plan''s present value of obligation (liabilities) and the related current service cost, and where applicable past service cost.
The obligation is measured at the present value of the estimated future cash flows using a discount rate based on the market yield on government securities of a maturity period equivalent to the weighted average maturity profile of the defined benefit obligations at the Balance Sheet date.
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. Re-measurement, comprising actuarial gains and losses, the return on plan assets (excluding amounts included in net interest on the net defined benefit liability or asset) and any change in the effect of asset ceiling (if applicable) is recognised in Other Comprehensive Income and is reflected in Retained earnings and the same is not eligible to be reclassified to Profit or Loss.
⢠Other Employee benefit obligations
Other Employee benefit comprises of leave encashment towards un-availed leave and compensated absences. These are accounted as current employee cost as these are payable by the company within subsequent 12 months.
Re-measurements of leave encashment towards un-availed leave are recognized in the Statement of profit or loss except those included in cost of
assets as permitted in the period in which they occur. Accumulated leaves are not allowed to be carried forward beyond 12 months.
3.14 Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value. For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the company''s cash management.
Operating segments are those components of the business whose operating results are regularly reviewed by the chief operating decision making body in the Company to make decisions for performance assessment and resource allocation.
The reporting of segment information is the same as provided to the management for the purpose of the performance assessment and resource allocation to the segments. The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole. Common allocable costs, wherever allocated, are allocated to each segment on an appropriate basis.
The Company presents basic and diluted earnings per share ("EPS") data for its ordinary shares.
Basic earnings per share
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders after tax by the weighted average number of equity shares outstanding during the period.
Diluted earnings per share
Diluted earnings per share is computed by dividing the profit after tax after considering the effect of interest and other financing costs or income (net of attributable taxes) associated with dilutive potential equity shares by the weighted average number of equity shares considered for deriving basic earnings per share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares including the treasury shares held by the Company to satisfy the exercise of the share options by the employees.
3.17 Events after the reporting period
Events after the reporting period are those events, favourable and unfavourable, that occur between
the end of the reporting period and the date when the financial statements are approved by the Board of Directors in case of a company, and, by the corresponding approving authority in case of any other entity for issue.
Two types of events can be identified;
⢠those that provide evidence of conditions that existed at the end of the reporting period (adjusting events after the reporting period); and
⢠those that are indicative of conditions that arose after the reporting period (non-adjusting events after the reporting period)
3.18 Contingent Liabilities and Contingent assets A contingent liability is;
⢠a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the company or
⢠a present obligation that is not recognised because, it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognised because it cannot be measured reliably. The Company does not recognise a contingent liability but discloses its existence in the financial statements.
A contingent asset is not recognised unless it becomes virtually certain that an inflow of economic benefits will arise. When an inflow of economic benefits is probable, contingent assets are disclosed in the financial statements.
Contingent liabilities and contingent assets are reviewed at each balance sheet date.
Initial recognition and measurement
Financial assets and financial liabilities are recognised when an entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through Statement of Profit and Loss (FVTPL)) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit and loss are recognised immediately in Statement of
Profit and Loss. However, trade receivables that do not contain a significant financing component are measured at transaction price.
I. Financial assets
On initial recognition, a financial asset is classified as measured at:
- amortised cost
- FVTOCI - Debt Investment
- FVTOCI - Equity Investment or
- FVTPL
Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.
a. Subsequent Measurement
i. Financial asset measured at Amortised cost:
Financial assets are subsequently measured at amortised cost, using the EIR method less impairment, if any, if these financial assets are held within a business model whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The amortization of EIR and loss arising from impairment, if any is recognised in the Statement of Profit and Loss
ii. Financial assets measured at Fair Value Through Other Comprehensive Income (FVTOCI)
Financial asset is, except trade receivables and contract assets that are measured at transaction price, measured at FVTOCI if it is held within a business model whose objective is achieved by both, selling financial assets and collecting contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that represents solely payments of principal and interest on the principal amount outstanding.
Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date at
fair value. Fair value movements are recognised in the Other Comprehensive Income (OCI). However, the Company recognises interest income, impairment losses & reversals and foreign exchange gain or loss in the Statement of Profit and Loss. On derecognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to Statement of Profit and Loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method
iii. Financial assets measured at Fair Value Through Profit or Loss (FVTPL)
Financial asset which is not classified in any of the above categories are measured at FVTPL. Financial assets are reclassified subsequent to their recognition, if the Company changes its business model for managing those financial assets. Changes in business model are made and applied prospectively from the reclassification date which is the first day of immediately next reporting period following the changes in business model in accordance with principles laid down under Ind AS 109 - Financial Instruments.
iv. Other Equity investment
All other equity investments are measured at fair value, with value changes recognised in Statement of Profit and Loss, except for those equity investments for which the Company has elected to present the value changes in ''Other Comprehensive Income''. However, dividend on such equity investments are recognised in Statement of Profit and loss when the Company''s right to receive payment is established.
b. Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar financial assets) is primarily derecognised (i.e. removed from the Company''s balance sheet) when:
The rights to receive cash flows from the asset have expired, or
The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material lay to a third party under a ''pass-through'' arrangement; and either (a) the Company has transferred substantially
all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Company''s continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
c. Impairment of financial assets
In accordance with Ind AS 109, the Company uses ''Expected Credit Loss'' (ECL) model, for evaluating impairment of Financial Assets other than those measured at Fair Value Through Profit and Loss (FVTPL).
Expected Credit Losses are measured through a loss allowance at an amount equal to:
⢠The 12-months expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date), if the credit risk on a financial instrument has not increased significantly; or
⢠Full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument),if the credit risk on a financial instrument has increased significantly.
For trade receivables the Company applies ''simplified approach'' which requires expected lifetime losses to be recognised from initial recognition of the receivables. The Company uses historical default rates to determine impairment loss on the portfolio of trade receivables. At every reporting date these historical default rates are reviewed and changes in the forwardlooking estimates are analysed.
Trade receivables that are more than 365 days overdue are presumed to have a significantly increased credit risk. As such expected credit loss is recognized for these receivables:
|
Type of financial asset |
Policy |
|
Security Deposit |
Security deposit is in the nature of statutory deposits like electricity, telephone deposits. Since they are kept with Government bodies, there is low risk. |
|
Loans and advances to |
Loan and advances to |
|
employee |
employee are considered to be good and there are neither been any past instances of default and also management doesn''t expect any default in case of Company receivables. |
These receivables are evaluated individually or as part of a specific risk segment based on customer type, days past due, and past default history.
A provision rate of 2.5% to 7.5% is typically applied, unless there is objective evidence to support a different expected recovery.
For other assets, the Company uses 12 month ECL to provide for impairment loss where there is no significant increase in credit risk. If there is significant increase in credit risk full lifetime ECL is used.
A financial asset is ''credit- impaired'' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data:
⢠significant financial difficulty of the borrower or issuer;
⢠a breach of contract such as a default or being past due for 90 days or more;
⢠the restructuring of a loan or advance by the Company on terms that the Company would not consider otherwise;
⢠it is probable that the borrower will enter bankruptcy or other financial reorganisation; or
⢠the disappearance of an active market for a security because of financial difficulties
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating expected credit losses, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company''s historical experience and informed credit assessment and including forwardlooking information.
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company''s procedures for recovery of amounts due.
Other Financial Assets mainly consists of Advances to employees and Security Deposit. Following are the policy for specific financial assets:-
a. Subsequent Measurement
Financial liabilities are classified as measured at Amortised cost or ''FVTPL.
