Mar 31, 2023
Background of the Company
BASF India Limited (the âCompanyâ) is a public limited Company domiciled in India with its registered office located in Mumbai. The Company is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The Companyâs portfolio consists of six segments: Agricultural Solutions, Materials, Industrial solutions, Surface Technologies, Nutrition & Care and Chemicals.
1. Significant Accounting Policies
a. Basis of preparation
(i) Compliance with Ind AS
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (âthe Actâ) read together with the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions and amendments of the Act.
The financial statements are presented in Indian Rupees (INR) which is also the Companyâs functional currency. All amounts have been rounded off to the nearest millions, unless otherwise indicated.
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 to the Act. The Company has identified twelve months as its operating cycle.
The accounting policies adopted in the preparation of the financial statements are consistent with those of the previous year.
(ii) Basis of measurement
The financial statements have been prepared on an accrual basis and on a historical cost basis, except for the following items:
⢠certain financial assets and liabilities (including derivative instruments) and contingent consideration that is measured at fair value,
⢠assets held for sale - measured at carrying amount or fair value less cost to sale whichever is low,
⢠Net defined benefit (asset)/liability - Fair value of plan assets less present value of defined benefit obligations; and
⢠share-based payments measured at fair value on grant date with no subsequent adjustment to the payments recognised.
b. Use of estimates and judgements
The presentation of financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made by management that affect the reported amount of assets and liabilities and disclosure of contingent liabilities as on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Differences between the actual results and estimates are recognised in the period in which the results are known/materialise.
Information about critical judgments in applying accounting policies, as well as estimates and assumptions that have the most significant effect to the carrying amounts of assets and liabilities within the next financial year, are included in the following notes:
a. Measurement of defined benefit obligations - Note 47
b. Measurement and likelihood of occurrence of provisions and contingencies - Note 39, 45 and 1(l)
c. Measurement of useful lives for property, plant and equipment & intangible assets and impairment -Note 1(d), 1(e) and 1(i)
d. Loss allowance on trade receivables and other financial assets - Note 37(iv)
e. Determination of lease terms and incremental borrowing rate - Note 41 and Note 1(p)
c. Revenue Recognition
According to Ind AS 115, revenue is measured at the amount of transaction price that is allocated to the performance obligation. Revenue is recognised using the following five step model specified in Ind AS 115: Step 1: Identify contracts with customers
Step 2: Identify performance obligations contained in the contracts Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations Step 5: Recognize revenue when the performance obligation is satisfied
The performance obligations arising from sale of products with Companyâs customers are satisfied at a point in time. Payment terms are generally agreed upon individually with customers.
c. Revenue Recognition (Continued)
Sales of products are recognised when control of the products has transferred based on the agreed terms. Sales are net of returns, trade discounts, rebates, sales tax and goods and service tax (GST), as applicable.
Sale of services includes indent commission and revenue from technical and service charges to group and other companies based on terms of the respective agreement. Revenue from sale of services are recognised as and when the services are provided.
The Company evaluates the arrangement with customers/ suppliers whether it is acting as a principal or an agent of the customers/ suppliers, considering underlying substance and terms and conditions of the arrangements. Accordingly, revenue is accounted either on gross or net basis based on the fulfillment of criteria of principal or agency.
At contract inception, since for most of the contracts it is expected that the period between the transfer of the promised goods or services to a customer and payment for these goods or services by the customer will be one year or less, practical expedient in Ind AS 115 have been applied and accordingly:
â The Company does not adjust the promised amount of consideration for the effects of a significant financing component
â The Company recognises the incremental costs of obtaining a contract as an expense when incurred
â No information on remaining performance obligations as of March 31, 2023 that have an expected original term of one year or less was reported.
As part of the adoption of Ind AS 115, contract liabilities are disclosed in the Balance Sheet. A contract liability is the Companyâs obligation to transfer goods or services to a customer, for which the Company has already received consideration from customers.
The Company operates Customer incentive programs where direct/ indirect customers accumulate points for purchases made of the Companyâs products, which entitle them for rewards in form of gift cards equal to the value of such points. A contract liability for the award points is recognised at the time of sale.
I ncome from export incentives is recognised on accrual basis to the extent the ultimate realisation is reasonably certain.
Interest income is recognised using the effective interest rate method. When calculating the effective interest rate, the company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses.
d. Property, plant and equipment Recognition and measurement
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Items such as stores, spare parts and stand by equipment are recognized as property, plant and equipment when it is held for use in production or supply of goods or services, or for administrative purpose and are expected to be used for more than one year. Otherwise such items are classified as inventory.
Subsequent expenditure
Subsequent costs are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is de-recognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Derecognition
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the item. Any gain or loss arising on disposal or retirement of item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the item and is recognized in the statement of profit and loss.
d. Property, plant and equipment (Continued)
Depreciation
Depreciation on property plant and equipment is calculated on a straight-line basis considering the following useful lives estimated by the Management based on technical evaluation or those prescribed under Schedule II of the Act:
Assets Category |
Useful life |
Buildings |
10-33 years |
Plant and machinery |
5-20 years |
Computers |
4 years |
Vehicles |
4 years |
Furniture and fixtures |
5-10 years |
Office equipment |
5 years |
Property, Plant and Equipment individually costing Rs. 5,000 or below are fully depreciated in the year of purchase. Depreciation on additions / deletions is calculated on a monthly pro-rata basis.
The annual depreciation charge for property, plant and equipment is sensitive to changes in the estimated useful economic lives and residual values of the assets. The Company reviews the residual value, useful lives and depreciation method annually and, if expectations differ from previous estimates, the change is accounted for as a change in accounting estimate on a prospective basis.
Leasehold land and Leasehold Improvements are amortised over the period of lease or useful life whichever is lower, unless the entity expects to use the assets beyond the lease term.
An assetâs carrying amount is written down immediately to its recoverable amount if the assetâs carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.
e. Intangible assets and amortization
I ntangible assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortized on a straight line basis over their estimated useful lives. Computer software is amortized over a period of four years and other intangible assets are amortized over a period of 2 to 4 years. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
Impairment of non-financial assets
The carrying amounts of assets are reviewed at each Balance Sheet date for any indication of impairment based on internal/external factors. Where the carrying value exceeds the estimated recoverable amount, provision for impairment is made to adjust the carrying value to the recoverable amount. The recoverable amount is the greater of the assets estimated net realizable value and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using an appropriate discounting rate. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash-generating units). If at the Balance Sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
f. Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in Statement of Profit and Loss over the period of the borrowings using the effective interest method.
Borrowings are derecognized when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in Statement of Profit and Loss as other gains/(losses).
Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. Where there is a breach of a material provision of a long-term loan arrangement on or before the end of the reporting period with the effect that the liability becomes payable on demand on the reporting date, the entity does not classify the liability as current, if the lender agreed, after the reporting period and before the approval of the financial statements for issue, not to demand payment as a consequence of the breach.
f. Borrowings (Continued)
Borrowing costs that are attributable to the acquisition and construction of qualifying assets are capitalised. Other borrowing costs are recognised as an expense in the period in which they are incurred.
Foreign exchange differences regarded as an adjustment to borrowing costs are presented in the Statement of Profit and Loss, within finance costs.
g. Inventories
I nventories including raw materials, packing materials, work-in-progress, stores and spares, traded and finished goods are valued at cost or estimated net realisable value, whichever is lower. The costs are determined on weighted average basis and includes expenditure incurred in acquiring inventories, production of conversion costs and other costs incurred in bringing them to their present location and condition. Fixed production overheads are allocated on the basis of normal capacity of production facilities. Goods and service tax (GST) is excluded from valuation of finished goods. Net realisable value is estimated selling price in the ordinary course of business less estimated costs of completion and selling expenses. The comparison of cost and net realisable value is made on an item by item basis.
h. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting and are based on monitoring of operating results by the Chief Operating Decision Maker, separately for making decision about resource allocation and performance assessment. The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company.
i. Non-current assets (or disposal groups) held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and contractual rights under insurance contracts, which are specifically exempt from this requirement.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) 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 (or disposal group), 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 (or disposal group) is recognised at the date of de-recognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.
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. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the Balance Sheet.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the Statement of Profit and Loss.
j. Financial Instruments
Financial asset
Financial assets are recognised when the Company becomes a party to the contractual provisions of the instrument.
Measurement
At initial recognition, the Company measures a financial asset (excluding trade receivables which do not contain a significant financing component) at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
Subsequent measurement
For subsequent measurement, the Company classifies its financial assets in the following measurement categories:
⢠those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
⢠those measured at amortised cost.
The classification depends on the entityâs business model for managing the financial assets and the contractual terms of the cash flows.
A financial asset is measured at amortised cost when they are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows that are solely payments of principal and interest. The amortised cost of a financial asset is also adjusted for impairment loss, if any.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.
Financial liabilities
Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument.
Financial liabilities are initially measured at fair value minus, in case of financial liabilities not at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial liabilities.
Borrowings are recognized initially at fair value, net of transaction costs incurred, and subsequently carried at amortised cost, any difference between the initial carrying value and the redemption value is recognized in the Statement of Profit and Loss over the period of the borrowings using the effective interest rate method.
Subsequent to initial recognition these financial liabilities are measured at amortised cost using effective interest method.
Offsetting
Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet where there is a legally enforceable right to offset the recognised amounts in the normal course of business and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
Impairment of financial assets
The Company assesses on a forward-looking basis the expected credit loss associated with its assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk since its initial recognition. Note 38 details how the Company determines whether there has been a significant increase in credit risk.
For trade receivables only, the Company applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables. The impairment losses and reversals are recognized in statement of profit and loss.
Derecognition of financial assets and financial liabilities A financial asset is derecognised only when:
The Company has transferred the rights to receive cash flows from the financial asset or retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
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. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset 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.
The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows under the modified terms are substantially different. The difference between the carrying amount and the financial liability extinguished and the new liability with modified terms is recognized in the Statement of Profit and Loss.
Measurement of fair values
The Company measures financial instruments at fair value in accordance with the accounting policies mentioned above. 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:
â in the principal market of the asset or liability; or
â in the absence of a principal market, in the most advantageous market for the asset or liability.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy that categorises into three levels, as described as follows, the inputs to valuation techniques used to measure value. The fair value hierarchy gives highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and lowest priority to unobservable inputs (level 3 inputs).
The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
k. Trade receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business and reflects the Companyâs 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.
l. Provisions and contingent liabilities
Provisions are recognized 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.
Provision for restructuring are recognized by the Company when it has developed a detailed formal plan for restructuring and has raised a valid expectation in those affected that the Company will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of provision for restructuring includes only direct expenditure arising from the restructuring, which are both necessary and entailed by the restructuring and not associated with the ongoing activities of the Company.
Provisions are measured based on the managementâs best estimate of the expenditure required to settle the present obligation at the end of the reporting period.
I f the effect of the time value of money is material, provisions are discounted to reflect its present value using a current pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made, unless the possibility of outflow of resources embodying economic benefits are remote.
When some or all of the economic benefits required to settle, a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
m. Onerous contracts
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.
n. Foreign Currency
Transactions in foreign currencies are translated in to currency of the primary economic environment in the which the entity operates (the âfunctional currencyâ of the Company) using the exchange rates prevailing on the date of transaction. Monetary items in foreign currencies are stated at the closing exchange rate. Gains/losses on conversion/translation are recognised in the Statement of Profit and Loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
o. Employee Benefits
Short Term Employee Benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits and are recognized in the Statement of Profit and Loss as an expense at the undiscounted amount on an accrual basis.
Post Employment Employee Benefits
The Companyâs contributions to defined contribution plans such as Superannuation Fund (administered through BASF India Limited Superannuation Fund Trust), Employee State Insurance and Labour Welfare Fund are recognized as expense in the Statement of Profit and Loss on an accrual basis. The Company does not have any further obligation beyond this contribution.
The Companyâs liability towards gratuity, which is a defined benefit plan, is determined on the basis of valuations, as at Balance Sheet date, carried out by an independent actuary using Projected Unit Credit Method. Remeasurement of the net defined benefit liability which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling if any (excluding interest) are recognised immediately in the Balance Sheet with a charge or credit recognised in Other Comprehensive Income in the period in which they occur. Re-measurement recognised in Other Comprehensive Income is recognised immediately in retained earnings and will not be reclassified to Statement of Profit and Loss. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit and loss. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service cost.
Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.
Provident Fund (upto August 31, 2022)
Eligible employees receive benefits from a provident fund which is a defined benefit plan. Both the employee and the Company make monthly contributions to the provident fund plan equal to a specified percentage of the covered employeeâs salary. The Company contributes a part of the contributions to the BASF India Limited Provident Fund Trust (âthe Trustâ). The rate at which the annual interest is payable to the beneficiaries by the Trust is being determined by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate. Any obligation in this respect is measured on the basis of an independent actuarial valuation. The remaining portion is contributed to the Government administered pension fund in respect of which the Company has no further obligations.
