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ಕಂಪನಿಯ ಅಕೌಂಟಿಗ್ ಪಾಲಿಸಿ Sizemasters Technology Ltd.
2. SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS:
Significant Accounting Policies:
Significant accounting policies adopted in the presentation of the Accounts are as under:
In accordance with the notification issued by the Ministry of Corporate Affairs, the Company has adopted
Indian Accounting Standards (âInd ASâ) notified under the Companies (Indian Accounting Standards) Rules,
2015 with effect from 1st April, 2017. Previous periods have been restated to Ind AS. In accordance with Ind
AS 101 First time Adoption of Indian Accounting Standards, the Company has presented a reconciliation from
the presentation of financial statements under Accounting Standards notified under the Companies
(Accounting Standards) Rules, 2006 (Previous GAAP) to Ind AS of Shareholdersâ equity as at 31st March,
2017 and 1st April, 2016 and the comprehensive net income for the year ended 31st March, 2017. These
consolidated financial statements have been prepared in accordance with Ind AS as prescribed under Section
133 of the Companies Act, 2013 (the Act) read with Rule 3 of the Companies (Indian Accounting Standards)
Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.
2.2 Basis of preparation and presentation
These Consolidated financial statements have been prepared on a historical cost basis, except for defined
benefit plans which are measured at fair value at the end of each reporting period.
2.3 Functional and presentation currency
The financial statements are presented in Indian Rupees(INR), which is also the Company''s functional
currency. All amounts have been rounded off to the nearest lakhs, unless otherwise indicated.
2.4 Current and Non current classification
The Company presents assets and liabilities in balance sheet based on current/non-current classification.
An asset is stated as current when it is -
a. Expected to be realised or intended to be sold or consumed in normal operating cycle
b. Held primarily for the purpose of trading
c. Expected to be realized within twelve months after the reporting period or
d. Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve
months after the reporting period.
All other assets are classified as non-current assets.
Similarly a liability is classified as current if -
a. It is expected to be settled in normal operating cycle
b. It is held primarily for the purpose of trading
c. It is due to be settled within twelve months after the reporting period or
d. There is no unconditional right to differ the settlement of the liability for at least twelve months after the
reporting period.
All other liabilities are classified as non-current.
The Company has ascertained its operating cycle as twelve months for the purpose of current/non current
classification of its assets and liabilities.
2.5 Property, Plant and Equipment (PPE)
2.5.1. Measurement and Presentation
On transition to Ind AS, the Company had elected to continue with the carrying value of all of its property
plant and equipment recognised as at April 1, 2016, measured as per the previous GAAP, and use that carrying
value as the deemed cost of such property plant and equipment.
Freehold land is carried at Historical cost. Property, plant and equipment are stated at historical cost less
depreciation and accumulated impairment, if any. Cost includes its purchase price, import duties, non
refundable purchase taxes and expenditure directly attributable for bringing the said asset to its working
condition and location for its intended use, including relevant borrowing costs and any expected cost of
decommissioning.
The cost of a self constructed item of property, plant and equipment comprises the cost of material, direct
labour and any other costs and expenditure directly attributable for bringing the said asset to its working
condition and location for its intended use, including relevant borrowing costs and any expected cost of
decommissioning.
Material items such as spare parts, stand by equipment and service equipments are classified as PPE when they
meet the definition of PPE as specified in Ind AS 16. Subsequent expenditure on PPE is capitalized only if it
is probable that the future economic benefits associated with the expenditure will flow to the Company.
2.5.2. Depreciation/ Amortization
i) Depreciation on fixed assets put to commercial use has been provided to the extent of depreciable assets on
written down value method at the rates and in the manner prescribed in schedule II of the Companies Act,
2013 over their useful life.
ii) Lease hold land is amortized over the period of lease.
iii) Depreciation on addition/disposal is provided on a pro rata basis.
v) The residual values and useful lives are reviewed and adjusted if appropriate at the end of each reporting
period. An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying
amount is greater than the estimated recoverable amount.
2.5.3. Disposal
An item of property, plant and equipment and any significant part initially recognised is derecognised upon
disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising
on derecognition of the asset is included in the Statement of Profit or Loss when the asset is derecognised.
2.6.1. Measurement and Presentation
On transition to Ind AS, the Company had elected to continue with the carrying value of all its intangible assets
recognized as at 1st April 2016 measured as per the previous GAAP and use that carrying value as the deemed
cost of intangible assets.
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition,
intangible assets are carried at cost less accumulated amortization and impairment, if any.
2.6.2 Amortization
i) Computer software are amortized over period of 5 years.
ii) Amortization on addition is provided on a pro rata basis.
2.7 Foreign currency transactions
Transactions in foreign currencies initially are recorded at the exchange rate as on the date of transactions as
provided in IND AS 21. Realized gain and losses as well as exchange differences arising on translation (at
year end exchange rates) of monetary assets and liabilities outstanding at the end of the year are recognized in
the statement of profit and loss.