Financial Liability - FVTPL
A Financial Liability is classified as at FVTPL if it is classified as held-for-trading, or it is a derivative (that does not meet hedge accounting requirements) or it is designated as such on initial recognition
A financial liability is classified as held for trading if:
⢠it has been incurred principally for the purpose of repurchasing it in the near term; or
⢠on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or
⢠it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:
⢠such designation eliminates or
significantly reduces a measurement or recognition inconsistency that would otherwise arise;
⢠the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed, and its
performance is evaluated on a fair value basis, in accordance with the Company''s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
⢠it forms part of a contract containing one or more embedded derivatives, and IND AS 109 permits the entire combined contract to be designated as at FVTPL in accordance with IND AS 109
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in Statement of Profit and Loss. The net gain or loss recognised in Statement of Profit and Loss incorporates any interest paid on the financial liability and is included item in the Statement of Profit and Loss. For liabilities designated as FVTPL, fair value gains/losses attributable to changes in own credit risk are recognised in OCI.
Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortised cost using the effective interest method.
b. Derecognition of financial liabilities:
The Company derecognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or have expired. An exchange with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability (whether or not attributable to the financial difficulty of the debtor) is
accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognised in profit or loss.
III. Offsetting financial instrument
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 amount
Mar 31, 2024
3. Summary of Material Accounting Policies:
3.1 Use of Estimates, Judgements and Assumptions
The preparation of the financial statements in conformity with Ind AS requires the management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Actual results could differ from those estimates according to the nature of the assumption and other circumstances.
This note provides an overview of the areas where there is a higher degree of judgment or complexity. Detailed information about each of these estimates and judgments is included in relevant notes together with information about the basis of calculation.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimates are revised and future periods are affected.
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
The following are areas involving critical estimates and judgments:
Judgements:
⢠Evaluation of recoverability of deferred tax assets, and estimation of income tax payable (Note No. 20)
⢠Provisions (Note No. 19)
⢠Contingencies (Note No. 40)
Estimates:
⢠Impairment (Note No. 3.8, 3.9 and 3.19)
⢠Accounting for Defined benefit plans (Note No. 41)
⢠Useful lives of property, plant and equipment and intangible assets (Note No. 3.7 and 3.8)
⢠Financial instruments (Note No. 47)
⢠Fair value of financial instruments (Note No. 47)
⢠Valuation of inventories (Note No. 9)
3.2 Current versus non-current classification
The company presents assets and liabilities in the Balance Sheet based on current / non-current classification.
An asset is treated as current when it is:
⢠Expected to be realized or intended to be sold or consumed in normal operating cycle.
⢠Held primarily for the purpose of trading.
⢠Expected to be realised within twelve months after the reporting period, or
⢠Cash or Cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
A liability is current when:
⢠It is expected to be settled in normal operating cycle.
⢠It is held primarily for the purpose of trading.
⢠It is due to be settled within twelve months after the reporting period, or
⢠There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting Period.
All other assets and liabilities are classified as non-current assets and liabilities. Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The company has identified twelve months as its operating cycle.
3.3 Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is
based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
⢠In the principal market for the asset or liability, or
⢠In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2- Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3 -Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
At each reporting date, the Management analyses the movements in the values of assets and liabilities which are required to be re-measured or re-assessed as per the company''s accounting policies. For this analysis, the Management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents.
The Management also compares the change in the fair value of each asset and liability with relevant
external sources to determine whether the change is reasonable. On an annual basis, the Management presents the valuation results to the Audit Committee and the Company''s independent auditors. This includes a detailed discussion of the major assumptions used in the valuations.
For the purpose of fair value disclosures, the company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.
3.4 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 Company operates (functional currency). The Financial Statements of the Company are presented in Indian currency INR, which is also the functional currency of the Company.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gain/(loss) resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognised in the Statement of Profit and Loss. Foreign exchange differences regarded as an adjustment to borrowing costs are presented in the Statement of Profit and Loss, within finance costs. All other foreign exchange gain/(loss) presented in the Statement of Profit and Loss are on a net basis.
3.5 Revenue recognition
Revenue from contract with customer 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. Revenue is measured at the transaction price of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government. The Company has generally concluded that it is the principal in its revenue arrangements because it typically controls the goods or services before transferring them to the customer.
a. Revenue from Sale of Goods:
Revenue from sale of goods is recognised at the point in time when control of the goods is transferred to the customer, generally on dispatch/delivery of the goods or terms as agreed with the customer. The normal credit term is 60 to 90 days from the date of dispatch.
In determining the transaction price for the sale of goods, the company considers the effects of variable consideration, the existence of significant financing components, non-cash consideration, and consideration payable to the customer (if any).
b. Interest Income:
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principle outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset''s net carrying amount on initial recognition.
c. Export benefits:
Export incentives are recognized as income when the right to receive credit as per the terms of the scheme is established in respect of the exports made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.
Contract assets
A contract asset is the right to consideration in exchange for goods transferred to the customer. If the Company performs its obligation by transferring goods to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.
a. Trade receivables
A receivable represents the Company''s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Refer to accounting policies of financial assets in (Financial instruments - initial recognition and subsequent measurement.) Refer to accounting policies of financial assets in Financial instruments - initial recognition and subsequent measurement.
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Company performs under the contract.
3.6 Income Taxes
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 for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
a. Current income tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from ''profit before tax'' as reported in the Statement of Profit and Loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible.
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries where the company operates and generates taxable income.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
b. Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences, except:
⢠When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
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 that 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 utilised, except:
⢠When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction affects neither the accounting profit nor taxable profit or loss.
The carrying amount of deferred 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 tax asset to be utilised. Unrecognised 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 assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
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.
c. Minimum alternate tax (MAT)
Minimum alternate tax (MAT) paid as per Indian Income Tax Act, 1961 is in the nature of unused tax credit which can be carried forward and utilised when the Company will pay normal income tax during the specified period. The same is not applicable to the company as it has exercised the option to pay tax under Section 115BAA of The Income Tax Act, 1961.
3.7 Property, Plant and Equipment (PPE)
Property, plant and equipment (PPE) and capital work in progress is stated at cost, net of accumulated depreciation and accumulated impairment losses, if
any. The cost of acquired property, plant and equipment comprises its purchase price net of any trade discounts and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure on making the asset ready for its intended use, including relevant borrowing costs for qualifying assets and any expected costs of decommissioning. When significant parts of plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
The cost of a self-constructed asset comprises the cost of materials and direct labour, any other costs directly attributable to bringing the item to working condition for its intended use, and estimated costs of dis mantling and removing the item and restoring the site where it is located.
Property, plant and equipment that are not ready for intended use as on the date of Balance Sheet are disclosed as ''capital work-in-progress. Items of stores and spares that meet the definition of Property, plant and equipment are capitalized at cost and depreciated over their useful life. Otherwise, such items are classified as inventories.
Depreciation is calculated on written-down value basis over the estimated useful lives of the assets as prescribed under Part C of Schedule II of the Companies Act 2013 except for assets where management believes and based on independent technical evaluation, assets estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used. Leasehold land is amortized over the lease period on a straight-line basis.
The residual values are not more than 5% of the original cost of the item of Property, Plant and Equipment. 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. The depreciation rates charged are over following estimated useful lives:
has been estimated by the management supported by technical advice.
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 the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.
Parts of an item of PPE having different useful lives and significant value and subsequent expenditure on Property, Plant and Equipment arising on account of capital improvement or other factors are accounted for as separate components only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably.
The Company has elected to continue with the carrying value for all of its property, plant and equipment as recognised in the financial statements on transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition.
3.8 Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses, if any. Cost includes acquisition and other incidental cost related to acquiring the intangible asset. Administrative and other general overhead expenses that are specifically attributable to acquisition of intangible assets are allocated and capitalised as a part of the cost of the intangible assets.
The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. A summary of the policies applied to the Company''s intangible assets is as follows:
Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates.
The amortization expense on intangible assets with finite lives is recognised in the statement of profit and
loss. Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognized.
The Company has elected to continue with the carrying value for all of its intangible assets as recognised in the financial statements on transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition.
Research and Development Cost:
Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the Company can demonstrate:
⢠The technical feasibility of completing the intangible asset so that the asset will be available for use or sale,
⢠Its intention to complete and its ability and intention to use or sell the asset
⢠How the asset will generate future economic benefits
⢠The availability of resources to complete the asset
⢠The ability to measure reliably the expenditure during development
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortization and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation expense is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset. During the period of development, the asset is tested for impairment annually.