Provident Fund (effective September 1, 2022)
Eligible employees receive benefits from a provident fund which is a defined contribution plan. Both the employee and the Company make monthly contributions to the provident fund plan equal to a specified percentage of the covered employeeâs salary. The company pays provident fund contributions to publicly administered provident funds as per local regulations. The company has no further payment obligations once the contributions have been paid. The contributions are accounted for as defined contribution plans and the contributions are recognised as employee benefit expense when they are due.
Other Long Term Employee Benefits
The Companyâs liabilities towards Compensated Absences and Long Service Awards to employees are determined on the basis of valuations, as at Balance Sheet date, carried out by an independent actuary using Projected Unit Credit Method. The benefits are discounted using the appropriate market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements comprise experience adjustments and the effects of changes in actuarial assumptions and are recognised immediately 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 the settlement for at least 12 months after the reporting period, regardless of when the actual settlement is expected to occur.
Termination Benefits
Compensation paid to employees under Voluntary Retirement Scheme/Severance payments are recognised as an expense in the Statement of Profit and Loss when employees accept the scheme/payments.
Share based payments
The Ultimate Holding Company (âBASF SEâ) offers Share Price based compensation program (Long term incentive program - âLTIâ) for senior executives of BASF group. Participation in this program is voluntary.
LTI plans mentioned above are offered by BASF SE and the cost of such plans is not recharged to the Company. However, the Company recognises these share based payment transactions of BASF SE in accordance with the requirement of paragraph 43 A and 43 B of Ind AS 102 - Share Based Payments. As required under para 43B of Ind AS 102, since the Company receives the services of the employees to whom the options have been granted by BASF SE and the Company has no obligation to settle these options, the Company accounts for these services as an equity settled share based payment transaction.
p. Leases
.As a Lessee
As a lessee, the Company generally recognises for all leases a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Company.
As a general rule, the Company separates non-lease components, such as services from lease payments. Lease liabilities are measured at the present value of the remaining lease payments, taking into account the incremental borrowing rate.
Lease payments are discounted using the interest rate implicit in the lease contracts if that rate can be determined from the lease contracts. If the discount rate cannot be readily determined, which is generally the case for leases in the Company, the lesseeâs incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Company uses a risk free rate of interest which is adjusted for lease term, country risk and currency risk.
For leases previously classified as finance leases the Company recognised the carrying amount of the lease asset immediately before transition as the carrying amount of the right-of-use asset at the date of initial application. The measurement principles of Ind AS 116 are only applied after that date. There was no impact of transition on value of lease assets. Further there were no lease liabilities existing on date of transition.
A right-of-use asset is generally recognized at the same amount as the lease liability. After capitalization at commencement date, whereby the right-of-use asset is measured at cost, the right-of-use asset is generally depreciated over the lease term using the straight-line method. Lease payments are allocated between principal and finance cost. The finance cost is charged to statement of profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of liability for each period.
A number of leases include extension and termination options. Extension and termination options are taken into account on recognition of the lease liability only if the Company is reasonably certain that these options will be exercised in the future. Estimates and expectations which are asserted at the commencement date of the lease liability and the right-of-use asset and pertain to future payments not yet determined on the date of provision are assessed continuously during the lease term. If subsequently improved or changed knowledge influences the expected payment profile over time, the lease liability is remeasured. Any amount on account of re-measurement of lease liabilities is adjusted to the right-of-use assets. Where the carrying amount of the right-of-use assets is reduced to zero and there is a further reduction in the measurement of the lease liability, the Company recognises any remaining amount of the re-measurement in the income statement.
Initial direct costs are excluded for the measurement of right-of-use assets at the date of initial application The Company exercises the exemption for lease arrangements with a maximum term of 12 months (shortterm leases) and low-value assets. Payments associated with such short-term leases and low-value assets are recognised as an expense in Statement of Profit and Loss. Variable lease payments that depend on usage and / or other variable conditions are recognised in the Statement of Profit and Loss in the period in which the conditions that trigger those payments occur.
q. Taxation
Current tax is determined as the amount of tax payable in respect of taxable income for the year computed in accordance with relevant provisions of Income Tax Act, 1961 adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. It measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty. It establishes provisions where appropriate on the basis of amounts expected to be paid to tax authorities.
Deferred tax assets include Minimum Alternate Tax (âMATâ) paid in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future income tax liability. The credit available under the Income Tax Act, 1961 in respect of MAT paid is recognised as an asset only when and to the extent it is probable that future taxable profit will be available against which these tax credit can be utilised. Such an asset is reviewed at each Balance Sheet date.
Deferred tax charge or credit and correspondingly deferred tax liability or asset is recognised using tax rates that have been enacted or substantively enacted at the Balance Sheet date. Deferred tax is recognised, subject to the consideration of prudence, on temporary differences, being the difference between carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets are recognized to the extent that it probable that future taxable profits will be available against which they can be used. The existence of unused tax losses is strong evidence that future taxable
q. Taxation (Continued)
profit may not be available. Therefore, in case of history of recent losses, the Company recognizes a deferred tax asset only to the extent that it has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available against which such deferred tax asset can be realized.
Deferred tax assets - unrecognized or recognized are reviewed at each reporting date and are recognized/ reduced to the extent that it is probable/no longer probable respectively that related tax benefit will be realized. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and these relate to income taxes levied by the same tax authorities and are intended to settle current tax liabilities and assets on a net basis or such tax assets and liabilities will be realized simultaneously.
Current tax assets and liabilities are offset where the entity has legally enforceable right to offset and intends either to settle on net a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
r. Earnings per share
The basic earnings per share are computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding during the reporting period. Diluted earnings per share is computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity and dilutive equity equivalent shares outstanding during the year, except where the results would be anti-dilutive.
s. Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with financial institutions, other short term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash which are subject to an insignificant risk of change in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the Balance Sheet.
t. Derivative financial instruments
The Company enters majorly into foreign exchange forward contracts to mitigate the foreign currency exposure risk.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in Statement of Profit and Loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in Statement of Profit and Loss depends on the nature of the hedge relationship. Derivative assets and derivative liabilities are presented on gross basis in the Balance Sheet.
u. Dividends
The final dividend on shares is recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Companyâs Board of Directors.
v. Exceptional items
Exceptional items reflect items which individually or, if of a similar type, in aggregate, are disclosed separately due to their size or incidence in order to obtain clear and consistent presentation of the Companyâs performance.
w. New and amended standards adopted by the Company
The Ministry of Corporate Affairs had vide notification dated 23 March 2022 notified Companies (Indian Accounting Standards) Amendment Rules, 2022 which amended certain accounting standards, and are effective 1 April 2022. These amendments did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
x. New and amended standards issued but not effective
The Ministry of Corporate Affairs has vide notification dated 31 March 2023 notified Companies (Indian Accounting Standards) Amendment Rules, 2023 (the âRulesâ) which amends certain accounting standards, and are effective 1 April 2023. The Rules predominantly amend Ind AS 12, Income taxes, and Ind AS 1, Presentation of financial statements. The other amendments to Ind AS notified by these rules are primarily in the nature of clarifications. These amendments are not expected to have a material impact on the company in the current or future reporting periods and on foreseeable future transactions. Specifically, no changes would be necessary as a consequence of amendments made to Ind AS 12 as the companyâs accounting policy already complies with the now mandatory treatment.
Mar 31, 2022
BASF India Limited (the âCompany'') is a public limited Company domiciled in India with its registered office located in Mumbai. The Company is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The Company''s portfolio consists of six segments: Agricultural Solutions, Materials, Industrial solutions, Surface Technologies, Nutrition & Care and Chemicals.
1. Significant Accounting Policies
a. Basis of preparation
(i) Compliance with Ind AS
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (âthe Act'') read together with the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions and amendments of the Act.
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 millions, unless otherwise indicated.
All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in the Schedule III to the Act. The Company has identified twelve months as its operating cycle.
The accounting policies adopted in the preparation of the financial statements are consistent with those of the previous year.
The financial statements have been prepared on an accrual basis and on a historical cost basis, except for the following items:
⢠certain financial assets and liabilities (including derivative instruments) and contingent consideration that is measured at fair value,
⢠assets held for sale - measured at carrying amount or fair value less cost to sale whichever is low,
⢠Net defined benefit (asset)/liability - Fair value of plan assets less present value of defined benefit obligations; and
⢠share-based payments measured at fair value on grant date with no subsequent adjustment to the payments recognised.
The presentation of financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made by management that affect the reported amount of assets and liabilities and disclosure of contingent liabilities as on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Differences between the actual results and estimates are recognised in the period in which the results are known/materialise.
I nformation about critical judgments in applying accounting policies, as well as estimates and assumptions that have the most significant effect to the carrying amounts of assets and liabilities within the next financial year, are included in the following notes:
a. Measurement of defined benefit obligations - Note 48
b. Measurement and likelihood of occurrence of provisions and contingencies - Note 40, 46 and 1(l)
c. Measurement of useful lives for property, plant and equipment & intangible assets and impairment - Note 1(d), 1(e) and 1(f)
d. Loss allowance on trade receivables and other financial assets - Note 38(iv)
e. Determination of lease terms and incremental borrowing rate - Note 42 and Note 1(p)
According to Ind AS 115, revenue is measured at the amount of consideration the Company expects to receive in exchange for the goods or services when control of the goods or services and the benefits obtainable from them are transferred to the customer. Revenue is recognised using the following five step model specified in Ind AS 115:
Step 1: Identify contracts with customers
Step 2: Identify performance obligations contained in the contracts Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations Step 5: Recognize revenue when the performance obligation is satisfied
The performance obligations arising from sale of products with Company''s customers are satisfied at a point in time. Payment terms are generally agreed upon individually with customers.
Sales of products are recognised when control of the products has transferred based on the agreed terms. Sales are net of returns, trade discounts, rebates, sales tax and goods and service tax (GST), as applicable.
Sale of services includes indent commission and revenue from technical and service charges to group and other companies based on terms of the respective agreement. Revenue from sale of services are recognised as and when the services are provided.
The Company evaluates the arrangement with customers/ suppliers whether it is acting as a principal or an agent of the customers/ suppliers, considering underlying substance and terms and conditions of the arrangements. Accordingly, revenue is accounted either on gross or net basis based on the fulfillment of criteria of principal or agency.
At contract inception, since for most of the contracts it is expected that the period between the transfer of the promised goods or services to a customer and payment for these goods or services by the customer will be one year or less, practical expedient in Ind AS 115 have been applied and accordingly:
â The Company does not adjust the promised amount of consideration for the effects of a significant financing component
â The Company recognises the incremental costs of obtaining a contract as an expense when incurred
â No information on remaining performance obligations as of March 31, 2022 that have an expected original term of one year or less was reported.
As part of the adoption of Ind AS 115, contract liabilities are disclosed in the Balance Sheet. A contract liability is the Company''s obligation to transfer goods or services to a customer, for which the Company has already received consideration from customers.
The Company operates Customer incentive programs where direct/ indirect customers accumulate points for purchases made of the Company''s products, which entitle them for rewards in form of gift cards equal to the value of such points. A contract liability for the award points is recognised at the time of sale.
Income from export incentives is recognised on accrual basis to the extent the ultimate realisation is reasonably certain.
I nterest income is recognised using the effective interest rate method. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses.
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Items such as stores, spare parts and stand by equipment are recognized as property, plant and equipment when it is held for use in production or supply of goods or services, or for administrative purpose and are expected to be used for more than one year. Otherwise such items are classified as inventory.
Subsequent expenditure
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is de-recognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Derecognition
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the item. Any gain or loss arising on disposal or retirement of item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the item and is recognized in the statement of profit and loss.
Depreciation on property plant and equipment is calculated on a straight-line basis considering the following useful lives estimated by the Management based on technical evaluation or those prescribed under Schedule II of the Act:
Assets Category |
Useful life |
Buildings |
10-33 years |
Plant and machinery |
5-20 years |
Computers |
4 years |
Vehicles |
4 years |
Furniture and fixtures |
5-10 years |
Office equipment |
5 years |
Property, Plant and Equipment individually costing Rs. 5,000 or below are fully depreciated in the year of purchase. Depreciation on additions / deletions is calculated on a monthly pro-rata basis.
The annual depreciation charge for property, plant and equipment is sensitive to changes in the estimated useful economic lives and residual values of the assets. The Company reviews the residual value, useful lives and depreciation method annually and, if expectations differ from previous estimates, the change is accounted for as a change in accounting estimate on a prospective basis.
Leasehold land and Leasehold Improvements are amortised over the period of lease or useful life whichever is lower, unless the entity expects to use the assets beyond the lease term.