Non monetary items that are measured in terms of historical costs in foreign currency are translated using the
exchange rate as at the date of initial transactions as provided in IND AS 21.
2.8.1. Financial Assets
2.8.1.1 Classification
(a) those to be measured subsequently at fair value (either through other comprehensive income, or through
profit or loss), and
(b) those measured at amortised cost.
The classification depends on the entity''s business model for managing the financial assets and the contractual
terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in statement of profit and loss or
other comprehensive income. For investments in debt instruments, this will depend on the business model in
which the investment is held. For investments in equity instruments, this will depend on whether the Company
has made an irrevocable election at the time of initial recognition to account for equity investment at fair value
through other comprehensive income. The Company reclassifies debt investments when and only when its
business model for managing those assets changes.
2.8.1.2 Initial Measurements
At the initial recognition, the Company measures the financial assets at its fair value plus in the case of a
financial assets not at the fair value through profit or loss, transaction costs that are directly attributable to the
acquisition of financial asset. Transaction cost of a financial asset carried at fair value through profit or loss
are expensed in profit or loss.
2.8.1.3 Subsequent Measurement
(i) Debt instruments
Subsequent measurement of debt instruments depends on the Company''s business model for managing the
asset and the cash flow characteristics of the asset. There are three measurement categories in to which the
Company classifies its debt instruments :
Amortised cost : Assets that are held for collection of contractual cash flows where those cash flows represent
solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment
that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in profit
or loss when the asset is derecognised or impaired. Interest income from these financial assets is included in
finance income using the effective interest rate method.
Fair value through other comprehensive income (FVOCI): Assets that are held for collection of contractual
cash flows and for selling the financial assets, where the asset''s cash flow represent solely payments of
principal and interest , are measured at FVOCI. Movements in the carrying amount are taken through OCI
except for the recognition of impairment of gains or losses, interest revenue and foreign exchange gains and
losses which are recognised in profit and loss. 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.
Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured
at fair value through profit or loss. Gain or loss on the debt 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
in the period in which it arises. Interest income from these financial assets is included in other income.
(ii) Equity Instruments
The Company subsequently measures all equity instruments at fair value. Where the Company''s management
has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent
reclassification of fair value gains and losses to profit or loss. Dividend from such investments are recognised
in profit or loss as other income when the Company''s right to receive payments is established.
Changes in the fair value of a financial assets at fair value through profit or loss are recognised in other income.
Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not
reported separately from other changes in fair value.
2.8.1.4 Derecognition of financial assets
A financial asset is derecognised only when
- The Company has transferred the rights to receive cash flow from the financial asset or
- retains the contractual rights to receive the cash flows of the financial assets but assumes a contractual
obligation to pay cash flows to one or more recipients.
Where the entity has transferred an asset, the Company evaluates whether it has transferred substantially all
risks and rewards of ownership of the financial asset.
Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset,
financial assets is not derecognised.
Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of
ownership of the financial asset, the financial asset is derecognised if the Company has not retained control of
the financial asset. Where the Company retains control of the financial asset, the asset is continued to be
recognised to the extent of continuing involvement in the financial asset.
2.8.2. Financial Liabilities
2.8.2.1 Classification
The Company classifies its financial liabilities in the following measurement categories:
(a) those to be measured subsequently at fair value through profit and loss account ;
(b) those measured at amortised cost.
2.8.2.2 Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or
expires.
2.8.2.3 Offsetting
Financial assets and financial liabilities are offset and the net amount is presented in the balance sheet when,
and only when, the Company has a legally enforceable right to set off the amount and It intends, either to settle
them on a net basis or to realise the asset and settle the liability simultaneously.
2.8.3 Derivatives
The Company enters into certain derivative contracts to hedge risks which are not designated as hedges. Such
contracts are accounted at fair value through profit or loss and are included in profit and loss account.
Inventories are valued as follows :
i) Raw material is valued at lower of weighted average cost & net realizable value. However material held for
use in the production of inventories are not written down below cost, if the finished product in which they will
be incorporated are expected to be sold at or above cost. Cost comprises of its purchase price, non refundable
purchase taxes and any directly attributable expenses related to inventories.
ii) Work in Progress is valued at weighted average cost.
iii) Finished goods are valued at lower of weighted average cost and net realizable value. Cost for this purpose
includes direct cost and attributable overheads .
iv) Traded goods are valued at weighted average cost or net realizable value whichever is lower.
v) Stores & spares are valued at weighted average cost after providing for obsolescence and other losses, where
considered necessary.
vi) Scrap and rejected material is valued at net realizable cost.
Net realizable value is estimated selling price in the ordinary course of the business, less the estimated costs
of completion and the estimated costs necessary to make the sale.
Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary
course of business. If collection is due within one year, they are classified as current assets.