Intangible assets under development:
Expenditure incurred on acquisition/development of intangible assets which are not ready for their intended use at balance sheet date are disclosed under intangible assets under development.
!.9 Impairment of Assets
At the end of each reporting year, the Company reviews the carrying amounts of its property, plant and equipment and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (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. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
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.
If the recoverable amount of an 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 immediately in the Statement of Profit and Loss
3.10 Inventories
Inventories comprise of raw materials, spares and stores, consumables, supplies and loose tools are valued at the lower of the cost or net realizable value after providing for obsolescence and other losses. Cost includes all the charges in bringing the goods to the present location and conditions.Net realizable value is determined based on estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated cost of necessary to make the sale.
Cost of work-in-progress and finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure. Fixed overheads are allocated on the basis of normal operating capacity or more appropriate factor. Cost of inventories also include all other costs incurred in bringing the inventories to their present location and condition and non-refundable taxes paid. 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. Costs of inventories are determined on First in First out (FIFO) basis.
3.11 Leases
The Company assesses whether a contract contains a lease, at the 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 of time in exchange for consideration. To assess whether a contract
conveys the right to control the use of an identified asset, the Company assesses whether (i) the contract involves the use of identified asset; (ii) the Company has substantially all of the economic benefits from the use of the asset through the period of lease and (iii) the Company has right to direct the use of the asset
As a lessee:
a. The company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
b. The right-of-use asset is measured by applying cost model i.e. right-of-use asset at cost less accumulated depreciation and cumulative impairment, if any
c. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
d. 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 that rate cannot be readily determined, the company''s incremental borrowing rate. Generally, the company uses its incremental borrowing rate as the discount rate
e. Lease payments included in the measurement of the lease liability comprise fixed payments, including in-substance fixed payments, amounts expected to be payable under a residual value guarantee
f. The nature of lessee''s leasing activities is as follows:
i. Leasing of Immovable Property for Office Use
g. Short-term leases and leases of low-value assets:
The company has elected not to recognise right-of-use assets and lease liabilities for short-term leases of real estate properties that have a lease
term of 12 months. The company recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term
Mar 31, 2018
1. Significant accounting policies
System of Accounting:
First-time adoption of Ind AS Pursuant to the Companies (India Accounting Standard) Rules, 2015,
The Company has adopted 31st March 2018 as reporting date for first time adoption of India Accounting Standard (Ind AS) and consequently 1st April 2015 as the transition date for preparation of financial statements. The financial statements for the year ended 31st March 2018, are the first financials, prepared in accordance with Ind AS. Upto the Financial year ended 31st March 2017, the Group prepared its financial statements in accordance with the Accounting Standards notified under the Section 133 of the Companies Act 2013, read together with Companies (Accounts) Rules 2014 (Previous GAAP).
For preparing these financial statements, opening balance sheet was prepared as at 1st April 2016 i.e., the date of transition to Ind AS. The figures for the previous periods and for the year ended 31st March 2017 have been restated, regrouped and reclassified, wherever required to comply with Ind AS and Schedule III to the Companies Act 2013 and to make them comparable.
This note explains the principal adjustments made by the Group in restating its financial statements prepared in accordance with Previous GAAP, including the balance sheet as at 1st April 2016 and the financial statements as at and for the year ended 31st March 2017.
Exemptions:
Ind AS 101 allows first time adopters certain exemptions from the retrospective application of certain requirements under Ind AS.
On transition to Ind AS, the group has applied the following exemptions:
1. Group has elected to continue with the carrying value of all of its property, plant and equipment recognised as at 1st April 2016 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment.
2. Group has elected to continue with the carrying value of all of its intangible assets recognised as at 1st April 2016 measured as per the previous GAAP and use that carrying value as the deemed cost of intangible assets.
3. Ind AS 102 Share based payment has not been applied to equity instruments in share based
ii. Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the followings:
- Certain financial assets and liabilities that are measured at fair value; (refer accounting policy regarding financial instruments)
- Defined benefit plans - plan assets measured at fair value iii Current and non-current classification
An asset is classified as current if:
I It is expected to be realized or sold or consumed in the Companyâs normal operating cycle;
ii It is held primarily for the purpose of trading;
iii It is expected to be realized within twelve months after the reporting period; or
iv It is cash or a cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A Liability is classified as current if:
i It is expected to be settled in normal operating cycle;
ii It is held primarily for the purpose of trading;
iii It is expected to be settled within twelve months after the reporting period;
iv It has no unconditional right to defer the settlement of the liability for at least twelve months after reporting period.
All other liabilities are classified as non-current.
The operating cycle is the time between acquisition of assets for processing and their realization in cash and cash equivalents. Based on the nature of products and time between acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current/non-current classification of assets and liabilities
2.2 Segment Reporting :
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker. The chairman and Managing Director has been identified as being the Chief Operating Decision Maker.
2.3 Foreign Currency Transactions:
i. Functional and presentation currency
Item included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (âthe functional currencyâ) The financial statements are presented in Indian rupee (r), which is Smruthi Organics functional and presentation currency.
ii Transactions and balances
Foreign Exchange Transactions are translated into the functional currency using the exchange rates at the dates of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary liabilities denominated in foreign currencies at year end exchanges rate are generally recognized in statement of profit and loss.
Non-monetary items that are measured in items of historical cost in a foreign currency, using the exchange rate at the date of the transaction. Non- monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation difference on liabilities carried at fair value are reported as part of the fair value gain or loss.
2.4 Revenue recognition :
i) Revenue from Sale of Goods
Revenue from Sale of Goods is recognized when all the significant risk and rewards of ownership have been transferred to the buyer, revenue can be measured reliably, the costs incurred can be measured reliably, it is probable that the economic benefits associated to the transaction will flow to the entity and there is no continuing management involvement with the goods. Transfer or risks and rewards vary depending on the individual terms of contract of sale. Revenue from sale if goods is stated inclusive of excise duty and net of returns, trade allowances, rebates, sales tax, GST and amounts collected on behalf of third parties.
ii) Interest Incomes:
For all financial instruments measured at amortizes cost, interest income recognized using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period where appropriate, to the net carrying amount of the financial asset. Interest income is included in Other Income in the Statement of Profit and Loss.
2.5 Income Taxes:
The income tax expense or credit for the period is the tax payable on the current period taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
The current income tax charge is not calculated as the company is in operating loss.
Income Tax is computed after adjustments of Other Comprehensive income ( Foreign Exchange fluctuation amount).
Deferred income tax is provided in full, using the liability method, on temporal difference arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred tax assets are recognized for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilize those temporary differences and losses
Deferred tax liabilities are not recognized for temporary differences between the carrying amount and tax bases of investments in subsidiaries 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 recognized for temporary difference between the carrying amount and tax bases of investments in subsidiaries 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 utilized.
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 balance relate to the same taxation, authority. Current tax assets and liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realize the assets and settle the liability simultaneously.
Current and deferred tax is recognized in profit or loss. Except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively
Deferred Tax Assets include Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India, which likely to give future economic benefits in the form of availability of set off against future income tax liability. Accordingly MAT is recognized as deferent tax asset in the Balance sheet when the asset can be measured reliably and it is probable that the future entomic benefit associated with the asset will be realized.
2.6 Impairment
Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss will be recognized for the amounts by which the assetâs carrying amount exceeds its recoverable amount. The recoverable amount is higher of an assetâs fair value less costs of disposal and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash- generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
2.7 Cash and cash equivalents:
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with financial institutions, other short-term , highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowing in current liabilities in the balance sheet.
2.8 Trade receivables:
Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment.
During the year, the company has written off as bad of Rs. 79703285 to the Profit and Loss account.