An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.
e. Intangible assets and amortization
Intangible assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortized on a straight line basis over their estimated useful lives. Computer software is amortized over a period of four years and other intangible assets are amortized over a period of 2 to 4 years. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
The carrying amounts of assets are reviewed at each Balance Sheet date for any indication of impairment based on internal/external factors. Where the carrying value exceeds the estimated recoverable amount, provision for impairment is made to adjust the carrying value to the recoverable amount. The recoverable amount is the greater of the assets estimated net realizable value and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using an appropriate discounting rate. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash-generating units). If at the Balance Sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in Statement of Profit and Loss over the period of the borrowings using the effective interest method.
Borrowings are derecognized when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in Statement of Profit and Loss as other gains/(losses).
Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. Where there is a breach of a material provision of a long-term loan arrangement on or before the end of the reporting period with the effect that the liability becomes payable on demand on the reporting date, the entity does not classify the liability as current, if the lender agreed, after the reporting period and before the approval of the financial statements for issue, not to demand payment as a consequence of the breach.
Borrowing costs that are attributable to the acquisition and construction of qualifying assets are capitalised. Other borrowing costs are recognised as an expense in the period in which they are incurred.
Foreign exchange differences regarded as an adjustment to borrowing costs are presented in the Statement of Profit and Loss, within finance costs.
g. Inventories
I nventories including raw materials, packing materials, work-in-progress, stores and spares, traded and finished goods are valued at cost or estimated net realisable value, whichever is lower. The costs are determined on weighted average basis and includes expenditure incurred in acquiring inventories, production of conversion costs and other costs incurred in bringing them to their present location and condition. Fixed production overheads are allocated on the basis of normal capacity of production facilities. Goods and service tax (GST) is excluded from valuation of finished goods. Net realisable value is estimated selling price in the ordinary course of business less estimated costs of completion and selling expenses. The comparison of cost and net realisable value is made on an item by item basis.
h. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting and are based on monitoring of operating results by the Chief Operating Decision Maker, separately for making decision about resource allocation and performance assessment. The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company.
i. Non-current assets (or disposal groups) held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and contractual rights under insurance contracts, which are specifically exempt from this requirement.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) 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 (or disposal group), 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 (or disposal group) is recognised at the date of de-recognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.
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. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the Balance Sheet.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the Statement of Profit and Loss.
Financial asset
Financial assets are recognised when the Company becomes a party to the contractual provisions of the instrument.
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
Subsequent measurement
For subsequent measurement, the Company classifies its financial assets in the following measurement categories:
⢠those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
⢠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.
A financial asset is measured at amortised cost when they are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows that are solely payments of principal and interest. The amortised cost of a financial asset is also adjusted for impairment loss, if any.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.
Financial liabilities
Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument.
Financial liabilities are initially measured at fair value minus, in case of financial liabilities not at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial liabilities.
Borrowings are recognized initially at fair value, net of transaction costs incurred, and subsequently carried at amortised cost, any difference between the initial carrying value and the redemption value is recognized in the Statement of Profit and Loss over the period of the borrowings using the effective interest rate method. Subsequent to initial recognition these financial liabilities are measured at amortised cost using effective interest method.
Offsetting
Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet where there is a legally enforceable right to offset the recognised amounts in the normal course of business and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
Impairment of financial assets
The Company assesses on a forward-looking basis the expected credit loss associated with its assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk since its initial recognition. Note 38 details how the Company determines whether there has been a significant increase in credit risk.
For trade receivables only, the Company applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables. The impairment losses and reversals are recognized in statement of profit and loss.
Derecognition of financial assets and financial liabilities A financial asset is derecognised only when:
The Company has transferred the rights to receive cash flows from the financial asset or retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
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. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset 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.
The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows under the modified terms are substantially different. The difference between the carrying amount and the financial liability extinguished and the new liability with modified terms is recognized in the Statement of Profit and Loss.
Measurement of fair values
The Company measures financial instruments at fair value in accordance with the accounting policies mentioned above. 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:
â in the principal market of the asset or liability; or
â in the absence of a principal market, in the most advantageous market for the asset or liability.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy that categorises into three levels, as described as follows, the inputs to valuation techniques used to measure value. The fair value hierarchy gives highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and lowest priority to unobservable inputs (level 3 inputs).
The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less loss allowance.
Provisions are recognized 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.
Provision for restructuring are recognized by the Company when it has developed a detailed formal plan for restructuring and has raised a valid expectation in those affected that the Company will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of provision for restructuring includes only direct expenditure arising from the restructuring, which are both necessary and entailed by the restructuring and not associated with the ongoing activities of the Company. Provisions are measured based on the management''s best estimate of the expenditure required to settle the present obligation at the end of the reporting period.
If the effect of the time value of money is material, provisions are discounted to reflect its present value using a current pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made, unless the possibility of outflow of resources embodying economic benefits are remote.
When some or all of the economic benefits required to settle, a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.
Transactions in foreign currencies are translated in to currency of the primary economic environment in the which the entity operates (the âfunctional currency'' of the Company) using the exchange rates prevailing on the date of transaction. Monetary items in foreign currencies are stated at the closing exchange rate. Gains/losses on conversion/translation are recognised in the Statement of Profit and Loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Short Term Employee Benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits and are recognized in the Statement of Profit and Loss as an expense at the undiscounted amount on an accrual basis.
The Company''s contributions to defined contribution plans such as Superannuation Fund (administered through BASF India Limited Superannuation Fund Trust), Employee State Insurance and Labour Welfare Fund are recognized as expense in the Statement of Profit and Loss on an accrual basis. The Company does not have any further obligation beyond this contribution.
Eligible employees receive benefits from a provident fund which is a defined benefit plan. Both the employee and the Company make monthly contributions to the provident fund plan equal to a specified percentage of
the covered employee''s salary. The Company contributes a part of the contributions to the BASF India Limited Provident Fund Trust (âthe Trust''). The rate at which the annual interest is payable to the beneficiaries by the Trust is being determined by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate. Any obligation in this respect is measured on the basis of an independent actuarial valuation. The remaining portion is contributed to the Government administered pension fund in respect of which the Company has no further obligations.
The Company''s liability towards gratuity, which is a defined benefit plan, is determined on the basis of valuations, as at Balance Sheet date, carried out by an independent actuary using Projected Unit Credit Method. Remeasurement of the net defined benefit liability which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling if any (excluding interest) are recognised immediately in the Balance Sheet with a charge or credit recognised in Other Comprehensive Income in the period in which they occur. Re-measurement recognised in Other Comprehensive Income is recognised immediately in retained earnings and will not be reclassified to Statement of Profit and Loss.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit and loss. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service cost.
Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.
The Company''s liabilities towards Compensated Absences and Long Service Awards to employees are determined on the basis of valuations, as at Balance Sheet date, carried out by an independent actuary using Projected Unit Credit Method. The benefits are discounted using the appropriate market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements comprise experience adjustments and the effects of changes in actuarial assumptions and are recognised immediately 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 the settlement for at least 12 months after the reporting period, regardless of when the actual settlement is expected to occur.
Compensation paid to employees under Voluntary Retirement Scheme/Severance payments are recognised as an expense in the Statement of Profit and Loss when employees accept the scheme/payments.
The Ultimate Holding Company (âBASF SE'') offers Share Price based compensation program (Long term incentive program - âLTI'') for senior executives of BASF group. Participation in this program is voluntary.
LTI plans mentioned above are offered by BASF SE and the cost of such plans is not recharged to the Company. However, the Company recognises these share based payment transactions of BASF SE in accordance with the requirement of paragraph 43 A and 43 B of Ind AS 102 - Share Based Payments. As required under para 43B of Ind AS 102, since the Company receives the services of the employees to whom the options have been granted by BASF SE and the Company has no obligation to settle these options, the Company accounts for these services as an equity settled share based payment transaction.
p. Leases
As a Lessee
As a lessee, the Company generally recognises for all leases a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Company.
As a general rule, the Company separates non-lease components, such as services from lease payments. Lease liabilities are measured at the present value of the remaining lease payments, taking into account the incremental borrowing rate.
Lease payments are discounted using the interest rate implicit in the lease contracts if that rate can be determined from the lease contracts. If the discount rate cannot be readily determined, which is generally the case for leases in the Company, the lessee''s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Company uses a risk free rate of interest which is adjusted for lease term, country risk and currency risk.
For leases previously classified as finance leases the Company recognised the carrying amount of the lease asset immediately before transition as the carrying amount of the right-of-use asset at the date of initial application.
The measurement principles of Ind AS 116 are only applied after that date. There was no impact of transition on value of lease assets. Further there were no lease liabilities existing on date of transition.
A right-of-use asset is generally recognized at the same amount as the lease liability. After capitalization at commencement date, whereby the right-of-use asset is measured at cost, the right-of-use asset is generally depreciated over the lease term using the straight-line method. Lease payments are allocated between principal and finance cost. The finance cost is charged to statement of profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of liability for each period.
A number of leases include extension and termination options. Extension and termination options are taken into account on recognition of the lease liability only if the Company is reasonably certain that these options will be exercised in the future. Estimates and expectations which are asserted at the commencement date of the lease liability and the right-of-use asset and pertain to future payments not yet determined on the date of provision are assessed continuously during the lease term. If subsequently improved or changed knowledge influences the expected payment profile over time, the lease liability is remeasured. Any amount on account of re-measurement of lease liabilities is adjusted to the right-of-use assets. Where the carrying amount of the right-of-use assets is reduced to zero and there is a further reduction in the measurement of the lease liability, the Company recognises any remaining amount of the re-measurement in the income statement.
Initial direct costs are excluded for the measurement of right-of-use assets at the date of initial application The Company exercises the exemption for lease arrangements with a maximum term of 12 months (short-term leases) and low-value assets. Payments associated with such short-term leases and low-value assets are recognised as an expense in Statement of Profit and Loss. Variable lease payments that depend on usage and / or other variable conditions are recognised in the Statement of Profit and Loss in the period in which the conditions that trigger those payments occur.
q. Taxation
Current tax is determined as the amount of tax payable in respect of taxable income for the year computed in accordance with relevant provisions of Income Tax Act, 1961 adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. It measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty. It establishes provisions where appropriate on the basis of amounts expected to be paid to tax authorities.
Deferred tax assets include Minimum Alternate Tax (âMAT'') paid in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future income tax liability. The credit available under the Income Tax Act, 1961 in respect of MAT paid is recognised as an asset only when and to the extent it is probable that future taxable profit will be available against which these tax credit can be utilised. Such an asset is reviewed at each Balance Sheet date.
Deferred tax charge or credit and correspondingly deferred tax liability or asset is recognised using tax rates that have been enacted or substantively enacted at the Balance Sheet date. Deferred tax is recognised, subject to the consideration of prudence, on temporary differences, being the difference between carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets are recognized to the extent that it probable that future taxable profits will be available against which they can be used. The existence of unused tax losses is strong evidence that future taxable profit may not be available. Therefore, in case of history of recent losses, the Company recognizes a deferred tax asset only to the extent that it has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available against which such deferred tax asset can be realized.
Deferred tax assets - unrecognized or recognized are reviewed at each reporting date and are recognized/ reduced to the extent that it is probable/no longer probable respectively that related tax benefit will be realized. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and these relate to income taxes levied by the same tax authorities and are intended to settle current tax liabilities and assets on a net basis or such tax assets and liabilities will be realized simultaneously.
Current tax assets and liabilities are offset where the entity has legally enforceable right to offset and intends either to settle on net a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
Business combinations involving entities that are controlled by the Company are accounted for using the pooling of interests method as follows:
â The assets and liabilities of the combining entities are reflected at their carrying amounts.
â No adjustments are made to reflect fair values, or recognize any new assets or liabilities. Adjustments are only made to harmonise accounting policies.
â The balance of the retained earnings appearing in the financial statements of the transferor is aggregated with the corresponding balance appearing in the financial statements of the transferee.
â The identity of the reserves are preserved and the reserves of the transferor become the reserves of the transferee.
â The difference, if any, between the amounts recorded as share capital issued plus any additional consideration in the form of cash or other assets and the amount of Share Capital of the transferor is transferred to Capital Reserve and is presented separately from other Capital Reserves.
â Wherever any business combination is governed by the Scheme approved by the Hon''ble High Court/ NCLT, the business combination is accounted for as per the accounting treatment sanctioned in the Scheme.
The basic earnings per share are computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding during the reporting period. Diluted earnings per share is computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity and dilutive equity equivalent shares outstanding during the year, except where the results would be anti-dilutive.
t. Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with financial institutions, other short term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash which are subject to an insignificant risk of change in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the Balance Sheet.
