A Oneindia Venture
Click it and Unblock the Notifications
Accounting Policies of Clean Science & Technology Ltd. Company
Mar 31, 2025
2. | MATERIAL ACCOUNTING POLICIES
This note provides a list of the material accounting
policies adopted in the preparation of these
standalone financial statements. These policies have
been consistently applied to all the years presented,
unless otherwise stated.
2.1 Basis of preparation and presentation
a) Compliance with Ind AS
The Standalone financial statements of the
Company have been prepared in accordance
with Indian Accounting Standards (Ind
AS) notified under the Companies (Indian
Accounting Standards) Rules, 2015 (as
amended from time to time) notified under
section 133 of the Companies Act, 2013
and presentation requirements of Division
II of Schedule III to the Companies Act,
2013, (Ind AS compliant Schedule III), as
applicable to the Company.
The Standalone financial statements for
the year ended 31st March, 2025 were
approved for issue by the Company''s Board
of Directors on 22nd May, 2025.
b) Historical cost conversion
The Standalone financial statements
have been prepared on a historical cost
basis, except for the following assets and
liabilities which have been measured at fair
value or revalued amount:
i) Certain financial assets and liabilities
measured at fair value (refer
accounting policy regarding financial
instruments);
ii) Net defined benefit (asset) / liability
that are measured at fair value of plan
assets less present value of defined
benefit obligations.
iii) Share-based payments
c) Current and non-current classification of
assets and liabilities
All assets and liabilities have been
classified as current or non-current as per
the Company''s normal operating cycle and
other criteria set out in the Schedule III
(Division II) to the Companies Act, 2013.
Based on the nature of products and the
time between the acquisition of assets
for processing and their realisation in
cash and cash equivalents, the Company
has determined its operating cycle as 12
months.
d) New and amendments standards adopted
by the Company
Ministry of Corporate Affairs ("MCA")
notifies new standards or amendments to
the existing standards under Companies
(Indian Accounting Standards) Rules as
issued from time to time. For the year
ended 31st March, 2025, MCA has notified
amendments to the leases standard
(IND AS 116) for sale-and-leaseback
transactions. The amendments impact how
a seller-lessee accounts for variable lease
payments that arise in a sale-and-leaseback
transaction, in situations, where some or
all the lease payments are variable lease
payments, in particular, where the variability
does not relate to an index or a rate.
This amendment does not have any
material impact on the amounts recognised
in the prior periods and are not expected
to significantly affect the current or future
periods.
2.2 Revenue recognition:
Sales are recognised when control of the
products has been transferred to the customer,
being when the products are delivered to the
customer or its authorised representative and
there is no unfulfilled obligation that could affect
the customer''s acceptance of the products.
Revenue is measured at the transaction price
of the consideration received or receivable, net
of returns, trade discounts, and volume rebates.
Revenue also excludes taxes collected from
customer.
The sales made by the Company may include
transport arrangements from third parties. In
such cases, revenue for the supply of such third-
party transport arrangements are recorded at
gross or net basis depending on whether the
Company is acting as the principal or as an
agent of the customer. The Company recognises
revenue for the gross amount of consideration
when it is acting as a principal and at net amount
of consideration when it is acting as an agent.
A receivable is recognised when the goods are
delivered as this is the point in time that the
consideration is unconditional because only the
passage of time is required before the payment
is due as per agreed terms and conditions with
the buyers.
2.3 Trade receivables
Trade receivables are amounts due from
customers for goods and services performed in
the ordinary course of business and reflect the
Company''s unconditional right to consideration
(that is, payment is due only on the passage of
time.)
Trade receivables are recognised initially at
the transaction price as they do not contain
significant financing components. The Company
holds the trade receivables with the objective
of collecting the contractual cash flows and
therefore measures them subsequently at
amortised cost using the effective interest
method, less loss allowance.
2.4 Inventories
Inventories are valued at cost or net realisable
value whichever is lower after providing for cost
of obsolescence. Cost is determined on a First-
in-first-out formula.
Raw materials are valued at cost of purchase net
of duties (credit availed w.r.t taxes and duties)
and includes all expenses incurred in bringing the
materials to location of use. However, materials
and other items held for use in the production
of inventories are not written down below cost
if the finished products in which they will be
incorporated are expected to be sold at or above
cost.
Work-in-process (WIP) and finished goods
include conversion costs in addition to the landed
cost of raw materials. WIP includes certain
inventories used in the production process which
has life of more than one year. These inventories
are amortised over its useful life and included as
part of cost of production.
Finished goods are valued at lower of cost and
net realisable value. The net realisable value of
the finished goods is determined with reference
to the selling prices of related finished goods.
Cost of finished goods and work-in-progress
comprises cost of raw material and appropriate
fixed production overheads which are allocated
on the basis of normal capacity of production
facilities and variable production overheads on
the basis of actual production of material and
after deduction of the realisable value of the by¬
product.
Components, Stores, and Spares cost includes
cost of purchase and other costs incurred in
bringing the inventories to their present location
and condition.
Net realisable value is the estimated selling
price in the ordinary course of business, less
estimated costs of completion and estimated
costs necessary to make the sale. Obsolete
and slow-moving inventories are identified and
wherever necessary, such inventories are written
off/provided during the year.
2.5 Property, plant and equipment
Freehold land is carried at historical cost. All
other items of property, plant and equipment
are stated at historical cost less depreciation.
Depreciation method and estimated useful lives
Depreciation on tangible assets is provided
on the straight-line method on pro-rata basis,
over the useful lives of assets as prescribed in
Schedule - II of the Companies Act, 2013 which
is as follows:
The residual values of the assets are not more
than 5% of the original cost of the asset.
Depreciation method, useful lives and residual
values are reviewed at each financial year-end
and adjusted if appropriate.
⢠Recognition and measurement
The cost of an item of property, plant and
equipment shall be recognised as an asset
if, and only if 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.
Property, plant and equipments are carried
at cost which includes capitalised borrowing
costs, less accumulated depreciation and
impairment loss, if any. Items of property,
plant and equipment are measured
at cost of acquisition or construction
less accumulated depreciation and / or
accumulated impairment losses, if any.
The cost of an item of property, plant and
equipment comprises its purchase price,
including import duties and other non¬
refundable taxes or levies and any directly
attributable cost of bringing the asset to
its working condition for its intended use
and estimated costs of dismantling and
removing the item and restoring the site
on which it is located. Any trade discounts
and rebates are deducted in arriving at the
purchase price. Borrowing costs directly
attributable to the construction of a
qualifying asset are capitalised as part of
the cost. The cost of a self-constructed item
of property, plant and equipment 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 dismantling
and removing the item and restoring the
site on which it is located. The Company
identifies and determines cost of each
component/ part of the asset separately,
if the component/ part has a cost which is
significant to the total cost of the asset and
has useful life that is materially different
from that of the remaining asset. These
components are depreciated separately
over their useful lives; the remaining
components are depreciated over the life of
the principal asset.
Property, plant and equipment under
construction are disclosed as capital work-
in-progress.
⢠Subsequent costs
The cost of replacing a part of an item of
property, plant and equipment is recognised
in the carrying amount of the item if it is
probable that the future economic benefits
embodied within the part will flow to the
Company and its cost can be measured
reliably. The carrying amount of the replaced
part is derecognised. The costs of the
day-to-day servicing of property, plant and
equipment are recognised in the Statement
of Profit and Loss as incurred.