2.9 Inventories:
Raw materials and stores, work -in-progress, traded and finished goods are stated at the lower of cost and net realizable value. Cost of raw materials and stores comprise of cost of purchase. Cost of work-in-progress and finished goods comprises direct materials labour and an appropriate preparation of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost of inventories also include all other cost incurred in bringing the inventories to their present location and condition. Costs of purchased inventory are determined after deducting rebates and discounts. Net realizable value is the estimated costs of completion and the estimated necessary to make the sale. Items held for use in production of inventory are not written below cost if the finished product in which there will be incorporated are expected to be sold at or above cost.
2.10 Investments and other financial assets.
I) Classification :
The company classifies its financial assets in the following measurements categories:
- Those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
- Those measured at amortized cost.
The classification depends on the entityâs business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair values, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instrument, this will depend on the business model in which the investment is held. For investment in equity instruments, this will depend on whether the company has 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 investments when and only when its business model for managing those assets changes.
ii) Measurement :
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair at its value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
iii) Impairment of financial assets
For trade receivable only, the company applies the simplified approach permitted by Ind AS 109Financial Instruments, which requires expected lifetime losses to be recognized from initial recognition of the receivables.
2.11 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet where there is a legally enforceable right to offset the recognized amount and there is an intention to settle on a net bas are realize the assets and settle the liabilities simultaneously. The legally enforceable right the most not be contingent on further events and most be enforceable in the normal courses of business and in the event of default, insolvency or bankruptcy of the company or the counterparty.
2.12 Property, Plant and Equipment
Property, Plant and Equipment Leasehold land is carried at historical costs. All other items of property, plant and equipment are stated at cost less accumulated depreciation and impairment loss, if any.
Cost includes cost of acquisition, installation or construction, other direct expenses incurred to bring the assets to its working condition and finance costs incurred up to the date the asset is ready for its intended use and excludes cenvat / value added tax eligible for credit / setoff.
Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of plant and equipment are required to be replaced at intervals, the same are depreciated separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the statement of profit or loss as incurred.
Capital work-in-progress in respect of assets which are not ready for their intended use are carried at cost, comprising of direct costs, related incidental expenses and attributable interest. All identifiable Revenue expenses including interest incurred in respect of various projects / expansion, net of income earned during the project development stage prior to its intended use, are considered as pre - operative expenses and disclosed under Capital Work-in-Progress. Capital expenditure on tangible assets for research and development is classified under property, plant and equipment and is depreciated on the same basis as other property, plant and equipment.
Property, plant and equipment are eliminated from financial statements, either on disposal or when retired from active use. Losses arising in the case of the retirement of property, plant and equipment and gains or losses arising from disposal of property, plant and equipment are recognised in the statement of profit and loss in the year of occurrence.
Depreciation for Company
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Property, plant and equipment is provided on written down value method, over the useful life of the assets, as specified in Schedule II to the Companies Act, 2013. Property, plant and equipment which are added / disposed off during the year, depreciation is provided on pro-rata basis. Building constructed on leasehold land are depreciated based on the useful life specified in Schedule II to the Companies Act, 2013, where the lease period of the land is beyond the life of the building. In other cases, building constructed on leasehold lands are amortised over the primary lease period of the lands. The assetâs residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.
An assetâs carrying amount is written down immediately to its recoverable amount if the assetâs carrying amount is greater than its estimated recoverable amount.
During the year, the PPE is reduced from Gross amount of Rs. 240498 as materials received are not in as per specification and rejected and debited to the respective accounts by the company.
2.13 Trade and Other Payables:
These amounts represents liabilities for goods provided to the company prior to the end of financial year which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognized initially at their fair value and subsequently measured at amortized cost using the effective interest method.
2.14 Borrowings:
Borrowings are initially recognized at fair value, net of transaction cost incurred. Borrowings are subsequently measured at amortized cost. Any difference between the proceeds(net of transaction costs)and the redemption amount is recognized in profit or loss over the period of the borrowings using the effectives interest method. Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In the case the fee is deferred until the draw down occurs.
Borrowings are classified as current liabilities unless the company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.
2.15 Provision
Provision 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 the determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risk specific to the liability. The increase in the provisions due to the passage of time is recognized as interest expenses. Provision for litigation related obligation represents liabilities that are expected to materialize in respect of matters in app
2.16 Employee benefits:
- Short-terms obligations
Liabilities for wages and salaries, bonus, ex-gratia etc. that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related services are recognized 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 benefits obligations in the balance sheet.
- Other Long-term employee benefit obligations
The liabilities for earned leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are to be measured as the present value of expected future payments to be made in respect of service provided by employees up to the end of the reporting period using the projected unit credit method. The benefit are discounted using the market yields at the end of the reporting period that have terms approximating to the terms related obligations.
The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.
The company has not measured the details of earned leave for the year.
Defined benefit liability and employer contributions:
The company has purchased insurance policy to provide for payment of gratuity to the employees. For the year the insurance company carries out a funding valuation based on the latest employee data provided by the company. Balance fund of gratuity is to be payable by the company for Nil further payment obligations. The company has to be provide actuarial amount of gratuity fund.
The provision for Leave encashment is to be provided for the year Indian Accounting Standard subject to this loss changes.
- Post-employment obligations:
The company operates the following post-employment schemes:
a) Defined benefit plans such as gratuity and;
b) Defined contribution plans such as provident fund
Defined contribution plans
The company pays provident fund contributions to publicly administered funds as per local regulations. The company has no further payment obligations once the contributions have been paid. The contributions are accounted for as defined contribution plans and the contributions are recognized as employee benefit expense when they are due.
2.17 Dividend: During the year, the company has not declared the dividend on its shares.
2.18 Contribution to Equity :
Equity shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
2.19 Earnings per share:
1. Basic earnings per share is calculated by dividing:
- The profit attributable to owners of the company
- By the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year.
2. Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
- The after âincome Taxâ effect of interest and other financing costs associated with dilutive potential equity shares, and
The weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares
2.20 Excise Duty and GST:
Excise duty collected on sales is included in Gross Sales. Excise duty paid/payable on sales is shown as an item of expense. Value of closing stock of finished goods include excise duty paid/payable on such stock wherever applicable.
GST collected on sales is excluded in Gross Sales. . Value of closing stock of finished goods include GST paid/payable on such stock wherever applicable.
2.21 Research and Development :
Revenue Expenditure on research and development is expensed in the period in which it is incurred. Capital expenditure on research and development is shown as additional fixed assets.
Mar 31, 2016
Note : 1. Accounting Policies and Other information
A. Significant accounting policies
1. System of Accounting:
i. The company follows mercantile system of accounting and recognizes income and expenditure on accrual basis.
ii. The financial statements have been prepared in all material respects with Accounting Standards as relevant and notified by the Central Government.
iii. The financial statements are prepared on historical cost basis and as a going concern.
2. Revenue recognition :
Revenue from Sale of Goods is recognized when all the significant risk and rewards of ownership of the goods have been part to the buyer. The company collect the Sales Tax and value added taxes (VAT) on behalf of the Government and therefore these are not economic benefits flowing to the company. Hence there are excluded from the revenue. Excise duty deducted from revenue (Gross) is the amount i.e. included in the revenue (gross) and not the entire amount of liability arising during the year.
3. Tangible Fixed Assets and Depreciation :
Depreciation on tangible fixed assets is provided on written down value basis at the rates derived from the useful lives prescribed in Schedule II of the Companies Act, 2013 after considering the residual value at 5% of the original costs thereof except in case of reactors & distillation columns and the related equipments, electrical installations/equipments and plant and machinery used for research and development where the useful lives are considered at 23 years based on internal assessment.
Pursuant to Schedule II to the Companies Act, 2013, the Company has re-determined the written down values of the tangible assets as per the useful lives of the tangible assets as prescribed in Schedule II to the Companies Act, 2013 or, as the case may be, as per internal assessment.
4. Investments: Investments are stated at cost.
5. Inventories:
a) Finished goods are valued at cost or net realizable value whichever is the lower.
b) Stock in process is valued at cost.
c) Stock of raw materials, stores and spares and packing materials are valued at lower of cost or net realizable value.