The Company enters majorly into foreign exchange forward contracts to mitigate the foreign currency exposure risk.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in Statement of Profit and Loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in Statement of Profit and Loss depends on the nature of the hedge relationship. Derivative assets and derivative liabilities are presented on gross basis in the Balance Sheet.
The final dividend on shares is recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Company''s Board of Directors.
Exceptional items reflect items which individually or, if of a similar type, in aggregate, are disclosed separately due to their size or incidence in order to obtain clear and consistent presentation of the Company''s performance.
The Company has applied following amendments to Ind AS for the first time effective April 1, 2021.
⢠Extension of COVID-19 related concessions - amendments to Ind AS 116
⢠Interest rate benchmark reform - amendments to Ind AS 109, Financial Instruments, Ind AS 107, Financial Instruments: Disclosures, Ind AS 104, Insurance Contracts and Ind AS 116, Leases.
The amendments listed above did not have any impact on the amounts recognized in prior periods or current period and are not expected to significantly affect the future periods.
The Company has reclassified comparative amounts to conform with current year presentation as per the requirements of Ind AS 1. The impact of such classifications is summarised below:
Balance sheet (extract) |
March 31,2021 (as previously reported) |
Increase / (Decrease) |
March 31,2021 (revised) |
Other financial liabilities (current) |
1,926.7 |
(1,521.9) |
404.8 |
Borrowings (Current) |
â |
1,521.9 |
1,521.9 |
Loans (non-current) |
141.0 |
(140.4) |
0.6 |
Other financial assets (non-current) |
â |
140.4 |
140.4 |
Loans (current) |
33.1 |
(32.3) |
0.8 |
Other financial assets (current) |
396.8 |
30.1 |
426.9 |
Other current assets |
2,396.9 |
2.2 |
2,399.1 |
The Ministry of Corporate Affairs has vide notification dated 23 March 2022 notified Companies (Indian Accounting Standards) Amendment Rules, 2022 which amends certain accounting standards, and are effective 1 April 2022. These amendments are not expected to have a material impact on the Company in the current or future reporting periods.
Mar 31, 2019
Background of the Company
BASF India Limited (the âCompany'') is a public limited Company domiciled in India with its registered office located in Mumbai. The Company is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The Company''s portfolio consists of six segments: Agricultural Solutions, Materials, Industrial Solutions, Surface Technologies, Nutrition & Care and Chemicals.
1. Significant Accounting Policies
a. Basis of preparation
(i) Compliance with Ind AS
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (âthe Act'') read together with the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions and amendments of the Act.
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 millions, unless otherwise indicated.
All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in the Schedule III to the Act.
The accounting policies adopted in the preparation of the financial statements are consistent with those of the previous year.
(ii) Basis of measurement
The financial statements have been prepared on an accrual basis and on a historical cost basis, except for the following items:
- certain financial assets and liabilities (including derivative instruments) and contingent consideration that is measured at fair value,
- assets held for sale - measured at carrying amount or fair value less cost to sale whichever is low,
- Net defined benefit (asset) / liability - Fair value of plan assets less present value of defined benefit obligations; and
- share-based payments measured at fair value on grant date with no subsequent adjustment to the payments recognised.
b. Use of estimates & judgements
The presentation of financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made by management that affect the reported amount of assets and liabilities and disclosure of contingent liabilities as on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Differences between the actual results and estimates are recognised in the period in which the results are known / materialise.
Information about critical judgments in applying accounting policies, as well as estimates and assumptions that have the most significant effect to the carrying amounts of assets and liabilities within the next financial year, are included in the following notes:
(a) Measurement of defined benefit obligations - Note 43
(b) Measurement and likelihood of occurrence of provisions and contingencies - Note 35 and 41
(c) Recognition of deferred tax assets - Note 3
(d) Measurement of useful lives for property, plant and equipment & intangible assets and impairment -Note 1(d), 1(e) and 1(f)
(e) Loss allowance on trade receivables and other financial assets - Note 33(iv)
c. Revenue Recognition
Effective April 1, 2018, the Company has adopted Indian Accounting Standard 115 - âRevenue from Contracts with Customers'' (âInd AS 115'') with modified retrospective approach. Accordingly, the comparative information for previous year has not been restated.
According to Ind AS 115, revenue is measured at the amount of consideration the Company expects to receive in exchange for the goods or services when control of the goods or services and the benefits obtainable from them are transferred to the customer. Revenue is recognised using the following five step model specified in Ind AS 115:
Step 1: Identify contracts with customers
Step 2: Identify performance obligations contained in the contracts Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations Step 5: Recognize revenue when the performance obligation is satisfied
The performance obligations arising from sale of products with Company''s customers are satisfied at a point in time. Payment terms are generally agreed upon individually with customers.
Sales of products are recognised when control of the products has transferred based on the agreed terms. Sales are inclusive of excise duty and net of returns, trade discounts, rebates, sales tax and goods and service tax (GST) as applicable.
Sale of services includes indent commission and revenue from technical and service charges. Revenue from sale of services are recognised as and when the services are provided.
The Company evaluates the arrangement with customers/ suppliers whether it is acting as a principal or an agent of the customers/ suppliers, considering underlying substance and terms and conditions of the arrangements. Accordingly, revenue is accounted either on gross or net basis based on the fulfillment of criteria of principal or agency.
At contract inception, since for most of the contracts it is expected that the period between the transfer of the promised goods or services to a customer and payment for these goods or services by the customer will be one year or less, practical expedient in Ind AS 115 have been applied and accordingly:
â The Company does not adjust the promised amount of consideration for the effects of a significant financing component
â The Company recognises the incremental costs of obtaining a contract as an expense when incurred
â No information on remaining performance obligations as of March 31, 2019 that have an expected original term of one year or less was reported.
As part of the adoption of the new standard, contract liabilities are new additions to the Balance Sheet disclosure. A contract liability is the Company''s obligation to transfer goods or services to a customer, for which the Company has already received consideration from customers.
Income from export incentives is recognised on accrual basis to the extent the ultimate realisation is reasonably certain.
Interest income is recognised using the effective interest rate method. When calculating the effective interest rate, the company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses.
d. Property, plant and equipment Recognition and measurement
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Items such as stores, spare parts and standby equipment are recognized as property, plant and equipment when it is held for use in production or supply of goods or services, or for administrative purpose and are expected to be used for more than one year. Otherwise such items are classified as inventory.
Subsequent expenditure
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is de-recognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Derecognition
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the item. Any gain or loss arising on disposal or retirement of item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the item and is recognized in the statement of profit and loss.
Depreciation
Depreciation on property, plant and equipment is calculated on a straight-line basis considering the following useful lives estimated by the Management based on technical evaluation or those prescribed under Schedule II of the Act:
d. Property, plant and equipment (Continued)
Property, Plant and Equipment individually costing Rs. 5,000 or below are fully depreciated in the year of purchase. Depreciation on additions / deletions is calculated on a monthly pro-rata basis.
The Company reviews the residual value, useful lives and depreciation method annually and, if expectations differ from previous estimates, the change is accounted for as a change in accounting estimate on a prospective basis. Leasehold land and Leasehold improvements are amortised over the period of lease or useful life whichever is lower.
e. Intangible assets and amortization
Intangible assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortized on a straight line basis over their estimated useful lives. Software is being amortized over a period of four years. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
f. Impairment of non-financial assets
The carrying amounts of assets are reviewed at each Balance Sheet date for any indication of impairment based on internal/external factors. Where the carrying value exceeds the estimated recoverable amount, provision for impairment is made to adjust the carrying value to the recoverable amount. The recoverable amount is the greater of the assets estimated net realizable value and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using an appropriate discounting rate. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash-generating units). If at the Balance Sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
g. Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in Statement of Profit and Loss over the period of the borrowings using the effective interest method.
Borrowings are derecognized when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in Statement of Profit and Loss as other gains/(losses).
Borrowing costs that are attributable to the acquisition and construction of qualifying assets are capitalised. Other borrowing costs are recognised as an expense in the period in which they are incurred.
Foreign exchange differences regarded as an adjustment to borrowing costs are presented in the Statement of Profit and Loss, within finance costs.
h. Inventories
Inventories including raw materials, work-in-progress, traded and finished goods are valued at cost or estimated net realisable value, whichever is lower. The costs are determined on weighted average basis and includes expenditure incurred in acquiring inventories, production of conversion costs and other costs incurred in bringing them to their present location and condition. Fixed production overheads are allocated on the basis of normal capacity of production facilities. Goods and service tax (GST) is excluded from valuation of finished goods. Net realisable value is estimated selling price in the ordinary course of business less estimated costs of completion and selling expenses. The comparison of cost and net realisable value is made on an item by item basis.
i. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting and are based on monitoring of operating results by the Chief Operating Decision Maker, separately for making decision about resource allocation and performance assessment. The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company.
j. Non-current assets (or disposal groups) held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and contractual rights under insurance contracts, which are specifically exempt from this requirement.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) 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 (or disposal group), 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 (or disposal group) is recognised at the date of de-recognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.
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. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the Balance Sheet.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the Statement of Profit and Loss.
k. Financial Instruments
Financial assets
Financial assets are recognised when the Company becomes a party to the contractual provisions of the instrument.
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
Subsequent measurement
For subsequent measurement, the Company classifies its financial assets in the following measurement categories:
- those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
- 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.
A financial asset is measured at amortised cost when they are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows that are solely payments of principal and interest. The amortised cost of a financial asset is also adjusted for impairment loss, if any.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.
Financial liabilities
Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument.
Financial liabilities are initially measured at fair value minus, in case of financial liabilities not at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial liabilities.
Borrowings are recognized initially at fair value, net of transaction costs incurred, and subsequently carried at amortised cost, any difference between the initial carrying value and the redemption value is recognized in the Statement of Profit and Loss over the period of the borrowings using the effective interest rate method.
Subsequent to initial recognition these financial liabilities are measured at amortised cost using effective interest method.
Offsetting
Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet where there is a legally enforceable right to offset the recognised amounts in the normal course of business and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
Impairment of financial assets
The Company assesses on a forward-looking basis the expected credit loss associated with its assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk since its initial recognition. Note 33 details how the Company determines whether there has been a significant increase in credit risk.
For trade receivables only, the Company applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
The impairment losses and reversals are recognized in statement of profit and loss.
Derecognition of financial assets and financial liabilities A financial asset is derecognised only when:
The Company has transferred the rights to receive cash flows from the financial asset or retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
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. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset 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.
The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows under the modified terms are substantially different. The difference between the carrying amount and the financial liability extinguished and the new liability with modified terms is recognized in the Statement of Profit and Loss.
Measurement of fair values
The Company measures financial instruments at fair value in accordance with the accounting policies mentioned above. 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:
â in the principal market of the asset or liability; or
â in the absence of a principal market, in the most advantageous market for the asset or liability.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy that categorises into three levels, as described as follows, the inputs to valuation techniques used to measure value. The fair value hierarchy gives highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and lowest priority to unobservable inputs (Level 3 inputs).
The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
l. Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less loss allowance.
m. Provisions and contingent liabilities
Provisions are recognized 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 based on the management''s best estimate of the expenditure required to settle the present obligation at the end of the reporting period.
If the effect of the time value of money is material, provisions are discounted to reflect its present value using a current pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made, unless the possibility of outflow of resources embodying economic benefits are remote.
When some or all of the economic benefits required to settle, a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
n. Onerous contracts
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.
o. Foreign Currency
Transactions in foreign currencies are translated in to currency of the primary economic environment in the which the entity operates (the âfunctional currency'') of the Company using the exchange rates prevailing on the date of transaction. Monetary items in foreign currencies are stated at the closing exchange rate. Gains/losses on conversion/translation are recognised in the Statement of Profit and Loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
p. Employee Benefits
Short Term Employee Benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits and are recognized in the Statement of Profit and Loss as an expense at the undiscounted amount on an accrual basis.
Post Employment Employee Benefits
The Company''s contributions to defined contribution plans such as Superannuation Fund (administered through BASF India Limited Superannuation Fund Trust), Employee State Insurance and Labour Welfare Fund are recognized as expense in the Statement of Profit and Loss on an accrual basis. The Company does not have any further obligation beyond this contribution.
Eligible employees receive benefits from a provident fund which is a defined benefit plan. Both the employee and the Company make monthly contributions to the provident fund plan equal to a specified percentage of the covered employee''s salary. The Company contributes a part of the contributions to the BASF India Limited Provident Fund Trust (âthe Trust''). The rate at which the annual interest is payable to the beneficiaries by the Trust is being determined by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate. Any obligation in this respect is measured on the basis of an independent actuarial valuation. The remaining portion is contributed to the Government administered pension fund in respect of which the Company has no further obligations.