⢠Disposal
An item of property, plant and equipment
is derecognised upon disposal or when no
future benefits are expected from its use or
disposal. Gains and losses on disposal of
an item of property, plant and equipment
are determined by comparing the proceeds
from disposal with the carrying amount
of property, plant and equipment, and
are recognised net within other income/
expenses in the Statement of Profit and
Loss.
2.6 Other intangible assets:
The useful lives of intangible assets are assessed
based on management estimates.
Intangible assets i.e., computer software is
amortised on a straight-line basis over the period
of expected future benefits commencing from
the date the asset is available for its use.
The management has estimated the useful life
for software & licenses as following,
Amortisation method, useful lives and residual
values are reviewed at the end of each financial
year and adjusted if appropriate.
See note 3.3 below for remaining relevant
accounting policies.
2.7 Employee Share-based Payments
Employees of the Company receive remuneration
in the form of share based payment transactions,
whereby employees render services as
consideration for equity instruments (equity-
settled transactions).
The cost of equity-settled transactions is
determined by the fair value at the date when
the grant is made using an appropriate valuation
model.
That cost is recognised, together with a
corresponding increase in Employee Stock
Option (ESOP) Reserve in equity, over the
period in which the performance and/or service
conditions are fulfilled in employee benefits
expense. The cumulative expense recognised
for equity-settled transactions at each reporting
date until the vesting date reflects the extent
to which the vesting period has expired and
the Company''s best estimate of the number of
equity instruments that will ultimately vest. The
expense or credit for a period represents the
movement in cumulative expense recognised
as at the beginning and end of that period and is
recognised in employee benefits expense.
The dilutive effect of outstanding options is
reflected as additional share dilution in the
computation of diluted earnings per share.
Expense relating to options granted to employees
of the subsidiaries under the Company''s
Employee Stock Option plan, is charged for their
share of the ESOP cost by equity settlement.
2.8 Financial assets
Initial recognition and measurement
A financial instrument is any contract that gives
rise to a financial asset of one entity and a
financial liability or equity instrument of another
entity. All financial assets are recognised initially
at fair value plus except for trade receivables
which are initially measured at transaction price,
in the case of financial assets not recorded
at fair value through profit or loss, transaction
costs that are attributable to the acquisition of
the financial asset.
Subsequent measurement
For purposes of subsequent measurement,
financial assets are classified in one of the three
categories:
a) At amortised cost
b) At fair value through Other Comprehensive
Income (''FVTOCI'')
c) At fair value through profit or loss (''FVTPL)
(a) Financial assets classified as measured at
amortised cost
A financial asset shall be measured at
amortised cost if both of the following
conditions are met:
- the financial asset is held within a
business model whose objective is to
hold financial 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.
After initial measurement, such financial
assets are subsequently measured at
amortised cost using the effective interest
rate (''EIR'') method, less impairment charge.
Amortised cost is calculated by considering
any discount or premium on acquisition
and fees or costs that are an integral part of
the EIR. The EIR amortisation is included in
finance expense/ (income) in the Statement
of Profit and Loss. The losses arising from
impairment are recognised in the Statement
of Profit and Loss. This category generally
applies to trade receivables, security and
other deposits receivable by the Company.
Interest income or expense is recognised
using the effective interest rate method.
The ''effective interest rate'' is the rate that
exactly discounts estimated future cash
receipts or payments through the expected
life of the financial instrument to:
- the gross carrying amount of the
financial asset; or
- the amortised cost of the financial
liability.
(b) Financial assets classified as measured at
FVOCI
A financial asset is measured at fair value
through other comprehensive income if
it is held within a business model whose
objective is achieved by both collecting
contractual cash flows and selling financial
assets 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. Further, the Company
makes such election on an instrument-
by-instrument basis, for its investments
which are classified as equity instruments,
the subsequent changes in fair value are
recognised in other comprehensive income.
Movements in the carrying amount are taken
through OCI, except for the recognition of
impairment gains or losses and interest
revenue which are recognised in other
comprehensive income. When the financial
asset is derecognised, the cumulative gain
or loss previously recognised in OCI is
reclassified from equity to profit or loss and
recognised in other gains/ (losses). Interest
income from these financial assets is
included in other income using the effective
interest rate method.
(c) Financial assets classified as measured at
FVTPL
Assets that do not meet the criteria for
amortised cost or FVOCI are measured
at fair value through profit or loss. A gain
or loss on a mutual fund investment that
is subsequently measured at fair value
through profit or loss is recognised in profit
or loss and presented net in the Statement
of Profit and Loss within other gains/
(losses) in the period in which it arises.
Financial assets are not reclassified
subsequent to their initial recognition,
except if and in the period the Company
changes its business model for managing
financial assets.
De-recognition of financial asset
The Company derecognises a financial asset
when the contractual rights to the cash flows
from the financial asset expire, or it transfers the
rights to receive the contractual cash flows in a
transaction in which substantially all of the risks
and rewards of ownership of the financial asset
are transferred or in which the Company neither
transfers nor retains substantially all of the risks
and rewards of ownership and does not retain
control of the financial asset.
If the Company enters into transactions whereby
it transfers assets recognised on its Balance
Sheet but retains either all or substantially all of
the risks and rewards of the transferred assets,
the transferred assets are not derecognised.
Impairment of financial assets
The Company applies the expected credit loss
model for recognising impairment loss on
financial assets.
Expected credit loss is the difference between
the contractual cash flows and the cash flows
that the entity expects to receive discounted
using effective interest rate.
Loss allowances for trade receivables are
measured at an amount equal to lifetime
expected credit losses.
Lifetime expected credit losses are the
expected credit losses that result from all
possible default events over the expected life
of a financial instrument. Lifetime expected
credit loss is computed based on a provision
matrix which takes into account historical credit
loss experience adjusted for forward looking
information.
For other financial assets, expected credit loss is
measured at the amount equal to twelve months
expected credit loss unless there has been a
significant increase in credit risk from initial
recognition, in which case, those are measured
at lifetime expected credit loss.
Trade receivables are written off when there is no
reasonable expectation of recovery.
2.9 Offsetting of financial instruments
Financial assets and financial liabilities are
offset, and the net amount is reported in the
Balance Sheet if there is a currently enforceable
legal right to offset the recognised amounts
and there is an intention to settle on a net basis,
to realise the assets and settle the liabilities
simultaneously.
2.10 Derivative financial instruments
The Company enters into certain derivative
contracts to hedge risks which are not
designated as hedges. The Company holds
derivative financial instruments to hedge its
foreign currency and interest rate risk exposures.
Embedded derivatives are separated from the
host contract and accounted for separately if the
host contract is not a financial asset and certain
criteria are met.
Derivatives are initially measured at fair value.
Subsequent to initial recognition, derivatives are
measured at fair value, and changes therein are
generally recognised in the Statement of Profit
and Loss.
iaJ other accounting policies
2A.1 Other income
Sale of electricity
Revenue from sale of solar electricity power is
recognised on a point in time basis when solar
electrical power is transmitted to Alternating
Current Distribution Board (ACDB).