6. Staff Benefits :
a) Contribution to Provident Fund are funded as a Percentage of Salary / Wages.
b) Provision for leave encashment salary is to be provided for the year as per Accounting Standard subject to this amount, the profit changes.
c) Provision for Gratuity is to be made of as per Payment of Gratuity Act, as per Accounting Standard 15. The gratuity provision amount is not provided separately as per Accounting Standard . Subject to this amount, profit changes.
7. Research and Development:
Revenue expenditure on research and development is charged to Statement of profit and loss in the year in which it is incurred. Capital expenditure on research and development is added to the cost of fixed assets.
8. Deferred Taxation :
Accounting treatment in respect of deferred taxation is in accordance with Accounting Standard 22 -"Accounting for Taxes on Income" issued by the Institute of Chartered Accountants of India.
9. Sales Tax Benefits:
Shortfall / increase in sales tax benefits accruing to the company are accounted for in the year in which the final assessment by the concerned authorities is completed.
10. Borrowing Costs:
Costs in respect of borrowings for the purpose of expansion / additional fixed investments including R & D projects are capitalized to such investments.
Borrowing costs relating to period after the commencement of operations of the project are charged to revenue.
11. Foreign Currency Transactions:
Foreign Exchange Transactions are recorded at pre-determined standard exchange rates which are reviewed periodically. Gains or losses arising out of such periodic revisions of such standard rates and also on realization/settlement are accounted for accordingly.
None of the fixed assets have been acquired out of these foreign currency loans and as such the carrying cost of these assets is not affected by fluctuations. Therefore gain/loss arising on account of fluctuation of foreign exchange rates are debited to the fixed assets and credited to Term Loan liability account.
12. Impairment of Assets :
The carrying amounts of assets are reviewed at each Balance Sheet date, if there is any indication of impairment based on internal / external factors. An impairment loss will be recognized wherever the carrying amount of an asset exceeds its estimated recoverable amount. The recoverable amount is greater of the asset''s net selling price and value in use. In assessing the value in use, the estimated future cash flows are discounted to the present value using the weighted average cost of capital. In carrying out such exercise, due effect is given to the requirements of Schedule 11 of the Companies Act, 2013.
13. Corporate Social Responsibility
The average operating profit of three years is in negative profit, so the company not required to spent on Corporate Social Responsibility in accordance with the provisions of Section 135 of the Companies Act, 2013.
14. Segment Reporting :
The company operates in only one segments viz. Bulk Drugs & Drug Intermediates.
15. Contingent Liabilities:
Cenvat set-off of EOU unit appeal is pending with Additional Commissioner of Central Excise, Pune for 2007 to 2011 four years amounting to Rs. 57.44 lacs and with Tribunal Mumbai for F Y 2009-10 for Rs. 1.09 lacs till the date of audit.
16. The company computed the expenditure on Corporate Social Responsibility at Rs. 22.14 lacs in accordance with the provisions of Section 135 of the Companies Act, 2013 for 31st March 2015. Till the date of audit company has not incurred any such expenditure. For the year company is not liable to compute expenditure on Corporate Social Responsibility.
Mar 31, 2015
1. System of Accounting:
i. The company follows mercantile system of accounting and recognizes
income and expenditure on accrual basis.
ii. The financial statements have been prepared in all material
respects with Accounting Standards as relevant and notified by tte
Central Government.
iii. The financial statements are prepared on historical cost basis and
as a going concern.
2. Revenue recognition :
Revenue from Sale of Goods is recognized when all the significant risk
and rewards of ownership of the goods have been part to the buyer. The
company collect the Sales Tax and value added taxes (VAT) on behalf of
the Government and therefore these are not economic benefits flowing to
the company. Hence there are excluded from the revenue. Excise duty
deducted from revenue (Gross) is the amount i.e. included in the
revenue (gross) and not the entire amount of liability arising during
the year.
3. Tangible Fixed Assets and Depreciation :
Depreciation on tangible fixed assets is provided on written down value
basis at the rates derived from the useful lives prescribed in Schedule
II of the Companies Act, 2013 after considering the residual value at
5% of the original costs thereof except in case of reactors &
distillation columns and the related equipments, electrical
installations/equipments and plant and machinery used for research and
development where the useful lives are considered at 23 years based on
internal assessment.
4. Investments: Investments are stated at cost.
5. Inventories:
a) Finished goods are valued at cost or net realizable value whichever
is the lower.
b) Stock in process is valued at cost.
c) Stock of raw materials, stores and spares and packing materials are
valued at lower of cost or net realizable value.
d) Imported Raw material is lying with Nava Sheva Port, Mumbai is
valued at cost..
6. Staff Benefits :
a) Contribution to Provident Fund are funded as a Percentage of Salary
/ Wages.
b) Provision for leave encashment salary is not made on the basis of
actuarial valuation at the year ended of Rs. 994674/- subject to this
amount, the loss changes.
c) Provision for Gratuity is to be made of as per Payment of Gratuity
Act, as per Accounting Standard 15. The gratuity provision amount is
not provided separately as per Accounting Standard . Subject to this
amount, loss changes.
7. Research and Development:
Revenue expenditure on research and development is charged to Statement
of profit and loss in the year in which it is incurred. Capital
expenditure on research and development is treated at par with fixed
assets and depreciated as such.
8. Deferred Taxation :
Accounting treatment in respect of deferred taxation is in accordance
with Accounting Standard 22 - "Accounting for Taxes on Income" issued
by the Institute of Chartered Accountants of India.
9. Sales Tax Benefits:
Shortfall / increase in sales tax benefits accruing to the company are
accounted for in the year in which the final assessment by the
concerned authorities is completed.
10. Borrowing Costs:
Costs in respect of borrowings for the purpose of expansion /
additional fixed investments including R & D projects are capitalized
to such investments.
Borrowing costs relating to period after the commencement of operations
of the project are charged to revenue.
11. Foreign Currency Transactions:
Foreign Exchange Transactions are recorded at pre-determined standard
exchange rates which are reviewed periodically. Gains or losses arising
out of such periodic revisions of such standard rates and also on
realization/settlement are accounted for accordingly.
12. Impairment of Assets :
The carrying amounts of assets are reviewed at each Balance Sheet date,
if there is any indication of impairment based on internal / external
factors. An impairment loss will be recognized wherever the carrying
amount of an asset exceeds its estimated recoverable amount. The
recoverable amount is greater of the asset's net selling price and
value in use. In assessing the value in use, the estimated future cash
flows are discounted to the present value using the weighted average
cost of capital. In carrying out such exercise, due effect is given to
the requirements of Schedule 11 of the Companies Act, 2013.
13. Depreciation
Pursuant to Schedule II to the Companies Act, 2013, the Company has
re-determined the written down values of the tangible assets as per the
useful lives of the tangible assets as prescribed in Schedule II to the
Companies Act, 2013 or, as the case may be, as per internal assessment.
To the extent the existing written down values as on 1st April, 2014
are in excess of such re-determined written down values, the excess
thereof, net of deferred tax, is adjusted against the retained earnings
in the amount of Rs.173 lacs
The charge of depreciation, on these assets, for the year ended 31st
March, 2015 is lower by Rs. 67 Lacs as compared to the position that
would have obtained if estimates of useful lives adopted up to the
preceding financial year were to be have been applied in this year as
well.
14. Corporate Social Responsibility
The company computes the amount of Rs. 22.14 lacs required to be spent
on Corporate Social Responsibility in accordance with the provisions of
Section 135 of the Companies Act, 2013. The amounts are spent on the
eligible projects prescribed under Schedule VII of the Act. Provision
is made in the books for the amounts unspent, if material and the same
is carried forward to be spent in the subsequent year.
Mar 31, 2014
(A) Accounting Convention : The financial statements are prepared on
Historical Cost basis on the assumption of going concern concept.
(B) Fixed Assets and Depreciation.
a) Fixed Assets stated at cost of acquisition / constructions less
depreciation.
b) Depreciation on Assets is provided on Written Down Value Method at
the rates and in the manner, specified in Schedule XIV of the Companies
Act 1956.
c) Continuous Process Plants as defined in Schedule XIV to the
Companies Act, 1956 have been considered on Technical Assessment and
Depreciation provided accordingly.