The Company''s liability towards gratuity, which is a defined benefit plan, is determined on the basis of valuations, as at Balance Sheet date, carried out by an independent actuary using Projected Unit Credit Method. Remeasurement of the net defined benefit liability which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling if any (excluding interest) are recognised immediately in the Balance Sheet with a charge or credit recognised in Other Comprehensive Income in the period in which they occur. Re-measurement recognised in Other Comprehensive Income is recognised immediately in retained earnings and will not be reclassified to Statement of Profit and Loss.
Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.
Other Long Term Employee Benefits
The Company''s liabilities towards Compensated Absences and Long Service Awards to employees are determined on the basis of valuations, as at Balance Sheet date, carried out by an independent actuary using Projected Unit Credit Method. The benefits are discounted using the appropriate market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements comprise experience adjustments and the effects of changes in actuarial assumptions and are recognised immediately 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 the settlement for at least 12 months after the reporting period, regardless of when the actual settlement is expected to occur.
Termination Benefits
Compensation paid to employees under Voluntary Retirement Scheme/Severance payments are recognised as an expense in the Statement of Profit and Loss when employees accept the scheme/payments.
Share based payments
The Ultimate Holding Company (âBASF SE'') offers Share Price based compensation program (âoption program'') for senior executives of BASF group. Participation in this program is voluntary.
Options mentioned above are issued by BASF SE and the cost of such options is not recharged to the Company. However, the Company recognises these share based payment transactions of BASF SE in accordance with the requirement of paragraph 43 A and 43 B of Ind AS 102 - Share Based Payments. As required under para 43B of Ind AS 102, since the Company receives the services of the employees to whom the options have been granted by BASF SE and the Company has no obligation to settle these options, the Company accounts for these services as an equity settled share based payment transaction.
q. Leases
As a Lessee
Determining whether an arrangement contains lease
At inception of an arrangement, it is determined whether the arrangement is or contains a lease.
At inception or on reassessment of the arrangement that contains a lease, the payments and other consideration required by such an arrangement are separated into those for the lease and those for other elements on the basis of their relative fair values. If it is concluded that for a finance lease that is impracticable to separate the lease payments reliably, then an asset and a liability are recognized at an amount equal to the fair value of the underlying asset. The liability is reduced as payments are made and an imputed finance cost on the liability is recognized using the incremental borrowing rate.
Assets held under leases
Leases of property, plant and equipment that transfers to the Company substantially all the risks and rewards of ownership are classified as finance leases. The leased assets are measured initially at an amount equal to the lower of fair value of the leased asset and the present value of the minimum lease payments. Subsequent to the initial recognition, the assets are accounted for in accordance with the accounting policy applicable to similar owned assets. Assets held under leases that do not transfer to the Company substantially all the risk and rewards of ownership (i.e. operating leases) are not recognized in the Company''s Balance Sheet.
Lease payments
Payments made under operating leases are generally recognized in profit or loss on a straight line basis over the term of the lease unless such payments are structured to increase in line with expected general inflation to compensate for the lessor''s expected inflationary cost increases.
r. Taxation
Current tax is determined as the amount of tax payable in respect of taxable income for the year computed in accordance with relevant provisions of Income Tax Act, 1961 adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to tax authorities.
The Company recognises Minimum Alternate Tax credit under the Income Tax Act, 1961 as an asset only when and to the extent there is convincing evidence that the Company will be liable to pay normal income tax during the specified period.
Deferred tax charge or credit and correspondingly deferred tax liability or asset is recognised using tax rates that have been enacted or substantively enacted at the Balance Sheet date. Deferred tax is recognised, subject to the consideration of prudence, on temporary differences, being the difference between carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets are recognized to the extent that it probable that future taxable profits will be available against which they can be used. The existence of unused tax losses is strong evidence that future taxable profit may not be available. Therefore, in case of history of recent losses, the Company recognizes a deferred tax asset only to the extent that it has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available against which such deferred tax asset can be realized. Deferred tax assets - unrecognized or recognized are reviewed at each reporting date and are recognized/reduced to the extent that it is probable/no longer probable respectively that related tax benefit will be realized. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and these relate to income taxes levied by the same tax authorities and are intended to settle current tax liabilities and assets on a net basis or such tax assets and liabilities will be realized simultaneously.
Current tax assets and liabilities are offset where the entity has legally enforceable right to offset and intends either to settle on net a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
s. Earnings per share
The basic earnings per share are computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding during the reporting period. Diluted earnings per share is computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity and dilutive equity equivalent shares outstanding during the year, except where the results would be anti-dilutive.
t. Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with financial institutions, other short term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash which are subject to an insignificant risk of change in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the Balance Sheet.
u. Derivative financial instruments
The Company enters majorly into foreign exchange forward contracts to mitigate the foreign currency exposure risk. Derivatives are initially recognised at fair value at the date the derivative contracts are entered and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in Statement of Profit and Loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in Statement of Profit and Loss depends on the nature of the hedge relationship. Derivative assets and derivative liabilities are presented on gross basis in the Balance Sheet.
v. Standards issued but not yet effective
The Ministry of Corporate Affairs (MCA) notified the Companies (Indian Accounting Standards) Amendment Rules, 2019 & Companies (Indian Accounting Standards) Second Amendment Rules, 2019 (the âRules'') on March 30, 2019. The rules shall be effective from reporting periods beginning on or after April 1, 2019. Amendments to Ind AS as per these rules are mentioned below:
Ind AS 116 - Leases
Effective April 1, 2019, Ind AS 116 - âLeases'' will replace the existing leases Standard, Ind AS 17 Leases. Ind AS 116 introduces a single lease accounting model and requires a lessee to recognize assets and liabilities for almost all the leases with a term of more than twelve months, unless the underlying asset is of low value.
A significant number of lease agreements that currently represent operating leases will be reported in the balance sheet as right-of-use assets with the corresponding lease liabilities. As of the date of initial application of the new standard i.e. April 1, 2019, the Company will measure - in accordance with the modified retrospective method - lease liabilities arising from operating leases with a remaining term of more than 12 months at the present value of the remaining lease payments, taking into account current incremental borrowing rates. The right-of-use asset will be recognized at the same amount as the lease liability.
In the Statement of Profit and Loss, there will be a reduction in operating expenses and an increase in finance costs (lease interest expense at effective interest rate) and depreciation (on right-of-use assets on a straight-line basis).
In the cash flow statement, cash payments for the principal portion of the lease liability and its related interest are classified within financing activities. Payments for short-term leases, leases of low-value assets and variable lease payments not included in the measurement of the lease liability are presented within operating activities.
Appendix C, Uncertainty over Income Tax Treatments to Ind AS 12
This amendment clarifies how the recognition and measurement requirements of Ind-AS 12 âIncome taxes'', are applied where there is uncertainty over income tax treatments. An uncertain tax treatment is any tax treatment applied by an entity where there is uncertainty over whether that treatment will be accepted by the tax authority. The management is in process of evaluating the impact of the amendment on the financial position. The Company will adopt the amendment from April 1, 2019.
Prepayment Features with Negative Compensation, Amendments to Ind AS 109
The amendment to Ind AS 109 - âFinancial Instruments'' enables entities to measure certain pre-payable financials assets with negative compensation at amortised cost. These assets, which include some loan and debt securities, would otherwise have to be measured at fair value through profit and loss. This interpretation is effective for annual periods beginning on or after April 1, 2019. The Company is in process of evaluating the impact of the amendment on the financial position, though it is expected that the impact from the amendment would not be significant.
Plan Amendment, Curtailment or Settlement, Amendments to Ind AS 19
The amendment to Ind-AS 19 - Employee Benefits clarify that if a plan amendment, curtailment or settlement occurs, it is mandatory that the current service cost and the net interest for the period after the re-measurement are determined using the assumptions used for the re-measurement. This interpretation is effective for annual periods beginning on or after April 1, 2019. The Company is evaluating the impact of the amendment on the financial position, though it is expected that the impact from the amendment would not be significant. The Company will adopt the amendment from April 1, 2019.
Annual Improvements to Ind AS
Ind AS 23, âBorrowing Costâ- clarified that if a specific borrowing remains outstanding after the related qualifying asset is ready for its intended use or sale, it becomes part of general borrowings.
Ind AS 12, âIncome Taxesâ- clarified that the income tax consequences of dividends on financial instruments classified as equity should be recognised according to where the past transactions or events that generated distributable profits were recognised. These requirements apply to all income tax consequences of dividends.
These interpretations are effective for annual periods beginning on or after April 1, 2019. The Company is evaluating the impact of the amendment on the financial position, though it is expected that impact from the amendment would not be significant. The Company will adopt the amendments from April 1, 2019.
Mar 31, 2018
a. Basis of preparation
(i) Compliance with Ind AS
The financial statements of BASF India Limited (âthe Companyâ) have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (âthe Actâ) read together with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions and amendments of the Act.
The financial statements are presented in Indian Rupees (INR) which is also the Companyâs functional currency. All amounts have been rounded off to the nearest millions, unless otherwise indicated.
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 to the Act.
The accounting policies adopted in the preparation of the financial statements are consistent with those of the previous year.
(ii) Basis of measurement
The financial statements have been prepared on an accrual basis and on a historical cost basis, except for the following items:
- certain financial assets and liabilities (including derivative instruments) and contingent consideration that is measured at fair value,
- assets held for sale - measured at fair value less cost to sale whichever is low,
- net defined benefit (asset)/liability - Fair value of plan assets less present value of defined benefit obligations; and
- share-based payments measured at fair value on grant date with no subsequent adjustment to the payments recognised.
b. Use of estimates & judgements
The presentation of financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made by management that affect the reported amount of assets and liabilities and disclosure of contingent liabilities as on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Differences between the actual results and estimates are recognised in the period in which the results are known/materialise.
Information about critical judgments in applying accounting policies, as well as estimates and assumptions that have the most significant effect to the carrying amounts of assets and liabilities within the next financial year, are included in the following notes:
(a) Measurement of defined benefit obligations - Note 42
(b) Measurement and likelihood of occurrence of provisions and contingencies - Note 34 and 40
(c) Recognition of deferred tax assets - Note 3
(d) Measurement of useful lives for property, plant and equipment and intangible assets - Note 1(d) and 1(e)
(e) Loss allowance on trade receivables and other financial assets - Note 32(iv)
c. Revenue recognition
Sales of products and Indent commission are recognised when significant risks and rewards of ownership of the products are passed on to the customers and there is no significant uncertainty regarding amount of the consideration that will be derived. Sales are inclusive of Excise duty and net of returns, trade discount, rebates, sales tax and goods and service tax (GST).
Sale of services includes indent commission and revenue from technical and service charges. Revenue from sale of services are recognised as and when the services are provided.
The Company evaluates the arrangement with customers/suppliers whether it is acting as a principal or an agent of the customers/suppliers, considering underlying substance and terms and conditions of the arrangements. Accordingly, revenue is accounted either on gross or net basis based on the fulfillment of criteria of principal or agency.
Interest income is recognised using the effective interest rate method. When calculating the effective interest rate, the company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses.
Income from export incentives is recognised on accrual basis to the extent the ultimate realisation is reasonably certain.
d. Property, plant and equipment Recognition and measurement
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Items such as stores, spare parts and standby equipment are recognized as property, plant and equipment when it is held for use in production or supply of goods or services, or for administrative purpose and are expected to be used for more than one year. Otherwise such items are classified as inventory.
Subsequent expenditure
Subsequent costs are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is de-recognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Derecognition
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the item. Any gain or loss arising on disposal or retirement of item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the item and is recognized in the statement of profit and loss.
Depreciation
Depreciation on property, plant and equipment is calculated on a straight-line basis considering the following useful lives estimated by the Management based on technical evaluation or those prescribed under Schedule II of the Act.
Property, Plant and Equipment individually costing Rs. 5,000 or below are fully depreciated in the year of purchase. Depreciation on additions/deletions is calculated on a monthly pro-rata basis.
The Company reviews the residual value, useful lives and depreciation method annually and, if expectations differ from previous estimates, the change is accounted for as a change in accounting estimate on a prospective basis.
Leasehold land and Leasehold improvements are amortised over the period of lease or useful life whichever is lower.
e. Intangible assets and amortization
Intangible assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortized on a straight line basis over their estimated useful lives. Software is being amortized over a period of four years. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
f. Impairment of non-financial assets
The carrying amounts of assets are reviewed at each Balance Sheet date for any indication of impairment based on internal/external factors. Where the carrying value exceeds the estimated recoverable amount, provision for impairment is made to adjust the carrying value to the recoverable amount. The recoverable amount is the greater of the assets estimated net realizable value and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using an appropriate discounting rate. If at the Balance Sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
g. Borrowing
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in Statement of Profit and Loss over the period of the borrowings using the effective interest method.
Borrowings are derecognized when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in Statement of Profit and Loss as other gains/(losses).