Interest income
Interest income on financial assets at amortised
cost is calculated using the effective interest
method is recognised in the statement of profit
and loss as part of other income.
Dividends
Dividends are recognised in the Statement of
Profit and Loss only when the right to receive
payment is established, and it is probable that
the economic benefits associated with the
dividend will flow to the Company and that the
amount of the dividend can be measured reliably.
Export Incentive
Export incentives are accounted for on export of
goods if the entitlements can be estimated with
reasonable accuracy and conditions precedent
to claim is fulfilled.
2A.2 Impairments of non-financial assets:
The Company assesses at each balance sheet
date whether there is any indication that an asset
or cash generating unit (CGU) may be impaired.
If any such indication exists, the Company
estimates the recoverable amount of the asset.
The recoverable amount is the higher of an
asset''s or CGU''s fair value less costs of disposal
or its value in use. Where the carrying amount of
an asset or CGU exceeds its recoverable amount,
the asset is considered impaired and is written
down to its recoverable amount.
In assessing value in use, the estimated future
cash flows are discounted to their present value
using a pre- tax discount rate that reflects current
market assessments of the time value of money
and the risks specific to the asset. In determining
fair value less costs of disposal, recent market
transactions are considered.
An impairment loss is recognised if the
carrying amount of an asset or CGU exceeds
its recoverable amount. Impairment losses are
recognised in the Statement of Profit and Loss.
If at the balance sheet date there is an indication
that a previously assessed impairment loss no
longer exists, an impairment loss is reversed only
to the extent that the asset''s carrying amount
does not exceed the carrying amount that would
have been determined, net of depreciation or
amortisation, if no impairment loss had been
recognised.
For the purpose of assessing the impairment,
assets are grouped at the lowest level for which
there are separately identifiable cashflows which
are largely independent of assets or group of
assets.
2A.3 Other intangible assets
⢠Recognition and measurement
Intangible assets are recognised when the
asset is identifiable, is within the control of
the Company, it is probable that the future
economic benefits that are attributable to
the asset will flow to the Company and cost
of the asset can be reliably measured.
Intangible assets acquired separately are
measured on initial recognition at cost.
Intangible assets acquired by the Company
that have finite useful lives are measured
at cost less accumulated amortisation
and any accumulated impairment losses.
Intangible assets with indefinite useful
lives are not amortised, but are tested for
impairment annually, either individually or at
the cash-generating unit level.
Expenditure on research activities is
recognised in the Statement of Profit and
Loss as incurred. Development expenditure
is capitalised only if the expenditure can be
measured reliably, the product or process
is technically and commercially feasible,
future economic benefits are probable,
and the Company intends to complete
development and to use or sell the asset.
Intangible assets which comprise of the
development expenditure incurred on
new product and expenditure incurred on
acquisition of user licenses for computer
software are recorded at their acquisition
price.
⢠Subsequent measurement
Subsequent expenditure is capitalised only
when it increases the future economic
benefits embodied in the specific asset to
which it relates.
Intangible assets are assessed for
impairment whenever there is an indication
that the intangible asset may be impaired.
⢠Disposal
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
derecognised.
2A.4 Employee benefits:
Short-term employee benefits
The distinction between short term and long¬
term employee benefits is based on expected
timing of settlement rather than the employee''s
entitlement benefits. Employee benefits payable
wholly within twelve months of rendering the
service are classified as short-term employee
benefits. Such benefits include salaries, wages,
bonus, short term compensated absences,
awards, ex-gratia, performance pay etc. and are
recognised in the period in which the employee
renders the related service. The undiscounted
amount of short-term employee benefits
expected to be paid in exchange for the services
rendered by employees is recognised during
the year. A liability is recognised for the amount
expected to be paid e.g., under short-term cash
bonus, if the Company has a present legal or
constructive obligation to pay this amount as a
result of past service provided by the employee,
and the amount of obligation can be estimated
reliably.
The liabilities for compensated absence 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 therefore measured as the present value of
expected future payments to be made in respect
of services provided by employees up to the end
of the reporting period using the projected unit
credit method. The benefits are discounted using
the market yields at the end of the reporting period
that have terms approximating to the terms of
the related obligation. Remeasurements as a
result of experience adjustments and changes in
actuarial assumptions are recognised in profit or
loss.
The 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.
Defined contribution plans
Contributions to the provident fund and
superannuation schemes which is defined
contribution scheme, are recognised as an
employee benefit expense in the Statement
of Profit and Loss in the period in which the
contribution is due. Contributions are made in
accordance with the rules of the statute and are
recognised as expenses when employees render
service entitling them to the contributions. The
Company has no obligation, other than the
contribution payable to the provident fund.
If the contribution payable to the scheme for
service received before the balance sheet date
exceeds the contribution already paid, the deficit
payable to the scheme is recognised as a liability
after deducting the contribution already paid.
If the contribution already paid exceeds the
contribution due for services received before the
balance sheet date, then excess is recognised
as an asset to the extent that the pre-payment
will lead to, for example, a reduction in future
payment or a cash refund.
Defined benefit plans
The employees'' gratuity scheme is a defined
benefit plan which is administered by a trust
formed for this purpose through the group
schemes of Life Insurance Corporation of India
(LIC). The present value of the obligation under
such defined benefit plans is determined based
on actuarial valuation using the projected unit
credit method, which recognises each period
of service as giving rise to additional unit of
employee benefit entitlement and measures each
unit separately to build up the final obligation.
The obligation is measured at the present value
of the estimated future cash flows. The discount
rates used for determining the present value
of the obligation under defined benefit plans,
is based on the market yields on government
securities as at the reporting date, having
maturity periods approximating to the terms of
related obligations.
Remeasurements, comprising of actuarial
gains and losses, the effect of the asset ceiling,
excluding amounts included in net interest on
the net defined benefit liability and the return
on plan assets (excluding amounts included in
net interest on the net defined benefit liability),
are recognised immediately in the Balance
Sheet with a corresponding debit or credit to
retained earnings through other comprehensive
income (OCI) in the period in which they occur.
Remeasurements are not reclassified to the
Statement of Profit and Loss in subsequent
periods.
In case of funded plans, the fair value of the
planned assets is reduced from the gross
obligation under the defined benefit plans, to
recognise the obligation on net basis.
When the benefits of the plan are changed or
when a plan is curtailed, the resulting change in
benefits that relates to past service or the gain or
loss on curtailment is recognised immediately in
the Statement of Profit and Loss. Net interest is
calculated by applying the discount rate to the net
defined benefit liability or asset. The Company
recognises gains/ losses on settlement of a
defined plan when the settlement occurs.
2A.5 Income taxes:
Income tax expense comprises current and
deferred tax. It is recognised in the Statement of
Profit and Loss except to the extent that it relates
to a business combination, or items recognised
directly in equity or in other comprehensive
income (OCI).
⢠Current tax
Current tax comprises the expected tax
payable or receivable on the taxable income
or loss for the year and any adjustment to
the tax payable or receivable in respect
of previous years. The amount of current
tax reflects the best estimate of the tax
amount expected to be paid or received
after considering the uncertainty, if any,
related to income taxes. Current 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 country
where the Company operates and generates
taxable income. Current tax assets and
liabilities are offset only if there is a legally
enforceable right to set it off the recognised
amounts and it is intended to realise the
asset and settle the liability on a net basis
or simultaneously.