Commercial receivables are recognised initially at fair value and subsequently measured at amortised cost
using the effective interest rate method, less provision for impairment. A provision for impairment for trade
receivables is recognised when there is objective evidence that the Company will not be able to collect all
amounts due under the original terms of receivables. When receivable is deemed uncollectible it is written off.
Any subsequent recovery of previous written off amounts is recognised in the income statement.
2.11.1 Impairment of Financial Assets
The Company recognises loss allowances for expected credit losses on
- Financial assets measured at amortised cost and
At each reporting date, Company assesses whether financial assets carried at amortised cost are credit impaired.
Financial asset is ''credit impaired'' when one or more events that have a detrimental impact on the estimated
future cashflows of the financial assets have occurred.
In accordance with Ind AS 109- Financial instruments, the Company follows ''simplified approach'' 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 credit loss at each reporting date, right from its initial recognition.
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there
is no realistic prospect of recovery. This is generally the case when Company determines that the debtor does
not have assets or sources of income that could generate sufficient cashflows to repay the amounts subject to
write off. However, the financial assets that have written off could still be subject to enforcement activities in
order to comply with the Company''s procedures of recovery of amounts due.
2.11.2 Impairment of Non-Financial Assets
An impairment loss is the amount by which the carrying amount of an asset or a cash generating unit exceeds
its recoverable amount. The recoverable amount of an asset or a cash generating unit is the higher of its fair
value less cost of disposal and its value in use. Fair value is the price that would be received for sale of an asset
or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax
discount rate.
The Company assesses at end of each reporting period whether there is any indication that an asset is impaired.
In assessing whether there is any indication that an asset may be impaired, the Company considers external as
well as internal source of information. If any such indication exits, the Company estimates the recoverable
amount for the individual asset. If and only if the recoverable amount of an asset is less than its carrying
amount, the carrying amount of an asset is reduced to its recoverable amount. An impairment loss is recognised
immediately in profit or loss unless the asset is carried at revalued amount in accordance with another Standard.
If it is not possible to estimate the recoverable amount of the individual asset, the Company determines the
recoverable amount of the cash generating unit to which the asset belongs (the asset''s cash generating unit). A
cash generating unit is the smallest identifiable group of asset that generates cash inflows that are largely
independent of the cash inflows from other assets or group of assets. The Company recognises impairment
loss for a cash generating unit if and only if the recoverable amount of the cash generating unit is less than the
carrying amount of cash generating unit. The Company allocates impairment loss of cash generating units first
to the carrying amount of goodwill allocated to the cash generating unit, if any, and then, to the other assets of
the cash generating units pro-rata on the basis of the carrying amount of each asset in the cash generating units.
These reductions in carrying amount shall be treated as impairment losses on individual assets and recognised
accordingly.
2.12 Cash and cash equivalents :
Cash and cash equivalents in the balance sheet comprise cash on hand and balance with banks and deposits
which are readily convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value.
Borrowings are recognised initially at fair value net of transaction cost incurred. Borrowings are subsequently
carried at amortised cost; any difference between the proceeds (net of transaction cost) and the redemption
value is recognised in the income statement over the period of borrowings using the effective interest rate
method.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer their
settlement for at least 12 months after the end of reporting period.
Fees paid for availing loan facilities are recognised as transaction cost of the loan to the extent that it is probable
that some or all of the facilities will be drawn down. In this case fees are deferred until the draw down occurs
to the extent there is no evidence that it is probable that some or all of the facilities will be drawn down.
Financial guarantee contracts issued by the Company are those contracts that requires a payment to be made
to reimburse the holder for a loss it incurred because the specified debtor fails to make a payment when due in
accordance with the terms of debt instrument. Financial guarantee contracts are recognised as a liability at fair
value, adjusted for transaction costs that are directly attributable to the issuance of 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 amortization.
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of
business from supplier. Trade payable are classified as current liabilities if payment is due within one year or
less.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method.
2.15.1 Current income tax
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to
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.
Current income tax relating to the items recognised outside profit or loss is recognised outside profit or loss
(either in other comprehensive income or equity). Current tax items are recognised in correlation to the
underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken
in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and
establishes provisions where appropriate.
2.15.2 Deferred tax
Deferred tax is provided using the balance sheet method on temporary differences between the tax bases of
assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred
tax liabilities are recognised for all taxable temporary differences.
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
profits will be available against which deductible temporary difference and carry forward of unused tax credits
and unused tax losses can be utilised.
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 the future taxable profits will allow the deferred tax assets to be
recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the
assets is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantially
enacted at the reporting date. Deferred tax items are recognised in correlation to the underlying transaction
either in OCI or directly in equity. Deferred tax assets and deferred tax liabilities are offset if a legally
enforceable right exists to set off current tax assets against current tax liability and the deferred tax assets relate
to the same taxable entity and same taxation authorities.
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