Borrowing costs that are attributable to the acquisition and construction of qualifying assets are capitalised. Other borrowing costs are recognised as an expense in the period in which they are incurred.
Foreign exchange differences regarded as an adjustment to borrowing costs are presented in the Statement of Profit and Loss, within finance costs.
h. Inventories
Inventories including raw materials, work-in-progress, traded and finished goods are valued at cost or estimated net realisable value, whichever is lower. The costs are determined on weighted average basis and includes expenditure, incurred in acquiring inventories production of conversion costs and other costs incurred in bringing them to their present location and condition. Fixed production overheads are allocated on the basis of normal capacity of production facilities. Excise duty on goods manufactured by the Company and remaining in inventory is included as a part of valuation of finished goods for the year ended March 31, 2017 and goods and service tax (GST) is excluded from valuation of finished goods for the year ended March 31, 2018. Net realisable value is estimated selling price in the ordinary course of business less estimated costs of completion and selling expenses. The comparison of cost and net realisable value is made on an item by item basis.
i. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting and are based on monitoring of operating results by the Chief Operating Decision Maker, separately for making decision about resource allocation and performance assessment. The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company.
j. Non-current assets (or disposal groups) held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and contractual rights under insurance contracts, which are specifically exempt from this requirement.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) 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 (or disposal group), 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 (or disposal group) is recognised at the date of de-recognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.
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. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the Balance Sheet.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the Statement of Profit and Loss.
k. Financial instruments
Financial assets
Financial assets are recognised when the Company becomes a party to the contractual provisions of the instrument.
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
Subsequent measurement
For subsequent measurement, the Company classifies its financial assets in the following measurement categories:
- those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
- those measured at amortised cost.
The classification depends on the entityâs business model for managing the financial assets and the contractual terms of the cash flows.
A financial asset is measured at amortised cost when they are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows that are solely payments of principal and interest. The amortised cost of a financial asset is also adjusted for impairment loss, if any.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income.
Financial liabilities
Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument.
Financial liabilities are initially measured at fair value minus, in case of financial liabilities not at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial liabilities.
Borrowings are recognized initially at fair value, net of transaction costs incurred, and subsequently carried at amortised cost, any difference between the initial carrying value and the redemption value is recognized in the Statement of Profit and Loss over the period of the borrowings using the effective interest rate method.
Subsequent to initial recognition these financial liabilities are measured at amortised cost using effective interest method.
Offsetting
Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
Impairment of financial assets
The Company assesses on a forward-looking basis the expected credit losses associated with its assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk since its initial recognition. Note 32 details how the Company determines whether there has been a significant increase in credit risk.
For trade receivables only, the Company applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables. The impairment losses and reversals are recognized in Statement of Profit and Loss.
Derecognition of financial assets and financial liabilities A financial asset is derecognised only when:
The Company has transferred the rights to receive cash flows from the financial asset or retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
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. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset 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.
The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows under the modified terms are substantially different. The difference between the carrying amount and the financial liability extinguished and the new liability with modified terms is recognized in the Statement of Profit and Loss.
Measurement of fair values
The Company measures financial instruments at fair value in accordance with the accounting policies mentioned above. 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:
â in the principal market of the asset or liability; or
â in the absence of a principal market, in the most advantageous market for the asset or liability.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy that categorises into three levels, as described as follows, the inputs to valuation techniques used to measure value. The fair value hierarchy gives highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and lowest priority to unobservable inputs (level 3 inputs).
The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
l. Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.
m. Provisions and contingent liabilities
Provisions are recognized 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 based on the managementâs best estimate of the expenditure required to settle the present obligation at the end of the reporting period.
If the effect of the time value of money is material, provisions are discounted to reflect its present value using a current pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made.
When some or all of the economic benefits required to settle, a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
n. Onerous contracts
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.
o. Foreign currency
Transactions in foreign currencies are translated in to currency of the primary economic environment in the which the entity operates (the âfunctional currencyâ) of the Company using the exchange rates prevailing on the date of transaction. Monetary items in foreign currencies are stated at the closing exchange rate. Gains/losses on conversion/translation are recognised in the Statement of Profit and Loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
p. Employee benefits
Short Term Employee benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits and are recognized in the Statement of Profit and Loss as an expense at the undiscounted amount on an accrual basis.
Post Employment Employee benefits
The Companyâs contributions to defined contribution plans such as Superannuation Fund, Employee State Insurance and Labour Welfare Fund are recognized as expense in the Statement of Profit and Loss on an accrual basis.
Eligible employees receive benefits from a provident fund which is a defined benefit plan. Both the employee and the Company make monthly contributions to the provident fund plan equal to a specified percentage of the covered employeeâs salary. The Company contributes a part of the contributions to the BASF India Limited
Provident Fund Trust (âthe Trustâ). The rate at which the annual interest is payable to the beneficiaries by the Trust is being determined by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate. Any obligation in this respect is measured on the basis of an independent actuarial valuation. The remaining portion is contributed to the Government administered pension fund in respect of which the Company has no further obligations. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.
The Companyâs liability towards gratuity, which is a defined benefit plan, is determined on the basis of valuations, as at Balance Sheet date, carried out by an independent actuary using Projected Unit Credit Method. Remeasurement of the net defined benefit liability which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling if any (excluding interest) are recognised immediately in the Balance Sheet with a charge or credit recognised in Other Comprehensive Income in the period in which they occur. Re-measurement recognised in Other Comprehensive Income is recognised immediately in retained earnings and will not be reclassified to Statement of Profit and Loss.
Other long term employee benefits
The Companyâs liabilities towards Compensated Absences and Long Service Awards to employees are determined on the basis of valuations, as at Balance Sheet date, carried out by an independent actuary using Projected Unit Credit Method. The benefits are discounted using the appropriate market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements comprise experience adjustments and the effects of changes in actuarial assumptions and are recognised immediately 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 the settlement for at least 12 months after the reporting period, regardless of when the actual settlement is expected to occur.
Termination benefits
Compensation paid to employees under Voluntary Retirement Scheme/Severance payments are recognised as an expense in the Statement of Profit and Loss when employees accept the scheme/payments.
Share based payments
The Ultimate Holding Company (âBASF SEâ) offers Share Price based compensation program (âoption programâ) for senior executives of BASF group. Participation in this program is voluntary.
Options mentioned above are issued by BASF SE and the cost of such options is not recharged to the Company. However, the Company recognises these share based payment transactions of BASF SE in accordance with the requirement of paragraph 43 A and 43 B of Ind AS 102 - Share Based Payments. As required under para 43B of Ind AS 102, since the Company receives the services of the employees to whom the options have been granted by BASF SE and the Company has no obligation to settle these options, the Company accounts for these services as an equity settled share based payment transaction.
q. Leases
As a Lessee
Determining whether an arrangement contains lease
At inception of an arrangement, it is determined whether the arrangement is or contains a lease.
At inception or on reassessment of the arrangement that contains a lease, the payments and other consideration required by such an arrangement are separated into those for the lease and those for other elements on the basis of their relative fair values. If it is concluded that for a finance lease that is impracticable to separate the lease payments reliably, then an asset and a liability are recognized at an amount equal to the fair value of the underlying asset. The liability is reduced as payments are made and an imputed finance cost on the liability is recognized using the incremental borrowing rate
Assets held under leases
Leases of property, plant and equipment that transfer to the Company substantially all the risks and rewards of ownership are classified as finance leases. The leased assets are measured initially at an amount equal to the lower of fair value and the present value of the minimum lease payments. Subsequent to the initial recognition, the assets are accounted for in accordance with the accounting policy applicable to similar owned assets. Assets held under leases that do not transfer to the Company substantially all the risk and rewards of ownership (i.e. operating leases) are not recognized in the Companyâs Balance Sheet.
Lease payments
Payments made under operating leases are generally recognized in Statement of Profit and Loss on a straight line basis over the term of the lease unless such payments are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases.
r. Taxation
Current tax is determined as the amount of tax payable in respect of taxable income for the year computed in accordance with relevant provisions of Income Tax Act, 1961 adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to tax authorities.
The Company recognises Minimum Alternate Tax credit under the Income Tax Act, 1961 as an asset only when and to the extent there is convincing evidence that the Company will be liable to pay normal income tax during the specified period.
Deferred tax charge or credit and correspondingly deferred tax liability or asset is recognised using tax rates that have been enacted or substantively enacted at the Balance Sheet date. Deferred tax is recognised, subject to the consideration of prudence, on temporary differences, being the difference between carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets are recognized to the extent that it probable that future taxable profits will be available against which they can be used. The existence of unused tax losses is strong evidence that future taxable profit may not be available. Therefore, in case of history of recent losses, the Company recognizes a deferred tax asset only to the extent that it has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available against which such deferred tax asset can be realized. Deferred tax assets - unrecognized or recognized are reviewed at each reporting date and are recognized/reduced to the extent that it is probable/no longer probable respectively that related tax benefit will be realized. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and these relate to income taxes levied by the same tax authorities and are intended to settle current tax liabilities and assets on a net basis or such tax assets and liabilities will be realized simultaneously.
Current tax assets and liabilities are offset where the entity has legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in Statement of Profit and Loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
s. Earnings per share
The basic earnings per share are computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding during the reporting period. Diluted earnings per share is computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity and dilutive equity equivalent shares outstanding during the year, except where the results would be anti-dilutive.
t. Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with financial institutions, other short term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash which are subject to an insignificant risk of change in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the Balance Sheet.
u. Derivative financial instruments
The Company enters majorly into foreign exchange forward contracts to mitigate the foreign currency exposure risk.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in Statement of Profit and Loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in Statement of Profit and Loss depends on the nature of the hedge relationship. Derivative assets and derivative liabilities are presented on gross basis in the Balance Sheet.
v. Standards issued but not yet effective
The Ministry of Corporate Affairs (MCA) notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 (the âRulesâ) on March 28, 2018. The rules shall be effective from reporting periods beginning on or after April 1, 2018. Amendments to Ind AS as per these rules are mentioned below:
Ind AS 115 - Revenue from contracts with customers
I nd AS 115, Revenue from contracts with customers deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entityâs contracts with customers. Revenue is recognised when a customer obtains control of a promised good or service and thus has the ability to direct the use and obtain the benefits from the good or service in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The standard replaces Ind AS 18 Revenue and Ind AS 11 Construction contracts and related appendices.
The Company is in the process of assessing the detailed impact of Ind AS 115, though it is expected that application of Ind AS 115 will not significantly change the timing of the Companyâs revenue recognition. The Company intends to adopt the standard using the modified retrospective approach which means that the cumulative impact of the adoption will be recognised in retained earnings as of April 1, 2018 and that comparatives will not be restated.
Appendix B to Ind AS 21 - Foreign currency transactions and advance consideration
The appendix clarifies how to determine the date of transaction for the exchange rate to be used on initial recognition of a related asset, expense or income where an entity pays or receives consideration in advance for foreign currency-denominated contracts. For a single payment or receipt, the date of the transaction should be the date on which the entity initially recognises the non-monetary asset or liability arising from the advance consideration (the prepayment or deferred income/contract liability). If there are multiple payments or receipts for one item, date of transaction should be determined as above for each payment or receipt.
The management is in process of assessing the impact of above amendment, though it is expected that impact from the amendment would not be significant. The Company intends to adopt the amendments prospectively from April 1, 2018.
Ind AS 40 - Investment property - Transfers of investment property
The amendments clarify that transfers to, or from, investment property can only be made if there has been a change in use that is supported by evidence. A change in use occurs when the property meets, or ceases to meet, the definition of investment property. A change in intention alone is not sufficient to support a transfer. The list of evidence for a change of use in the standard was re-characterised as a non-exhaustive list of examples and scope of these examples have been expanded to include assets under construction/development and not only transfer of completed properties.
The management has assessed the effects of the amendment on classification of existing property at April 1, 2018 and concluded that no reclassifications are required. The Company intends to adopt the amendments prospectively from April 1, 2018.
Ind AS 12 - Income taxes regarding recognition of deferred tax assets on unrealised losses
The amendments clarify the accounting for deferred taxes where an asset is measured at fair value and that fair value is below the assetâs tax base. The Company shall apply the amendments to Ind AS 12 retrospectively in accordance with Ind AS 8.
The management is in process of assessing the impact of above amendment, though it is expected that impact from the amendment would not be significant. The Company will adopt the amendments from April 1, 2018.
Mar 31, 2017
a. Basis of preparation
(i) Compliance with Ind AS
The financial statements of BASF India Limited (âthe Companyâ) have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (âthe Actâ) read together with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.
The financial statements are presented in Indian Rupees (INR) which is also a Companyâs functional currency. All amounts have been rounded off to the nearest millions, unless otherwise indicated.
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 to the Act.