⢠Deferred tax
Deferred tax is provided using the balance
sheet method on temporary differences
between the tax base of assets and
liabilities and their carrying amounts for
financial reporting purposes at the reporting
date.
- Temporary differences related
to investments in subsidiaries,
associates, and joint arrangements to
the extent that the Company is able
to control the timing of the reversal
of the temporary differences and it is
probable that they will not reverse in
the foreseeable future.
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 (including
unabsorbed depreciation) 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 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.
Deferred tax relating to items recognised
outside profit or loss is recognised outside
profit or loss. Deferred tax items are
recognised in correlation to the underlying
transaction either in OCI or directly in equity.
2A.6 Earnings per share (EPS):
Basic EPS is calculated by dividing the profit
for the year attributable to equity holders of the
Company by the weighted average number of
equity shares outstanding during the financial
year, adjusted for bonus elements and stock
split in equity shares issued during the year and
excluding treasury shares. The weighted average
number of equity shares outstanding during the
period and for all periods presented is adjusted
for events, such as bonus shares and stock split,
other than the conversion of potential equity
shares that have changed the number of equity
shares outstanding, without a corresponding
change in resources.
Diluted EPS adjust the figures used in the
determination of basic EPS to consider.
⢠The after-income tax 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.
Mar 31, 2024
2. MATERIAL ACCOUNTING POLICIES
2.1 Basis of preparation and presentation
a) Statement of Compliance
The Standalone financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) notified under section 133 of the Companies Act, 2013 and presentation requirements of Division II of Schedule III to the Companies Act, 2013, (Ind AS compliant Schedule III), as applicable to the Company.
The Standalone financial statements for the year ended 31st March, 2024 were approved for issue by the Companyâs Board of Directors on 15th May, 2024.
b) Basis of measurement
The Standalone financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value or revalued amount:
i) Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments);
ii) Asset held for sale measured at lower of carrying amount or fair value less cost to sell;
iii) Net defined benefit (asset) / liability that are measured at fair value of plan assets less present value of defined benefit obligations.
The accounting policies adopted for preparation and presentation of Standalone financial statements have been consistent with the previous year.
The Standalone financial statements are presented in Indian Rupees (?) and all values are rounded to the nearest million, upto two places of decimal, unless otherwise stated.
2.2 Current and non-current classification of assets and liabilities
All assets and liabilities have been classified as current or non-current as per the Companyâs normal operating cycle and other criteria set out in the Schedule III (Division II) to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has determined its operating cycle as 12 months.
2.3 Use of judgements estimates and assumptions
The preparation of the Standalone financial statements in conformity with Ind AS requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenue, expenses, current assets, non-current assets, current liabilities, non-current liabilities, and disclosure of the contingent liabilities at the end of each reporting period. Such estimates are on a reasonable and prudent basis considering all available information, however, due to uncertainties about these judgments, estimates and assumptions, actual results could differ from estimates. Information about each of these estimates and judgements is included in relevant notes.
Judgements
Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the Standalone financial statements is included in the following notes:
⢠Note 40 - classification of financial assets: assessment of business model within which the assets are held and assessment
of whether the contractual terms of the financial asset are solely payments of principal and interest on the principal amount outstanding.
Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a may have risk of resulting in a material adjustment is included in the following notes:
⢠Note 9 - Valuation of inventories: Allocation of overheads.
⢠Note 35 - Recognition of contingencies: key assumptions about the likelihood and magnitude of outflow of resources.
⢠Note 38 - Impairment of trade receivables: Computation of weighted average loss rate.
⢠Note 41 - Defined benefit obligation: key actuarial assumptions.
2.4 Revenue recognition:
Sales are recognised when control of the products has been transferred to the customer, being when the products are delivered to the customer or its authorised representative and there is no unfulfilled obligation that could affect the customer''s acceptance of the products. Revenue is measured at the transaction price of the consideration received or receivable, net of returns, trade discounts, and volume rebates. Revenue also excludes taxes collected from customer.
The sales made by the Company may include transport arrangements from third parties. In such cases, revenue for the supply of such third-party transport arrangements are recorded at gross or net basis depending on whether the Company is acting as the principal or as an agent of the customer. The Company recognises revenue for the gross amount of consideration when it is acting as a principal and at net amount of consideration when it is acting as an agent.
A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due as per agreed terms and conditions with the buyers.
Revenue from sale of solar electricity power is recognised on a point in time basis when solar electrical power is transmitted to Alternating Current Distribution Board (ACDB).
2.5 Inventories
Inventories are valued at cost or net realisable value whichever is lower after providing for cost of obsolescence. Cost is determined on a First-in-first-out formula.
Raw materials are valued at cost of purchase net of duties (credit availed w.r.t taxes and duties) and includes all expenses incurred in bringing the materials to location of use. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost.
Work-in-process (WIP) and finished goods include conversion costs in addition to the landed cost of raw materials. WIP includes certain inventories used in the production process which has life of more than one year. These inventories are amortised over its useful life and included as part of cost of production.
Finished goods are valued at lower of cost and net realisable value. The net realisable value of the finished goods is determined with reference to the selling prices of related finished goods.
Cost of finished goods and work-in-progress comprises cost of raw material and appropriate fixed production overheads which are allocated on the basis of normal capacity of production facilities and variable production overheads on the basis of actual production of material and after deduction of the realisable value of the byproduct.
Components, Stores, and Spares cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale. Obsolete and slow-moving inventories are identified and wherever necessary, such inventories are written off/provided during the year.
2.6 Property, plant and equipment
⢠Recognition and measurement
The cost of an item of property, plant and equipment shall be recognised as an asset if, and only if 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.
Property, plant and equipments are carried at cost which includes capitalised borrowing costs, less accumulated depreciation and impairment loss, if any. Items of property, plant and equipment are measured at cost of acquisition or construction less accumulated depreciation and / or accumulated impairment losses, if any. The cost of an item of property, plant and equipment comprises its purchase price, including import duties and other non-refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition for its intended use and estimated costs of dismantling and removing the item and restoring the site on which it is located. Any trade discounts and rebates are deducted in arriving at the purchase price. Borrowing costs directly attributable to the construction of a qualifying asset are capitalised as part of the cost. The cost of a self-constructed item of property, plant and equipment 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 dismantling and removing the item and restoring the site on which it is located. The Company identifies and determines cost of each component/ part of the asset separately, if the component/ part has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset. These components are depreciated separately over their useful lives; the remaining components are depreciated over the life of the principal asset.
Property, plant and equipment under construction are disclosed as capital work-in-progress.
⢠Subsequent costs
The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can
be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in the Statement of Profit and Loss as incurred.
⢠Disposal
An item of property, plant and equipment is derecognised upon disposal or when no future benefits are expected from its use or disposal. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised net within other income/ expenses in the Statement of Profit and Loss.
⢠Depreciation method and estimated useful lives
Depreciation on tangible assets is provided on the straight-line method on pro-rata basis, over the useful lives of assets as prescribed in Schedule -II of the Companies Act, 2013 which is as follows:
Depreciation method, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.