(C) Inventories :
a) Finished goods are valued at cost or net realizable value whichever
is the lower.
b) Stock in process is valued at cost.
c) Stock of raw materials, stores and spares and packing materials are
valued at lower of cost or net realizable value.
d) Finished Goods in transit is valued at cost or net realizable value
whichever is lower.
e) Imported Raw material is lying with Nava Sheva Port, Balaji
Warehouse, Mumbai is valued at cost.
(D) Sale of Goods :
Revenue from Sale of Goods is recognized when all the significant risk
and rewards of ownership of the goods have been part to the buyer. The
company collects the Sales Tax and Value Added Taxes (VAT) on behalf of
the Government and therefore these are not economic benefits flowing to
the company. Hence there are excluded from the revenue. Excise duty
deducted from revenue (Gross) is the amount i.e. included in the
revenue (gross) and not the entire amount of liability arising during
the year.
(E) Staff Retirement Benefits :
a) Contribution to Provident Fund are funded as a Percentage of Salary
/ Wages.
b) Provision for leave encashment salary is not made on the basis of
actuarial valuation at the year ended of Rs. 926053.00, subject to this
amount, the loss changes.
c) Provision for Gratuity is to be made of as per Payment of Gratuity
Act, as per Accounting Standard
15. The gratuity provision amount is not provided separately as per
Accounting Standard , subject to this amount, loss changes.
(F) Provision for Income Tax is not provided as the net loss as per
books of accounts.
(G) Borrowing Costs : Cost in respective the loss in foreign exchange
difference on Foreign Currency Term Loan of Axis Bank Ltd, is credited
to the Term Loan account and debited to the respective fixed assets at
proportionately.
(H) Foreign Currency Transactions : Transactions in foreign exchange
are translated in Indian Rupees at the Exchange Rates prevailing at the
year end as notified by Foreign Exchange Dealers Association of India
(FEDAI). Items of profit and loss account are accounted for at the
exchange rates prevailing on the date of transaction. Gains and losses
arising on account of periodic revisions of such standard exchange
rates and also on realization are accounted to profit and loss account.
None of the fixed assets have been acquired out these foreign currency
loans and as such the carrying cost of these assets is not affected by
fluctuations. Therefore gain/loss arising on account of fluctuation of
foreign exchange rates are credited to the fixed assets and debited to
Term Loan liability account.
(I) Research and Development Expenditure :
Revenue expenditure is charged to Profit and Loss Account and Capital
Expenditure added to Cost of Fixed Assets.
Expenditure details on R&D for 2013-14 and 2012-13 (Rs.In Lacs)
Particulars 2013-14 2012-13
a) Capital 00.00 00.67
b) Recurring 63.96 83.55
Total Rs.63.96 84.22
Total as 0.70% 0.47%
R&D expenditure
a percentage of total turnover :
(J) Provisions, Contingent Liabilities and Contingent Assets :
A provision is made based on a reliable estimate when it is probable
that an outflow of resources embodying economic benefits will be
required to settle an obligation. Contingent Liabilities, if material
are disclosed by way of notes to accounts. Contingent Assets are not
disclosed or recognized in the financial statements.
(K) Recognition of Income and Expenditure :
a) The revenue is recognized when no significant uncertainty as regards
reliability exist. In case of claims, revenue is recognized on
admittance of the claim.
b) Sales Tax Benefits: Shortfall / Increase in the sales tax refund
receivable by the company is accounted in the year in which the final
assessment by sales tax authorities is completed. The Sales Tax amount
of Rs. 83.58 Lacs is due under PSI1993 Scheme is paid during the year.
(L) Investment: Investments are stated at cost.
(M) Deferred Revenue Expenditure: Nil
(N) Impairment of Assets: AS-28
An asset is treated as impaired when the carrying cost of assets
exceeds its recoverable value. An impairment loss is charged to Profit
and Loss Account in the year in which an asset is identified as
impaired. The impaired loss recognized in prior accounting periods is
reversed if there has been a change in the estimate of recoverable
amount.
Mar 31, 2013
A) Accounting Convention : The financial statements are prepared on
Historical Cost basis on the assumption of going concern concept.
B) Fixed Assets and Depreciation
i) Fixed Assets stated at cost of acquisition / constructions less
depreciation.
ii) Depreciation on Assets is provided on Written Down Value Method at
the rates and in the manner, specified in Schedule XIV of the Companies
Act 1956.
iii) Continuous Process Plants as defined in Schedule XIV to the
Companies Act, 1956 have been considered on Technical Assessment and
Depreciation provided accordingly.
C) Inventories
a) Finished goods are valued at cost or net realizable value whichever
is the lower.
b) Stock in process is valued at cost.
c) Stock of raw materials, stores and spares and packing materials are
valued at lower of cost or net realizable value.
d) Finished Goods in transit is valued at cost or net realizable value
whichever is lower.
e) Imported Raw material is lying with Nava Sheva Port, Balaji
Warehouse, Mumbai is valued at cost..
D) Sale of Goods : Revenue from Sale of Goods is recognized when all
the significant risk and rewards of ownership of the goods have been
part to the buyer. The company collects the Sales Tax and value added
taxes (VAT) on behalf of the Government and therefore these are not
economic benefits flowing to the company. Hence there are excluded from
the revenue. Excise duty deducted from revenue (Gross) is the amount
i.e. included in the revenue (gross) and not the entire amount of
liability arising during the year.
E) Staff Retirement Benefits
a) Contribution to Provident Fund are funded as a Percentage of Salary
/ Wages.
b) Provision for leave encashment salary is not made on the basis of
actuarial valuation at the year ended of Rs.625232/- . Subject to this
amount, the profit changes.
c) Provision for Gratuity is made of as per payment of Gratuity Act.
As per Accounting Standard 15, the gratuity amount is not provided
separately.
F) Provision for Current Tax is made on the basis of relevant
provisions of Income-Tax Act, 1961 considering the benefit of Exemption
of R & D u/s 35 (2AB) of Income Tax Act. The Deferred Tax for timing
differences between the Book and Tax Profits for the year is accounted
for using the Tax Rates and Laws that have been substantively enacted
as at the Balance Sheet.
G) Borrowing Costs : Costs in respect of borrowing for the purpose of
expansion project have been capitalized in accordance with Accounting
Standard-16 issued by The Institute of Chartered Accountants of India.
During the year, the company has availed the term loan from AXIS Bank
Limited, Pune towards construction of factory shed and purchase of
plant and machinery and others of Rs. 700.00 lacs.and interest of Rs.
47.00 lacs as on 31.3.2013 is capitalized during the period.
H) Foreign Currency Transactions : Transactions in foreign exchange are
translated in Indian Rupees at the Exchange Rates prevailing at the
year end as notified by Foreign Exchange Dealers Association of India
(FEDAI). Items of profit and loss account are accounted for at the
exchange rates prevailing on the date of transaction. Gains and losses
arising on account of periodic revisions of such standard exchange
rates and also on realization are accounted to profit and loss account.
None of the fixed assets have been acquired out these foreign currency
loans and as such the carrying cost of these assets is not affected by
fluctuations. Therefore gain/loss arising on account of fluctuation of
foreign exchange rates are credited to the fixed assets and debited to
Term loan liability account.
I) Research and Development Expenditure : Revenue expenditure is
charged to Profit and Loss Account and Capital Expenditure added to
Cost of Fixed Assets.
J) Provisions, Contingent Liabilities and Contingent Assets : A
provision is made based on a reliable estimate when it is probable that
an outflow of resources embodying economic benefits will be required to
settle an obligation. Contingent Liabilities, if material are disclosed
by way of notes to accounts. Contingent Assets are not disclosed or
recognized in the financial statements.