These financial statements are the first financial statements of the Company under Ind AS. Refer note 45 for an explanation of how the transition from previous GAAP to Ind AS has affected the Companyâs financial position, financial performance and cash flows.
The accounting policies adopted in the preparation of the financial statements are consistent with those of the previous year. The financial statements were authorised for issue by the Companyâs Board of Directors on 4th May 2017.
(ii) Basis of measurement
The financial statements have been prepared on an accrual basis and on a historical cost basis, except for the following items:
- certain financial assets and liabilities (including derivative instruments) and contingent consideration that is measured at fair value,
- assets held for sale - measured at fair value less cost to sale whichever is low,
- net defined benefit (asset)/liability - Fair value of plan assets less present value of defined benefit obligations; and
- share-based payments measured at fair value on grant date with no subsequent adjustment to the payments recognised.
b. Use of estimates & judgements
The presentation of financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made by management that affect the reported amount of assets and liabilities and disclosure of contingent liabilities as on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Differences between the actual results and estimates are recognised in the period in which the results are known/materialise.
Information about critical judgments in applying accounting policies, as well as estimates and assumptions that have the most significant effect to the carrying amounts of assets and liabilities within the next financial year, are included in the following notes:
(a) Measurement of defined benefit obligations - Note 42
(b) Measurement and likelihood of occurrence of provisions and contingencies - Note 34 and 40
(c) Recognition of deferred tax assets - Note 4
(d) Measurement of useful lives for property, plant and equipment and intangible assets - Note 1(d) and 1(e)
c. Revenue recognition
Sales of products and Indent commission are recognised when risks and rewards of ownership of the products are passed on to the customers, which is generally on dispatch of goods and there is no significant uncertainty regarding amount of the consideration that will be derived. Sales include excise duty but exclude trade discounts, rebates and sales tax.
Sale of services includes indent commission and revenue from technical and service charges. Revenue from technical and service charges are recognised as and when the services are provided.
Interest income is recognised using the effective interest rate method. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but does not consider the expected credit losses.
d. Property, plant and equipment Recognition and measurement
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Items such as stores, spare parts and standby equipment are recognized as property, plant and equipment when it is held for use in production or supply of goods or services, or for administrative purpose and are expected to be used for more than one year. Otherwise such items are classified as inventory.
Subsequent expenditure
Subsequent costs are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is de-recognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Derecognition
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the item. Any gain or loss arising on disposal or retirement of item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the item and is recognized in the statement of profit and loss.
Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment recognised as at 1 April 2015 (transition date) measured as per the previous GAAP and use that as its deemed cost as at date of transition.
Depreciation
Depreciation on property, plant and equipment is calculated on a straight-line basis considering the following useful lives estimated by the management based on technical evaluation which may/are different than those indicated in Schedule II of the Act.
Property, Plant and Equipment individually costing Rs. 5,000 or below are fully depreciated in the year of purchase. Depreciation on additions/deletions is calculated on a monthly pro-rata basis.
The Company reviews the residual value, useful lives and depreciation method annually and, if expectations differ from previous estimates, the change is accounted for as a change in accounting estimate on a prospective basis.
Leasehold land and leasehold improvements are amortised over the period of lease or useful life whichever is lower.
e. Intangible assets and amortization
Intangible assets are stated at acquisition cost, net of accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortized on a straight line basis over their estimated useful lives. Software is being amortized over a period of four years. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
f. Impairment of non-financial assets
The carrying amounts of assets are reviewed at each Balance Sheet date for any indication of impairment based on internal/external factors. Where the carrying value exceeds the estimated recoverable amount, provision for impairment is made to adjust the carrying value to the recoverable amount. The recoverable amount is the greater of the assets estimated net realizable value and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using an appropriate discounting rate. If at the Balance Sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
g. Borrowing
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in Statement of Profit and Loss over the period of the borrowings using the effective interest method.
Borrowings are derecognized when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in Statement of Profit and Loss as other gains/(losses).
Borrowing costs that are attributable to the acquisition and construction of qualifying assets are capitalised. Other borrowing costs are recognised as an expense in the period in which they are incurred.
h. Inventories
Inventories are valued at cost or estimated net realisable value, whichever is lower. The costs are determined on weighted average basis and includes expenditure, incurred in acquiring inventories production of conversion costs and other costs incurred in bringing them to their present location and condition. Fixed production overheads are allocated on the basis of normal capacity of production facilities. Excise duty on goods manufactured by the Company and remaining in inventory is included as a part of valuation of finished goods. Net realisable value is estimated selling price in the ordinary course of business less estimated costs of completion and selling expenses. The comparison of cost and net realisable value is made on an item by item basis.
i. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting and are based on monitoring of operating results by the Chief Operating Decision Maker, separately for making decision about resource allocation and performance assessment. The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company.
j. Non-current assets (or disposal groups) held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and contractual rights under insurance contracts, which are specifically exempt from this requirement.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) 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 (or disposal group), 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 (or disposal group) is recognised at the date of de-recognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.
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. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the Balance Sheet.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the Statement of Profit and Loss.
k. Financial instruments
Financial assets are recognised when the Company becomes a party to the contractual provisions of the instrument.
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in Statement of Profit and loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
Subsequent measurement
For subsequent measurement, the Company classifies its financial assets in the following measurement categories:
- those to be measured subsequently at fair value (either through Other Comprehensive Income, or through Profit or Loss), and
- those measured at amortised cost.
The classification depends on the entityâs business model for managing the financial assets and the contractual terms of the cash flows.
A financial asset is measured at amortised cost when they are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows that are solely payments of principal and interest. The amortised cost of a financial asset is also adjusted for impairment loss, if any.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through Other Comprehensive Income.
Financial liabilities
Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument.
Financial liabilities are initially measured at fair value minus, in case of financial liabilities not at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial liabilities.
Borrowings are recognized initially at fair value, net of transaction costs incurred, and subsequently carried at amortised cost, any difference between the initial carrying value and the redemption value is recognized in the Statement of Profit and Loss over the period of the borrowings using the effective interest rate method.
Subsequent to initial recognition these financial liabilities are measured at amortised cost using effective interest method.
Offsetting
Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
Impairment of financial assets
The Company assesses on a forward-looking basis the expected credit losses associated with its assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk since its initial recognition. Note 32 details how the Company determines whether there has been a significant increase in credit risk.
For trade receivables only, the Company applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables. The impairment losses and reversals are recognized in Statement of Profit and Loss.
Derecognition of financial assets and financial liabilities A financial asset is derecognised only when:
The Company has transferred the rights to receive cash flows from the financial asset or retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
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. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset 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.
The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows under the modified terms are substantially different. The difference between the carrying amount and the financial liability extinguished and the new liability with modified terms is recognized in Statement of Profit and Loss.
Measurement of fair values
The Company measures financial instruments at fair value in accordance with the accounting policies mentioned above. 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 of the asset or liability; or
- in the absence of a principal market, in the most advantageous market for the asset or liability.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy that categorises into three levels, as described as follows, the inputs to valuation techniques used to measure value. The fair value hierarchy gives highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and lowest priority to unobservable inputs (level 3 inputs).
Level 1: Fair value based on quoted, unadjusted prices on active markets
Level 2: Fair value based on parameters for which directly or indirectly quoted prices on active market are available
Level 3: Fair value based on parameters for which there is no observable market data
The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
l. Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.
m. Provisions and contingent liabilities
Provisions are recognized 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 based on the managementâs best estimate of the expenditure required to settle the present obligation at the end of the reporting period.
If the effect of the time value of money is material, provisions are discounted to reflect its present value using a current pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made.
When some or all of the economic benefits required to settle, a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
n. Onerous contracts
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.
o. Foreign currency
Transactions in foreign currencies are translated in to functional currency of the Company using the exchange rates prevailing on the date of transaction. Monetary items in foreign currencies are stated at the closing exchange rate. Gains/losses on conversion/translation are recognised in the Statement of Profit and Loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
p. Employee benefits
Short Term Employee Benefits
All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits and are recognized in the Statement of Profit and Loss as an expense at the undiscounted amount on an accrual basis.
Post Employment Employee Benefits
The Companyâs contributions to defined contribution plans such as Superannuation Fund, Employee State Insurance and Labour Welfare Fund are recognized as expense in the Statement of Profit and Loss on an accrual basis.
The Companyâs liability towards Gratuity, which is a defined benefit plan, is determined on the basis of valuations, as at Balance Sheet date, carried out by an independent actuary using Projected Unit Credit Method. Remeasurement of the net defined benefit liability which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling if any (excluding interest) are recognised immediately in the Balance Sheet with a charge or credit recognised in Other Comprehensive Income in the period in which they occur. Re-measurement recognised in Other Comprehensive Income is recognised immediately in retained earnings and will be reclassified to Statement of Profit and Loss.
Eligible employees receive benefits from a provident fund which is a defined benefit/contribution plan. Both the employee and the Company make monthly contributions to the provident fund plan equal to a specified percentage of the covered employeeâs salary. The Company contributes a part of the contributions to the BASF India Limited Provident Fund Trust (âthe Trustâ). The rate at which the annual interest is payable to the beneficiaries by the Trust is being determined by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate. Any obligation in this respect is measured on the basis of an independent actuarial valuation. The remaining portion is contributed to the Government administered pension fund in respect of which the Company has no further obligations.
Other long term employee benefits
Companyâs liabilities towards Compensated Absences and Long Service Awards to employees are determined on the basis of valuations, as at Balance Sheet date, carried out by an independent actuary using Projected Unit Credit Method. Actuarial gains and losses comprise experience adjustments and the effects of changes in actuarial assumptions and are recognised immediately in the Statement of Profit and Loss.
Termination benefits
Compensation paid to employees under Voluntary Retirement Scheme/Severance payments are recognised as an expense when employees accept the scheme/payments.
Share based payments
The Ultimate Holding Company (âBASF SEâ) offers Share Price based compensation program (âOption Programâ) for senior executives of BASF group. Participation in this program is voluntary.
Options mentioned above are issued by BASF SE and the cost of such options is not recharged to the Company. However, the Company recognises these share based payment transactions of BASF SE in accordance with the requirement of paragraph 43 A and 43 B of Ind AS 102 Share Based Payments. As required under para 43 B of Ind AS 102, since the Company receives the services of the employees to whom the options have been granted by BASF SE and the Company has no obligation to settle these options, the Company accounts for these services as an equity settled share based payment transaction.
q. Leases
Determining whether an arrangement contains lease
At inception of an arrangement, it is determined whether the arrangement is or contains a lease.
At inception or on reassessment of the arrangement that contains a lease, the payments and other consideration required by such an arrangement are separated into those for the lease and those for other elements on the basis of their relative fair values. If it is concluded that for a finance lease that is impracticable to separate the lease payments reliably, then an asset and a liability are recognized at an amount equal to the fair value of the underlying asset. The liability is reduced as payments are made and an imputed finance cost on the liability is recognized using the incremental borrowing rate.
Assets held under leases
Leases of property, plant and equipment that transfer to the Company substantially all the risks and rewards of ownership are classified as finance leases. The leased assets are measured initially at an amount equal to the lower of fair value and the present value of the minimum lease payments. Subsequent to the initial recognition, the assets are accounted for in accordance with the accounting policy applicable to similar owned assets. Assets held under leases that do not transfer to the Company substantially all the risk and rewards of ownership (i.e. operating leases) are not recognized in the Companyâs Balance Sheet.
Lease payments
Payments made under operating leases are generally recognized in Statement of Profit and Loss on a straight line basis over the term of the lease unless such payments are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases.
r. Taxation
Current tax is determined as the amount of tax payable in respect of taxable income for the year computed in accordance with relevant provisions of Income Tax Act, 1961.
The Company recognises Minimum Alternate Tax credit under the Income Tax Act, 1961 as an asset only when and to the extent there is convincing evidence that the Company will be liable to pay normal income tax during the specified period.
Deferred tax charge or credit and correspondingly deferred tax liability or asset is recognised using tax rates that have been enacted or substantively enacted at the Balance Sheet date. Deferred tax is recognised, subject to the consideration of prudence, on temporary differences, being the difference between carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which they can be used. The existence of unused tax losses is strong evidence that future taxable profit may not be available. Therefore, in case of history of recent losses, the Company recognizes a deferred tax asset only to the extent that it has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available against which such deferred tax asset can be realized. Deferred tax assets - unrecognized or recognized are reviewed at each reporting date and are recognized/reduced to the extent that it is probable/no longer probable respectively that related tax benefit will be realized. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and these relate to income taxes levied by the same tax authorities and are intended to settle current tax liabilities and assets on a net basis or such tax assets and liabilities will be realized simultaneously.