Impairments of non-frnancial assets:
The Company assesses at each balance sheet date whether there is any indication that an asset or cash generating unit (CGU) may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. The recoverable amount is the higher of an assetâs or CGUâs fair value less costs of disposal or its value in use. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
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
Subsequent measurement
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates.
Amortisation
The useful lives of intangible assets are assessed based on management estimates.
Intangible assets i.e., computer software is amortised on a straight-line basis over the period of expected future benefits commencing from the date the asset is available for its use.
The management has estimated the useful life for software & licenses as following,
market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are considered.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses are recognised in the Statement of Profit and Loss.
If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, an impairment loss is reversed only to the extent that the assetâs carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
2.7 Other intangible assets:
⢠Recognition and measurement
Intangible assets are recognised when the asset is identifiable, is within the control of the Company, it is probable that the future economic benefits that are attributable to the asset will flow to the Company and cost of the asset can be reliably measured.
Intangible assets acquired separately are measured on initial recognition at cost. Intangible assets acquired by the Company that have finite useful lives are measured at cost less accumulated amortisation and any accumulated impairment losses. Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level.
Expenditure on research activities is recognised in the Statement of Profit and Loss as incurred. Development expenditure is capitalised only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to complete development and to use or sell the asset.
Intangible assets which comprise of the development expenditure incurred on new product and expenditure incurred on acquisition of user licenses for computer software are recorded at their acquisition price.
Amortisation method, useful lives and residual values are reviewed at the end of each financial year and adjusted if appropriate.
Intangible assets are assessed for impairment whenever there is an indication that the intangible asset may be impaired.
⢠Disposal
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 derecognised.
2.8 Employee benefits:
⢠Short-term employee benefits
The distinction between short term and longterm employee benefits is based on expected timing of settlement rather than the employeeâs entitlement benefits. Employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits. Such benefits include salaries, wages, bonus, short term compensated absences, awards, ex-gratia, performance pay etc. and are recognised in the period in which the employee renders the related service. The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognised during
the year. A liability is recognised for the amount expected to be paid e.g., under short-term cash bonus, if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the amount of obligation can be estimated reliably.
The employees of the Company are entitled to compensated absences. The employees can carry forward a portion of the unutilised accumulating compensated absences and utilise it in future periods or receive cash at retirement or termination of employment. The Company records an obligation for compensated absences in the period in which the employee renders the services that increases this entitlement. Accumulated compensated absences, which are expected to be availed or encashed within 12 months from the end of the year are treated as short term employee benefits. The obligation towards the same is measured at the expected cost of accumulating compensated absences as the additional amount expected to be paid as a result of the unused entitlement as at the year end.
⢠Post-employment benefits
Defined contribution plans
Contributions to the provident fund and superannuation schemes which is defined contribution scheme, are recognised as an employee benefit expense in the Statement of Profit and Loss in the period in which the contribution is due. Contributions are made in accordance with the rules of the statute and are recognised as expenses when employees render service entitling them to the contributions. The Company has no obligation, other than the contribution payable to the provident fund.
If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognised as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognised as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
Defined benefit plans
The employeesâ gratuity scheme is a defined benefit plan which is administered by a trust formed for this purpose through the group schemes of Life Insurance Corporation of India (LIC). The present value of the obligation under such defined benefit plans is determined based on actuarial valuation using the projected unit credit method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plans, is based on the market yields on government securities as at the reporting date, having maturity periods approximating to the terms of related obligations.
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through other comprehensive income (OCI) in the period in which they occur. Remeasurements are not reclassified to the Statement of Profit and Loss in subsequent periods.
In case of funded plans, the fair value of the planned assets is reduced from the gross obligation under the defined benefit plans, to recognise the obligation on net basis.
When the benefits of the plan are changed or when a plan is curtailed, the resulting change in benefits that relates to past service or the gain or loss on curtailment is recognised immediately in the Statement of Profit and Loss. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises gains/ losses on settlement of a defined plan when the settlement occurs.
⢠Other long-term employee benefits
The liabilities for earned leave are not expected to be settled wholly within 12 months after the end of the reporting period in which the employees
render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method as determined by actuarial valuation. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating the terms of the related obligation. Remeasurements as a result of experience adjustments and change in actuarial assumptions are recognised in the Statement of Profit and Loss. 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.
⢠Termination benefits
Termination benefits are expensed at the earlier of when the Company can no longer withdraw the offer of those benefits and when the Company recognises costs for a restructuring. If benefits are not expected to be settled wholly within 12 months of the reporting date, then they are discounted.
2.9 Employee Share-based Payments
Employees of the Company receive remuneration in the form of share based payment transactions, whereby employees render services as consideration for equity instruments (equity-settled transactions).
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model.
That cost is recognised, together with a corresponding increase in Employee Stock Option (ESOP) Reserve in equity, over the period in which the performance and/or service conditions are fulfilled in employee benefits expense. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Companyâs best estimate of the number of equity instruments that will ultimately vest. The expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end
of that period and is recognised in employee benefits expense.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
Expense relating to options granted to employees of the subsidiaries under the Companyâs Employee Stock Option plan, is charged for their share of the ESOP cost by equity settlement.
2.10 Income taxes:
Income tax expense comprises current and deferred tax. It is recognised in the Statement of Profit and Loss except to the extent that it relates to a business combination or items recognised directly in equity or in other comprehensive income (OCI).
⢠Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax reflects the best estimate of the tax amount expected to be paid or received after considering the uncertainty, if any, related to income taxes. Current 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 country where the Company operates and generates taxable income. Current tax assets and liabilities are offset only if there is a legally enforceable right to set it off the recognised amounts and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
⢠Deferred tax
Deferred tax is provided using the balance sheet method on temporary differences between the tax base of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
- Temporary differences related to investments in subsidiaries, associates, and joint arrangements to the extent that the Company is able to control the timing of the reversal of the temporary differences and it
is probable that they will not reverse in the foreseeable future.
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 (including unabsorbed depreciation) 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 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.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
2.H Earnings per share (EPS):
Basic EPS is calculated by dividing the profit for the year attributable to equity holders of the Company by the weighted average number of
equity shares outstanding during the financial year, adjusted for bonus elements and stock split in equity shares issued during the year and excluding treasury shares. The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares and stock split, other than the conversion of potential equity shares that have changed the number of equity shares outstanding, without a corresponding change in resources.
Diluted EPS adjust the figures used in the determination of basic EPS to consider.
⢠The after-income tax 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.
Mar 31, 2022
1 CORPORATE INFORMATION
Clean Science and Technology Limited (erstwhile known as Clean Science and Technology Private Limited) (''the Companyâ) is a public limited company domiciled in India and is incorporated under Companies Act, 1956 applicable in India. The shares of the Company got listed on BSE Limited (BSE) and National Stock Exchange of India Limited (NSE) on 19th July, 2021. The registered office of the Company is located at Pentagon Towers 4, Magarpatta City, Hadapsar, Pune. The CIN of the Company is L24114PN2003PLC018532.
The Company is engaged in manufacturing and sale of various types of chemicals mainly MEHQ, Guaiacol, 4MAP at its manufacturing plant situated at Kurkumbh MIDC, Daund, Dist: Pune. The Company caters to both domestic and international markets.
The standalone financial statements for the year ended 31st March, 2022 were approved for issue by the Companyâs Board of Directors on 28th May, 2022.