K) Recognition of Income and Expenditure
i) The revenue is recognized when no significant uncertainty as regards
reliability exist. In case of claims, revenue is recognized on
admittance of the claim.
ii) Sales Tax Benefits: Shortfall / increase in the sales tax refund
receivable by the company is accounted in the year in which the final
assessment by sales tax authorities is completed. The Sales Tax amount
of Rs. 71.39 Lacs is due under PSI1993 Scheme is paid during the year.
L) Investment : Investments are stated at cost.
M) Deferred Revenue Expenditure : Nil
N) Impairment of Assets : AS-28
An asset is treated as impaired when the carrying cost of assets
exceeds its recoverable value. An impairment loss is charged to Profit
and Loss Account in the year in which an asset is identified as
impaired. The impaired loss recognized in prior accounting periods is
reversed if there has been a change in the estimate of recoverable
amount.
Mar 31, 2012
A) Accounting Convention : The Financial statements are prepared on
Historical Cost basis on the assumption of going concern concept.
B) Fixed Assets and Depreciation
i) Fixed Assets stated at cost of acquisition / constructions less
depreciation.
ii) Depreciation on Assets is provided on Written Down Value Method at
the rates and in the manner, specified in Schedule XIV of the Companies
Act, 1956.
iii) Continuous Process Plants as defined in Schedule XIV to the
Companies Act, 1956 have been considered on Technical Assessment and
Depreciation provided accordingly.
C) Inventories
a) Finished goods are valued at cost or net realizable value which ever
is the lower.
b) Stock in process is valued at cost.
c) Stock of raw materials, stores and spares and packing materials are
valued at lower of cost or net realizable value.
D) Sale of Goods : Revenue from Sale of Goods is recognized when all
the significant risk and rewards of ownership of the goods have been
part to the buyer. The Company collect the Sales Tax and Value Added
Taxes (VAT) on behalf of the Government and therefore these are not
economic benefits flowing to the Company . Hence there are excluded
from the revenue. Excise duty deducted from revenue (Gross) is the
amount i.e. included in the revenue (gross) and not the entire amount
of liability arising during the year.
E) Staff Retirement Benefits
a) Contribution to Provident Fund are funded as a Percentage of Salary
/ Wages.
b) Provision for leave encashment salary is made on the basis of
actuarial valuation at the yearend.
c) Provision for Gratuity is made of as per payment of Gratuity Act. As
per Accounting Standards it is not funded.
F) Provision for Current Tax is made on the basis of relevant
provisions of Income Tax Act, 1961 considering the benefit of Exemption
of R & D u/s 35 (2AB) of Income Tax Act. The Deferred Tax for timing
differences between the Book and Tax Profits for the year is accounted
for using the Tax Rates and Laws that have been substantively enacted
as at the Balance Sheet.
G) Borrowing Costs : Costs in respect of borrowing for the purpose of
expansion project have been capitalized in accordance with Accounting
Standard-16 issued by The Institute of Chartered Accountants of India.
During the year, the Company has availed the term loan from AXIS Bank
Limited , Pune towards construction of factory shed and purchase of
plant and machinery and others of Rs. 4.99 Crores. Interest of Rs.
11.95 Lacs as on 31.3.2012 is added to various fixed assets.
H) Foreign Currency Transactions : Transactions in foreign exchange are
translated in Indian Rupees at the Exchange Rates prevailing at the
year end as notified by Foreign Exchange Dealers Association of India
(FEDAI). Items of profit and loss account are accounted for at the
exchange rates prevailing on the date of transaction. Gains and losses
arising on account of periodic revisions of such standard exchange
rates and also on realization are accounted to profit and loss account.
None of the fixed assets have been acquired out of these foreign
currency loans and as such the carrying cost of these assets is not
affected by fluctuations. Therefore gain/loss arising on account of
fluctuation of foreign exchange rates are credited to the fixed assets
and debited to Term loan liability account.
I) Research and Development Expenditure : Revenue expenditure is
charged to Profit and Loss Account and Capital Expenditure added to
Cost of Fixed Assets.
J) Provisions, Contingent Liabilities and Contingent Assets : A
provision is made based on a reliable estimate when it is probable that
an outflow of resources embodying economic benefits will be required to
settle an obligation. Contingent Liabilities , if material are
disclosed by way of notes to accounts. Contingent Assets are not
disclosed or recognized in the Financial statements.
K) Recognition of Income and Expenditure
i) The revenue is recognized when no significant uncertainty as regards
reliability exist. In case of claims, revenue is recognized on
admittance of the claim.
ii) Sales Tax Benefits : Shortfall / increase in the sales tax refund
receivable by the Company is accounted in the year in which the final
assessment by sales tax authorities is completed. The Sales Tax amount
of Rs. 50.56 Lacs is due under PSI1993 Scheme is paid during the year.
L) Investment : Investments are stated at cost.
M) Deferred Revenue Expenditure : Nil
N) Impairment of Assets : AS-28
An asset is treated as impaired when the carrying cost of assets
exceeds its recoverable
value. An impairment loss is charged to Profit and Loss Account in the
year in which an asset is identified as impaired. The impaired loss
recognized in prior accounting periods is reversed if there has been a
change in the estimate of recoverable amount.
Mar 31, 2011
(A) Accounting Convention : The financial statements are prepared on
Historical Cost basis on the assumption of going concern concept.
(B) Fixed Assets and Depreciation.
i) Fixed Assets stated at cost of acquisition / constructions less
depreciation.
ii) Depreciation on Assets is provided on Written Down Value Method at
the rates and in the manner, specified in Schedule XIV of the Companies
Act 1956. iii) Continues Process Plants as defined in Schedule XIV to
the Companies Act, 1956 have been considered on Technical Assessment &
Depreciation provided accordingly.
(C) Inventories :
a) Finished goods are valued at cost or net realizable value which ever
is the lower.
b) Stock in process is valued at cost.
c) Stock of raw materials, stores and spares and packing materials are
valued at lower of cost or net realizable value.
(D) Sale of Products :
a) Sales includes excise duty and sales tax arising on sale
transactions but trade discount are separately booked as a expenditure.
b) Excise duty is chargeable on production but is payable on clearance
of goods. Excise duty on the goods manufactured by the company is
accounted for at the time of their clearance. Duty on finished goods,
lying in the bonded warehouse as on the balance sheet date, is not
provided for.
(E) Staff Retirement Benefits :
a) Contribution to Provident Fund are funded as a Percentage of Salary/
Wages.
b) Provision for leave encashment salary is made on the basis of
actuarial valuation at theyearend.
c) Provision for Gratuity is made of as per payment of Gratuity Act.
(F) Provision for Current Tax is made on the basis of relevant
provisions of Income-Tax Act, 1961 considering the benefit of Exemption
of EOU u/s 10B of Income Tax Act. The Deferred Tax for timing
differences between the Book and Tax Profits for the year is accounted
for using the Tax Rates and Laws that have been substantively enacted
as at the Balance Sheet.
(G) Borrowing Costs : Costs in respect of borrowing for the purpose of
expansion project have been capitalized in accordance with Accounting
Standard 16 issued by The Institute of Chartered Accountants of India-
No loan is obtained during the year.
(H) Foreign Currency Transactions : Transactions in foreign exchange
are translated in Indian Rupees at the Exchange Rates prevailing at the
year end as notified by Foreign Exchange Dealers Association of India
(FEDAI). Items of profit and loss account are accounted for at the
exchange rates prevailing on the date of transaction. Gains and losses
arising on account of periodic revisions of such standard exchange
rates and also on realization are accounted to profit and loss account.
None of the fixed assets have been acquired out these foreign currency
loans and as such the carrying cost of these assets is not affected by
fluctuations. Therefore gain/loss arising on account of fluctuation of
foreign exchange rates are credited to the fixed assets and debited to
Term loan liability account.
(I) Research and Development Expenditure :
Revenue expenditure is charged to Profit and Loss Account and Capital
Expenditure added to Cost of Fixed Assets.