2 SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation and presentation:
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) and presentation requirements of Division II of Schedule III to the Companies Act, 2013, (Ind AS compliant Schedule III), as applicable to the Company.
The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value or revalued amount:
i) Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments);
ii) Asset held for sale measured at lower of carrying amount or fair value less cost to sell;
iii) Net defined benefit (asset) / liability that are measured at fair value of plan assets less present value of defined benefit obligations.
The accounting policies adopted for preparation and presentation of financial statements have been consistent with the previous year.
The financial statements are presented in '' and all values are rounded to the nearest millions, upto two places of decimal, unless otherwise stated.
2.2 Current and non-current classification of assets and liabilities
All assets and liabilities have been classified as current or non-current as per the Companyâs normal operating cycle and other criteria set out in the Schedule III (Division II) to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has determined its operating cycle as 12 months.
2.3 Use of judgements, estimates and assumptions
The preparation of the financial statements in conformity with Ind AS requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenue, expenses, current assets, non-current assets, current liabilities, non-current liabilities, and disclosure of the contingent liabilities at the end of each reporting period. Such estimates are on a reasonable and prudent basis considering all available information, however, due to uncertainties about these judgments, estimates and assumptions, actual results could differ from estimates. Information about each of these estimates and judgements is included in relevant notes.
Judgements
Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements is included in the following notes:
⢠Note 41 - classification of financial assets: assessment of business model within which the assets are held and assessment of whether the contractual terms of the financial asset are solely payments of principal and interest on the principal amount outstanding.
Assumptions and estimation uncertainties Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment is included in the following notes:
⢠Note 9 - Valuation of inventories.
⢠Note 34 - Recognition of tax expense including deferred tax.
⢠Note 36 - Recognition of contingencies, key assumptions about the likelihood and magnitude of outflow of resources.
⢠Note 39 - Impairment of trade receivables.
⢠Note 42 - Defined benefit obligation: key actuarial assumptions.
These financial statements have been prepared on a going concern basis. The management has, given the significant uncertainties arising out of the outbreak of COVID 19, as explained in note below, assessed the cash flow projections and available liquidity for a period of at least twelve months from the date of this financial statements. Based this evaluation, Management believes that the Company will be able to continue as a ''going concernâ in the foreseeable future and for a period of at least twelve months from the date of this financial statement based on the following:
i) Expected future operating cash flows based on business projections, and
ii) Available credit facilities with its bankers.
Based on the above factors, Management has concluded that the ''going concernâ assumption is appropriate. Accordingly, the financial statement does not include any adjustments regarding the recoverability and classification of the carrying amount of assets and classification of liabilities that might result, should the Company be unable to continue as a going concern.
⢠Estimation of uncertainties relating to global health pandemic from COVID-19:
The World Health Organisation in February 2020 declared COVID-19 as a pandemic. The pandemic has been rapidly spreading throughout the world, including India. Governments around the world including India have been taking significant measures to curb the spread of the virus including imposing mandatory lockdowns and restrictions in activities. The Company is monitoring the situation closely taking into account directives from the Government.
Management believes that it has taken into account all the possible impacts of known events arising from COVID-19 pandemic and the resultant lockdown in the preparation of the financial statements including the assessment of recoverable values of its property, plant and equipment, capital work-inprogress and intangible assets and the net realisable values of other assets. However, given the effect of these lockdowns on the overall economic activity in India, the impact assessment of COVID-19 on the abovementioned financial statements captions is subject to significant estimation uncertainties given its nature and duration and, accordingly, the actual impacts in future may be different from
that estimated as at the date of approval of these financial statements. The Company will continue to monitor any material changes to future economic conditions and consequential impact on its financial statements.
2.4 Revenue recognition:
Sales are recognised when control of the products has been transferred to the customer, being when the products are delivered to the customer or its authorised representative and there is no unfulfilled obligation that could affect the customerâs acceptance of the products. Revenue is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. This inter alia involves discounting of the consideration due to the present value if payment extends beyond normal credit terms. The Companyâs obligation to provide a refund for defects in the products is recognised as a provision.
A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.
Revenue from sale of solar electricity power is recognised on a point in time basis when solar electrical power is transmitted to Alternating Current Distribution Board (ACDB).
Interest income or expense is recognised using the effective interest rate method. The ''effective interest rateâ is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument to:
- the gross carrying amount of the financial asset; or
- the amortised cost of the financial liability. Dividends are recognised in the statement of profit and loss only when the right to receive payment is established, and it is probable that the economic benefits associated with the dividend will flow to the Company and that the amount of the dividend can be measured reliably.
2.5 Inventories
Inventories are valued at cost or net realisable value whichever is lower after providing for cost of obsolescence. Cost is determined on a FIFO formula. Raw materials are valued at cost of purchase net of duties (credit availed w.r.t taxes and duties) and includes all expenses incurred in bringing the materials to location of use. However, materials and other items held for use in the production of
inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Work-in-process and finished goods include conversion costs in addition to the landed cost of raw materials. Finished goods are valued at lower of cost and net realisable value. The net realisable value of the finished goods is determined with reference to the selling prices of related finished goods.
Cost of finished goods and work-in-progress comprises cost of raw material and appropriate fixed production overheads which are allocated on the basis of normal capacity of production facilities and variable production overheads on the basis of actual production of material and after deduction of the realisable value of the by-product.
Raw Materials, Components, Stores, and Spares cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale. Obsolete and slow-moving inventories are identified and wherever necessary, such inventories are written off/provided during the year.
2.6 Property, plant and equipment
⢠Recognition and measurement
Property, plant and equipments are carried at cost which includes capitalised borrowing costs, less accumulated depreciation and impairment loss, if any. Items of property, plant and equipment are measured at cost of acquisition or construction less accumulated depreciation and / or accumulated impairment losses, if any. The cost of an item of property, plant and equipment comprises its purchase price, including import duties and other non-refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition for its intended use and estimated costs of dismantling and removing the item and restoring the site on which it is located. Any trade discounts and rebates are deducted in arriving at the purchase price. Borrowing costs directly attributable to the construction of a qualifying asset are capitalised as part of the cost. The cost of a self-constructed item of property, plant and equipment 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 dismantling and removing the item and restoring the site on which it is located. The Company identifies and determines cost of each component/ part of the asset separately, if the component/ part has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset. These components are depreciated separately over their useful lives; the remaining components are depreciated over the life of the principal asset.
Property, plant and equipment under construction are disclosed as capital work-in-progress.
⢠Subsequent costs
The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in the statement of profit and loss as incurred.
⢠Disposal
An item of property, plant and equipment is derecognised upon disposal or when no future benefits are expected from its use or disposal. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised net within other income/ expenses in the statement of profit and loss.
⢠Depreciation method and estimated useful lives
Depreciation on tangible assets is provided on the straight-line method on pro-rata basis, over the useful lives of assets as prescribed in Schedule - II of the Companies Act, 2013 which is as follows:
|
Type of asset |
Useful life (No. of years) |
|
Factory Building |
30 years |
|
Non-Factory Buildings |
60 years |
|
Plant and Machinery |
5-20 years |
|
Office Equipment |
5 years |
|
Vehicles |
8-10 years |
|
Furniture and fixtures |
10 years |
Depreciation method, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.