Expenditure details on R & D for 2010-11 and 2009-10 (Rs. in Lacs)
Particulars 2010-11 2009-10
a) Capital 26.60 42.28
b) Recurring 77.36 82.82
Total Rs. 103.96 125.10
Total R&D expenditure as 0.66% 1.04%
a percentage of total turnover
(J) Provisions, Contingent Liabilities and Contingent Assets :
A provision is made based on a reliable estimate when it is probable
that an outflow of resources embodying economic benefits will be
required to settle an obligation. Contingent Liabilities, if material
are disclosed by way of notes to accounts. Contingent Assets are not
disclosed or recognized in the financial statements.
(K) Recognition of Income and Expenditure.:
i) The revenue is recognized when no significant uncertainty as regards
reliability exist. In case of claims, revenue is recognized on
admittance of the claim.
ii) Sales Tax Benefits : Shortfall / increase in the sales tax refund
receivable by the company is accounted in the year in which the final
assessment by sales tax authorities is completed. The Sales Tax amount
of Rs. 25.16 lacs is due under PSI1993 Scheme is paid during the year.
(L) Investment: Investments are stated at cost.
(M) Deferred Revenue Expenditure : Out of the total expenditure of Rs.
25.21 lacs, the company has transferred Rs.8.40 lacs to Profit and Loss
Account during the year.
(N ) Impairment of Assets : AS-28
An asset is treated as impaired when the carrying cost of assets
exceeds its recoverable value. An impairment loss is charged to Profit
and Loss Account in the year in which an asset is identified as
impaired. The impaired loss recognized in prior accounting periods is
reversed if there has been a change in the estimate of recoverable
amount.
Mar 31, 2010
(A) Accounting Convention : The financial statements are prepared on
Historical Cost basis on the assumption of going concern concept.
(B) Fixed Assets and Depreciation.
i) Fixed Assets stated at cost of acquisition / constructions less
depreciation.
ii) Depreciation on Assets is provided on Written Down Value Method at
the rates and in the manner, specified in Schedule XIV of the Companies
Act 1956.
iii) Continues Process Plants as defined in Schedule XIV to the
Companies Act, 1956 have been considered on Technical Assessment and
Depreciation provided accordingly.
(C) Inventories :
a) Finished goods are valued at cost or net realizable value which ever
is the lower.
b) Stock in process is valued at cost.
c) Stock of raw materials, stores and spares and packing materials are
valued at lower of cost or net realizable value.
(D) Sale of Products :
a) Sales includes excise duty and sales tax arising on sale
transactions but trade discount are separately booked as a expenditure.
b) Excise duty is chargeable on production but is payable on clearance
of goods. Excise duty on the goods manufactured by the company is
accounted for at the time of their clearance. Duty on finished goods,
lying in the bonded warehouse as on the balance sheet date, is not
provided for.
(E) Staff Retirement Benefits :
a. Contribution to Provident Fund are funded as a Percentage of Salary
/ Wages.
b. Provision for leave encashment salary is made on the basis of
actuarial valuation attheyearend.
c. Provision for Gratuity is made of as per payment of Gratuity Act.
(F) Provision for Current Tax is made on the basis of relevant
provisions of Income-Tax Act, 1961 considering the benefit of Exemption
of EOU u/s 10 B of Income Tax Act. The Deferred Tax for timing
differences between the Book and Tax Profits for the year is accounted
for using the Tax Rates and Laws that have been substantively enacted
as at the Balance Sheet.
(G) Borrowing Costs : Costs in respect of borrowing for the purpose of
expansion project have been capitalized in accordance with Accounting
Standard 16 issued by The Institute of Chartered Accountants of India.
(H) Foreign Currency Transactions : Transactions in foreign exchange
are translated in Indian Rupees at the Exchange Rates prevailing at the
year end as notified by Foreign
Exchange Dealers Association of India (FEDAI). Items of profit and loss
account are accounted for at the exchange rates prevailing on the date
of transaction. Gains and losses arising on account of periodic
revisions of such standard exchange rates and also on realization are
accounted to profit and loss account. None of the fixed assets have
been acquired out these foreign currency loans and as such the carrying
cost of these assets is not affected by fluctuations. Therefore the
gain / loss arising on account of fluctuation of foreign exchange rates
is taken to profit and loss account as per AS-11.
(I) Research and Development Expenditure :
Revenue expenditure is charged to Profit and Loss Account and Capital
Expenditure added to Cost of Fixed Assets.
(]) Provisions, Contingent Liabilities and Contingent Assets :
A provision is made based on a reliable estimate when it is probable
that an outflow of resources embodying economic benefits will be
required to settle an obligation. Contingent Liabilities, if material
are disclosed by way of notes to accounts. Contingent Assets are not
disclosed or recognized in the financial statements.
(K) Recognition of Income and Expenditure.:
i) The revenue is recognized when no significant uncertainty as regards
reliability exist. In case of claims, revenue is recognized on
admittance of the claim.
ii) Sales Tax Benefits : Shortfall / increase in the sales tax refund
receivable by the company is accounted in the year in which the final
assessment by sales tax authorities is completed. Company has repaid
Sales tax loan amount payable under PSI 1988 Scheme. The sales tax
amount of Rs. 19.55 lacs is due under PSI 1993 scheme for the year.
(L) Investment: Investments are stated at cost.
(M) Deferred Revenue Expenditure : During the year Rs. 25.21 lacs has
paid against Foreign Technical consulting charges which is deferred for
three years. Out of which Rs 8.40 lacs is transferred to Profit & Loss
account. Out of existing Deferral Revenue Expenditure Rs. 8.31 lacs is
transferred to Profit and Loss Account.
(N) Impairment of Assets : AS-28
An asset is treated as impaired when the carrying cost of assets
exceeds its recoverable value. An impairment loss is charged to Profit
and Loss Account in the year in which an asset is identified as
impaired. The impaired loss recognized in prior accounting periods is
reversed if there has been a change in the estimate of recoverable
amount.
Mar 31, 2000
1. GENERAL :
a) The accounts have been prepared under the historical cost convention
and on the basis of a going concern.
b) Accounting policies not specifically referred to are consistent and
in consonance with generally accepted accounting principles.
c) Expenses and income to the extent considered payable and receivable
respectively are accounted for on accrual basis.
d) Contingencies which can be reasonably ascertained are provided for
it, in opinion of the Company
2. SALES :
a) Sales includes Excise Duty, Sales Tax and foreign exchange
differences arising on sale transaction, but trade discount are
separately booked as a expenditure.
b) Excise duty is chargeable on production but is payable on clearance
of goods. Excise duty on the goods manufactured by the Company is
accounted for at the time of their clearance. Duty on finished goods,
lying in the Bonded Warehouse as on the Balance Sheet date, is not
provided for.
3. VALUATION OF INVENTORIES :
a) Raw Materials, Consumable, Work in Process, Stores, Packing Material
and Spares are valued at cost.
b) Finished goods are valued at lower of cost and net realisable value.
Cost for this purpose inlcludes direct materials, direct labour,
factory administration and other overheads.
4. FIXED ASSETS :
Fixed Assets are stated at cost of acquisition or construction less
depreciation.
5. INVESTMENTS :
Long term investments are valued at cost.
6. MISCELLANEOUS EXPANDER :
Preliminary expenses are written off over a period of ten years from
the year of commencement of commercial production.
7. RETIREMENT BENEFITS :
i) No provision is made for accrued gratuity liability by the Company.
The amount is uncertained. the necessary provision will be made in the
respective year of payment.
ii) Provision is made for the value of unutilised leave due to
employees at the end of the year.
8. RECOGNITION OF INCOME & EXPENDITURE :
The Revenue is recognised when no significant uncertainty as regards
realisability exist. In case of claims revenue is recognised on
admittance of the claim.
9. FOREIGH EXCHANGE TRANSACTIONS :-
Foreign Exchange transactions are recorded at the exchange rates
prevailing on the date of transaction.
10. EXPORT BENEFITS :
Export benefits arising on account of entitlement of duty free import
under Duty Entitlement Pass Book Scheme is accounted in the year of
exports.
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