Impairments of non-financial assets:
The Company assesses at each balance sheet date whether there is any indication that an asset or cash generating unit (CGU) may be impaired. Indefinite life intangibles are subject to a review for impairment annually or more frequently if events or circumstances indicate that it is necessary. Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Companyâs cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. If any such indication exists, the Company estimates the recoverable amount of the asset. The recoverable amount is the higher of an assetâs or CGUâs fair value less costs of disposal or its value in use. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre- tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are considered.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses are recognised in the statement of profit and loss.
If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, an impairment loss is reversed only to the extent that the assetâs carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
2.7 Intangible assets:
⢠Recognition and measurement
Intangible assets are recognised when the asset is identifiable, is within the control of the Company, it is probable that the future economic benefits that are attributable to the asset will flow to the Company and cost of the asset can be reliably measured. Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Intangible assets acquired by the Company that have finite useful lives are measured at cost less accumulated amortisation and any accumulated impairment losses. Intangible assets with indefinite useful lives are not amortised,
but are tested for impairment annually, either individually or at the cash-generating unit level. Expenditure on research activities is recognised in the statement of profit and loss as incurred. Development expenditure is capitalised only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to complete development and to use or sell the asset.
Intangible assets which comprise of the development expenditure incurred on new product and expenditure incurred on acquisition of user licenses for computer software are recorded at their acquisition price.
⢠Subsequent measurement
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates.
⢠Amortisation
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets i.e., computer software is amortised on a straight-line basis over the period of expected future benefits commencing from the date the asset is available for its use.
The management has estimated the useful life for software & licenses as following,
|
Asset Class |
Years |
|
Software & licenses |
5 |
Amortisation method, useful lives and residual values are reviewed at the end of each financial year and adjusted if appropriate.
Intangible assets are assessed for impairment whenever there is an indication that the intangible asset may be impaired.
⢠Disposal
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 derecognised.
2.8 Assets held for sale:
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset (or disposal Group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset and its sale is highly probable. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Non-current assets classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell except for those assets that are specifically exempt under relevant Ind AS. Once the assets are classified as "Held for sale", those are not subjected to depreciation till disposal. An impairment loss is recognised for any initial or subsequent write-down of the asset to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset, but not in excess of any cumulative impairment loss previously recognised.
A gain or loss not previously recognised by the date of the sale of the non-current asset is recognised at the date of derecognition.
Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the balance sheet.
⢠Short-term employee benefits
The distinction between short term and long-term employee benefits is based on expected timing of settlement rather than the employee''s entitlement benefits. Employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits. Such benefits include salaries, wages, bonus, short term compensated absences, awards, ex-gratia, performance pay etc. and are recognised in the period in which the employee renders the related service. The undiscounted amount of shortterm employee benefits expected to be paid in exchange for the services rendered by employees is recognised during the year. A liability is recognised for the amount expected to be paid e.g., under shortterm cash bonus, if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the amount of obligation can be estimated reliably. The employees of the Company are entitled to compensated absences. The employees can carry forward a portion of the unutilised accumulating compensated absences and utilise it in future periods or receive cash at retirement or termination of employment. The Company records an obligation for compensated absences in the period in which the employee renders the services that increases this entitlement. Accumulated compensated absences, which are expected to be availed or encashed within 12 months from the end of the year are treated as short term employee benefits. The obligation towards the same is measured at the expected cost of accumulating compensated absences as the additional amount expected to be paid as a result of the unused entitlement as at the year end.
⢠Post-employment benefits Defined contribution plans
Contributions to the provident fund and superannuation schemes which is defined contribution scheme, are recognised as an employee benefit expense in the statement of profit and loss in the period in which the contribution is due. Contributions are made in accordance with the rules of the statute and are recognised as expenses when employees render service entitling them to the contributions. The Company has no obligation, other than the contribution payable to the provident fund. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognised as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognised as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
Defined benefit plans
The employees'' gratuity scheme is a defined benefit plan which is administered by a trust formed for this purpose through the group schemes of Life Insurance Corporation of India (LIC). The present value of the obligation under such defined benefit plans is determined based on actuarial valuation using the projected unit credit method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plans, is based on the market yields on government securities as at the reporting date, having maturity periods approximating to the terms of related obligations. Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through other comprehensive income (OCI) in the period in which they occur. Remeasurements are not reclassified to the statement of profit and loss in subsequent periods.
In case of funded plans, the fair value of the planned assets is reduced from the gross obligation under the defined benefit plans, to recognise the obligation on net basis.
When the benefits of the plan are changed or when a plan is curtailed, the resulting change in benefits that relates to past service or the gain or loss on curtailment is recognised immediately in the statement of profit and loss. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognises gains/ losses on settlement of a defined plan when the settlement occurs.
⢠Other long-term employee benefits
The liabilities for earned leave are not expected to be settled wholly within 12 months after the end of the reporting period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method as determined by actuarial valuation. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating the terms of the related obligation. Remeasurements as a result of experience adjustments and change in actuarial assumptions are recognised in the statement of profit and loss. 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.
Termination benefits are expensed at the earlier of when the Company can no longer withdraw the offer of those benefits and when the Company recognises costs for a restructuring. If benefits are not expected to be settled wholly within 12 months of the reporting date, then they are discounted.
2.10 Employee share-based Payments Equity-settled share-based payments to employees are measured at the fair value of the options at the grant date.
The fair value of option at the grant date is expensed over the respective vesting period in which all of the specified vesting conditions are to be satisfied with a corresponding increase in equity as ''Employee share -based Payments reserveâ. In case of forfeiture of unvested option, portion of amount already expensed is reversed. In a situation where the vested option forfeited or expires unexercised, the related balance standing to the credit of the "Employee Stock Options Account" are transferred to the "Retained Earnings".
When the options are exercised, the Company issues new equity shares of the Company of '' 1/-each fully paid-up. The proceeds received and the related balance standing to credit of the Employee Stock Options Account, are credited to share capital (nominal value) and Securities Premium Account. See Note 46 - Employee Share-based Payments for further details.
Income tax expense comprises current and deferred tax. It is recognised in the statement of profit and loss except to the extent that it relates to a business combination or items recognised directly in equity or in other comprehensive income (OCI).
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax reflects the best estimate of the tax amount expected to be paid or received after considering the uncertainty, if any, related to income taxes. Current 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 country where the Company operates and generates taxable income. Current tax assets and liabilities are offset only if there is a legally enforceable right to set it off the recognised amounts and it is intended to realise the asset and settle the liability on a net basis or simultaneously.
Deferred tax is provided using the balance sheet method on temporary differences between the tax base 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,
- Taxable temporary differences arising on the initial recognition of goodwill.
- Temporary differences related to investments in subsidiaries, associates, and joint arrangements to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future. 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 (including unabsorbed depreciation) 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 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.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
2.12 Earnings per share (EPS):
Basic EPS is calculated by dividing the profit for the year attributable to equity holders of the Company by the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements and stock split in equity shares issued during the year and excluding treasury shares. The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares and stock split, other than the conversion of potential equity shares that have changed the number of equity shares outstanding, without a corresponding change in resources.
Diluted EPS adjust the figures used in the determination of basic EPS to consider.
⢠The after-income tax 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.
2.13 Provision and contingent liabilities / assets:
A provision is 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 expenditure required to settle the present obligation at the Balance Sheet date. The provisions are measured on an undiscounted basis. Contingent liabilities are obligations arising from past events, the existence of which will be confirmed
only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company.
Contingent liability is disclosed in case of
- a present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation.
- present obligation arising from past events, when no reliable estimate is possible
- a possible obligation arising from past events where the probability of outflow of resources is not remote.
Contingent asset is not recognised in the financial statements. A contingent asset is disclosed, where an inflow of economic benefits is probable. Provisions, contingent liabilities and contingent assets are reviewed at each balance sheet date.
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. 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:
- the contract involves the use of an identified asset - this may be specified explicitly or implicitly and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified.
- the Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
- the Company has the right to direct the use of the asset. The Company has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Company has the right to direct the use of the asset if either:
- t he Company has the right to operate the asset; or
- the Company designed the asset in a way that predetermines how and for what purpose it will be
i iqpH
At inception or on reassessment of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.
Company as a lessee
The Company recognises 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.
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 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.
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 Companyâs incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the lease liability comprise the following:
- fixed payments, including in-substance fixed payments.
- variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date.
- amounts expected to be payable under a residual value guarantee; and
- the exercise price under a purchase option that the Company is reasonably certain to exercise, lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Company is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change
in an index or rate, if there is a change in the Companyâs estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
Leasehold land is amortised over the period of lease being 95 to 99 years.
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 that have a lease term of 12 months or less and leases of low-value assets. The Company recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
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 considers a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another.
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.
⢠Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities.
⢠Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
⢠Level 3 - inputs other than quoted prices included in
Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
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.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities based on the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
2.16 Foreign currency transactions
Transactions in foreign currencies are translated into the respective functional currency of the Company at the exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are generally recognised in the statement of profit and loss.
2.17 Financial instruments 2.17.1 Financial assets
Initial recognition and measurement A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial instruments also include derivative contracts such as foreign currency foreign exchange forward contracts, interest rate swaps and currency options, and embedded derivatives in the host contract. All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in one of the three categories:
a) At amortised cost
b) At fair value through Other Comprehensive Income (''FVTOCI'')
c) At fair value through profit or loss (''FVTPL'')
(a) Financial assets classified as measured at amortised cost
A financial asset shall be measured at amortised cost if both of the following conditions are met:
- the financial asset is held within a business model whose objective is to hold financial 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.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (''EIR'') method, less impairment charge. Amortised cost is calculated by considering any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance expense/ (income) in the statement of profit and loss. The losses arising from impairment are recognised in the statement of profit and loss. This category generally applies to trade receivables, security and other deposits receivable by the Company.
(b) Financial assets classified as measured at FVOCI
A financial asset is measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets 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.
Further, the Company makes such election on an instrument-by-instrument basis, for its investments which are classified as equity instruments, the subsequent changes in fair value are recognised in other comprehensive income. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses and interest revenue which are recognised in other comprehensive income. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/ (losses). Interest income from these financial assets is included in other income using the effective interest rate method.
(c) Financial assets classified as measured at FVTPL
Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a mutual fund investment that is subsequently measured at fair value through profit or loss is recognised in profit or loss and presented net in the statement of profit and loss within other gains/(losses) in the period in which it arises. Financial assets are not reclassified subsequent to their initial recognition, except if and in the period the Company changes its business model for managing financial assets.
Trade receivables and loans:
Trade receivables are initially recognised at fair value. Subsequently, these assets are held at amortised cost, using the effective interest rate (EIR) method net of any expected credit losses. The EIR is the rate that discounts estimated future cash income through the expected life of financial instrument. De-recognition of financial asset
The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control of the financial asset.
If the Company enters into transactions whereby it transfers assets recognised on its balance sheet but retains either all or substantially all of the risks and
rewards of the transferred assets, the transferred assets are not derecognised.
Impairment of financial assets
In accordance with I nd AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
- Trade receivables.
The Company follows ''simplified approachâ for recognition of impairment loss allowance on Trade receivables.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition. For recognition of impairment loss on other financial assets the Company recognises 12 month expected credit losses for all originated or acquired financial assets if at the reporting date, the credit risk has not increased significantly since its original recognition. However, if credit risk has increased significantly, lifetime ECL is used. ECL impairment loss allowance (or reversal) recognised in the statement of profit and loss.
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable and incremental transaction cost. The Companyâs financial liabilities include trade and other payables, loans and borrowings and derivative financial instruments. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
The Companyâs financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts. Financial liabilities at FVTPL Financial liabilities at FVTPL include financial liabilities held for trading and financial liabilities
designated as such upon initial recognition. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by Ind AS 109.
Gains or losses on liabilities held for trading are recognised in the statement of profit and loss. Financial liabilities designated as such upon initial recognition at the initial date of recognition if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risks are recognised in OCI. These gains/ losses are not subsequently transferred to the statement of profit and loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the statement of profit and loss.
(a) Financial liabilities at amortised cost
This is the most relevant category to the Company. The Company generally classifies interest bearing borrowings as financial liabilities carried at amortised cost. After initial recognition, these instruments are subsequently measured at amortised cost using the effective interest rate (EIR) method. Gains and losses are recognised in the statement of profit and loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
De-recognition of financial liability A financial liability (or a part of a financial liability) is derecognised from the balance sheet when, and only when, it is extinguished i.e., when the obligation specified in the contract is discharged or cancelled or expired.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Derivative financial instruments The Company enters into certain derivative contracts to hedge risks which are not designated as hedges. The Company holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the host contract is not a financial asset and certain criteria are met.
Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value and changes therein are generally recognised in the statement of profit and loss.
Financial guarantee contracts:
Financial guarantee contracts issued by the Company are those contracts that require specified payments to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument.
Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee.
Subsequently, the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amortisation. Where guarantees in relation to loans or other payables of subsidiaries are provided for no compensation, the fair values are accounted for as contributions and recognised as fees receivable under "other financial assets" or as a part of the cost of the investment, depending on the contractual terms.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The Board of Directors of the Company have been identified as being the Chief operating decision maker by the management of the Company.
Grants that compensate the Company for expenses incurred are recognised in statement of profit and loss as other operating income on a systematic basis in the periods in which such expenses are recognised.
Export Incentives
Export incentives under various schemes notified by the government are recognised when no significant uncertainties as to the amount of consideration that would be derived and that the Company will comply with the conditions associated with the grant and ultimate collection exist.
2.20 Cash and cash equivalents:
Cash and cash equivalents in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of not more than three months, which are subject to an insignificant risk of changes in value.
Cash Flows are reported using the indirect method, whereby net Profit before tax is adjusted for the effects of transactions of a non-cash nature, such as deferrals or accruals of past or future operating cash receipts or payments and items of income or expenses associated with investing or financing cash flows. In 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 as integral part of the Companyâs cash management.
2.22 Recent accounting pronouncements:
Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as amended from time to time. On 23rd March, 2022, MCA amended the Companies (Indian Accounting Standards) Amendment Rules, 2022 applicable from 1st April, 2022. The Company does not expect the amendment to have any significant impact in its financial statements.
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