Current and deferred tax is recognised in Statement of Profit and Loss, except to the extent that it relates to items recognised in Other Comprehensive Income or directly in equity. In this case, the tax is also recognised in Other Comprehensive Income or directly in equity, respectively.
s. Earnings per share
The basic earnings per share are computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity shares outstanding during the reporting period. Diluted earnings per share is computed by dividing the net profit attributable to the equity shareholders for the year by the weighted average number of equity and dilutive equity equivalent shares outstanding during the year, except where the results would be anti-dilutive.
t. Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less, and bank overdrafts.
u. Derivative financial instruments
The Company enters majorly into foreign exchange forward contracts to mitigate the foreign currency exposure risk.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in Statement of Profit and Loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in Statement of Profit and Loss depends on the nature of the hedge relationship.
v. Standards issued but not yet effective
In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, âStatement of Cash Flowsâ and Ind AS 102, âShare-based payment.â These amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7, âStatement of Cash Flowsâ and IFRS 2, âShare-based payment,â respectively. The amendments are applicable from 1 April, 2017.
Amendment to Ind AS 7:
The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the Balance Sheet for liabilities arising from financing activities, to meet the disclosure requirement.
The effect on the financial statements is being evaluated by the Company.
Amendment to Ind AS 102:
The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash settled awards and awards that include a net settlement feature in respect of withholding taxes.
It clarifies that the fair value of cash-settled awards is determined on a basis consistent with that used for equity-settled awards. Market-based performance conditions and non-vesting conditions are reflected in the âfair valuesâ, but non-market performance conditions and service vesting conditions are reflected in the estimate of the number of awards expected to vest. Also, the amendment clarifies that if the terms and conditions of a cash-settled share-based payment transaction are modified with the result that it becomes an equity-settled share-based payment transaction, the transaction is accounted for as such from the date of the modification. Further, the amendment requires the award that include a net settlement feature in respect of withholding taxes to be treated as equity-settled in its entirety. The cash payment to the tax authority is treated as if it was part of an equity settlement.
The requirements of the amendment have no impact on the financial statements as the Company does not have any cash settled awards.
Mar 31, 2016
(a) Basis of preparation
The financial statements of BASF India Limited (''the Company'') have
been prepared in accordance with generally accepted accounting
principles in India (Indian GAAP). The Company has prepared these
financial statements to comply in all material respects with the
provisions of the Companies Act, 2013 (''the Act'') and accounting
standards notified under Section 133 of the Companies Act, 2013 read
together with Rule 7 of the Companies (Accounts) Rules, 2014. The
financial statements have been prepared on an accrual basis and under
the historical cost convention. The financial statements are presented
in Millions of Indian Rupees. All assets and liabilities have been
classified as current or non-current as per the Company''s normal
operating cycle and other criteria set out in the Schedule III to the
Companies Act, 2013.
The accounting policies adopted in the preparation of the financial
statements are consistent with those of the previous year.
(b) Use of estimates
The presentation of financial statements in conformity with the
generally accepted accounting principles requires estimates and
assumptions to be made by management that affect the reported amount of
assets and liabilities and disclosure of contingent liabilities as on
the date of the financial statements and the reported amount of
revenues and expenses during the reporting period. Differences between
the actual results and estimates are recognised in the period in which
the results are known/materialise.
(c) Revenue Recognition
Sales of products and Indent commission are recognised when risks and
rewards of ownership of the products are passed on to the customers,
which is generally on despatch of goods and there is no significant
uncertainty regarding amount of the consideration that will be derived.
Revenue from technical and service charges are recognised as and when
the services are provided. Sales include excise duty but exclude trade
discounts, rebates and sales tax. Interest income is recognised on a
time proportion basis taking into account the amounts invested and the
rate of interest.
(d) Fixed assets and depreciation
Fixed assets are recorded at cost net of cenvat credit wherever
eligible and are stated net of accumulated depreciation and impairment
losses, if any. Cost includes all expenses attributable to the
construction, acquisition and installation (including eligible
borrowing cost) till the date the asset is ready to use.
Depreciation on fixed assets is calculated on a straight-line basis
considering the following useful lives estimated by the management
based on technical evaluation which are different than those indicated
in Schedule II of the Act (Also refer note 9(A))
Buildings  30 years
Plant & Machinery  5 to 20 years
Computers  4 years
Vehicles  4 years
Furniture and Fixtures  8 years
Office Equipment  5 years
Assets individually costing Rs. 5,000 or below are fully depreciated in
the year of purchase. Depreciation on additions/deletions is calculated
on a monthly pro-rata basis. Accelerated depreciation is charged on
certain assets based on periodic review of estimated useful life.
Leasehold land and Leasehold Improvements are amortised over the period
of lease or useful life whichever is lower.
(e) Intangible assets and amortization
Intangible Assets are stated at acquisition cost, net of accumulated
amortization and accumulated impairment losses, if any. Intangible
assets are amortized on a straight line basis over their estimated
useful lives. Goodwill arising on acquisition is being amortized over a
period of five years. Software is being amortized over a period of four
years.
(f) Impairment
The carrying amounts of assets are reviewed at each balance sheet date
for any indication of impairment based on internal/external factors.
Where the carrying value exceeds the estimated recoverable amount,
provision for impairment is made to adjust the carrying value to the
recoverable amount. The recoverable amount is the greater of the assets
estimated net realizable value and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present
value using an appropriate discounting rate. If at the Balance sheet
date there is an indication that a previously assessed impairment loss
no longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount subject to a maximum of depreciable
historical cost.
(g) Borrowing costs
Borrowing costs that are attributable to the acquisition and
construction of qualifying assets are capitalised. Other borrowing
costs are recognised as an expense in the period in which they are
incurred.
(h) Inventories
Inventories are valued at cost or estimated net realisable value,
whichever is lower. The costs are determined on weighted average basis.
Fixed production overheads are allocated on the basis of normal
capacity of production facilities. Excise duty on goods manufactured by
the Company and remaining in inventory is included as a part of
valuation of finished goods.
(i) Foreign Currency
Transactions in foreign currencies are recorded at the exchange rates
prevailing on the date of transaction. Monetary items in foreign
currencies are stated at the closing exchange rate. Gains/losses on
conversion/ translation are recognised in the Statement of Profit and
Loss. All forward exchange contracts are backed by underlying
transactions and the premium or discount arising at inception of such a
forward exchange contract is amortised as expense or income over the
life of the contract and the exchange differences on such contracts are
recognised in the Statement of Profit and Loss in the reporting period
in which the exchange rates change. With effect from 1st April 2012,
the Company has availed of the option provided under paragraph 46A of
AS 11: The Effects of Changes in Foreign Exchange Rates inserted vide
Notification dated December 29, 2011. Consequently, the exchange
differences arising on long-term foreign currency borrowings
attributable to the acquisition of depreciable assets, which were until
then being recognized in the Statement of Profit and Loss, are being
adjusted in the cost of the depreciable asset with effect from 1 April,
2012, and are being depreciated over the balance life of such assets.
In other cases, if any, the foreign exchange difference is accumulated
in a Foreign Currency Monetary Item Translation Difference Account, and
amortised over the balance period of such long-term monetary
asset/liability. Pursuant to this, foreign exchange differences
amounting to Rs. 537.9 million (Previous year Rs. 536.0 million) have
been adjusted in the cost of the depreciable fixed assets/capital
work-in- progress with corresponding increase in profits for the year.
(Previous year decrease in loss for the year.)
(j) Employee Benefits
(A) Short Term Employee Benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short term employee benefits and are
recognized in the Statement of Profit and Loss as an expense at the
undiscounted amount on an accrual basis.
(B) Post Employment Employee Benefits
Company''s contributions to defined contribution plans such as
Superannuation Fund, Family Pension Fund, Group Mediclaim Insurance
Policy, Employee State Insurance and Labour Welfare Fund are recognized
in the Statement of Profit and Loss on an accrual basis.
Company''s liability towards Gratuity, which is a defined benefit plan,
is determined on the basis of valuations, as at balance sheet date,
carried out by an independent actuary using Projected Unit Credit
Method. Actuarial gains and losses comprise experience adjustments and
the effects of changes in actuarial assumptions and are recognised
immediately in the Statement of Profit and Loss.
Eligible employees receive benefits from a provident fund which is a
defined benefit/contribution plan. Both the employee and the Company
make monthly contributions to the provident fund plan equal to a
specified percentage of the covered employee''s salary. The Company
contributes a part of the contributions to the BASF India Limited
Provident Fund Trust (''the Trust''). The rate at which the annual
interest is payable to the beneficiaries by the Trust is being
determined by the Government. The Company has an obligation to make
good the shortfall, if any, between the return from the investments of
the Trust and the notified interest rate. The remaining portion is
contributed to the Government administered pension fund in respect of
which the Company has no further obligations.
(C) Other Long Term Employee Benefits
Company''s liabilities towards Compensated Absences and Long Service
Awards to employees are determined on the basis of valuations, as at
balance sheet date, carried out by an independent actuary using
Projected Unit Credit Method. Actuarial gains and losses comprise
experience adjustments and the effects of changes in actuarial
assumptions and are recognised immediately in the Statement of Profit
and Loss.
(D) Termination Benefits
Compensation paid to employees under Voluntary Retirement
Scheme/Severance payments are recognised as an expense when employees
accept the scheme/payments.
(k) Assets taken on lease
Lease rentals payable as per agreements for assets taken on operating
lease are charged as expenditure on straight line basis over the lease
term.
(l) Taxation
Current tax is determined as the amount of tax payable in respect of
taxable income for the year computed in accordance with relevant
provisions of Income Tax Act, 1961.
In accordance with the guidance note issued by the Institute of
Chartered Accountants of India (''ICAI'') on accounting for credit
available in respect of Minimum Alternate Tax (MAT) under the Income
tax Act, 1961, the Company recognises MAT credit as an asset only when
and to the extent there is convincing evidence that the Company will be
liable to pay normal income tax during the specified period.
Deferred tax charge or credit and correspondingly deferred tax
liability or asset is recognised using tax rates that have been enacted
or substantively enacted at the balance sheet date. Deferred tax is
recognised, subject to the consideration of prudence, on timing
differences, being the difference between taxable income and accounting
income that originate in one period and are capable of reversal in one
or more subsequent periods. In the event of unabsorbed depreciation or
carried forward loss under taxation laws, deferred tax assets are
recognised only if there is virtual certainty supported by convincing
evidence that sufficient future taxable income will be available
against which such deferred tax assets can be realised. Deferred tax
assets are reviewed at each balance sheet date and written down or
written up to reflect the amount i.e. reasonable/virtually certain (as
the case may be) to be realised.
(m) Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised only when there is a present obligation as a
result of past events, it is more likely than not that an outflow of
resources will be required to settle the obligation and when a reliable
estimate of the amount of the obligation can be made.
Contingent liability is disclosed for (i) Possible obligations which
will be confirmed only by future events not wholly within the control
of the Company or (ii) Present obligations arising from past events
where it is not probable that an outflow of resources will be required
to settle the obligation or a reliable estimate of the amount of the
obligation cannot be made.
Contingent assets are neither recognised nor disclosed in the financial
statements.
(n) Research & Development Expenditure
Research expenditure is recognised as an expense in the period in which
it is incurred.
(o) Earnings per share
The basic earnings per share are computed by dividing the net profit
attributable to the equity shareholders for the year by the weighted
average number of equity shares outstanding during the reporting
period. Diluted earnings per share is computed by dividing the net
profit attributable to the equity shareholders for the year by the
weighted average number of equity and dilutive equity equivalent shares
outstanding during the year, except where the results would be
anti-dilutive.
Mar 31, 2015
(a) Basis of preparation
The financial statements of BASF India Limited ('the Company') have
been prepared in accordance with generally accepted accounting
principles in India (Indian GAAP). The Company has prepared these
financial statements to comply in all material respects with the
provisions of the Companies Act, 2013 ('the Act') and accounting
standards notified under Section 133 of the Companies Act, 2013 read
together with paragraph 7 of the Companies (Accounts) Rules, 2014. The
financial statements have been prepared on an accrual basis and under
the historical cost convention. The financial statements are presented
in Millions of Indian Rupees.
All assets and liabilities have been classified as current or
non-current as per the Company's normal operating cycle and other
criteria set out in the Schedule III to the Companies Act, 2013.
The accounting policies adopted in the preparation of the financial
statements are consistent with those of the previous year.
(b) Use of estimates
The presentation of financial statements in conformity with the
generally accepted accounting principles requires estimates and
assumptions to be made by management that affect the reported amount of
assets and liabilities and disclosure of contingent liabilities as on
the date of the financial statements and the reported amount of
revenues and expenses during the reporting period. Differences between
the actual results and estimates are recognized in the period in which
the results are known/materialize.
(c) Revenue Recognition
Sales of products and Indent Commission are recognised when risks and
rewards of ownership of the products are passed on to the customers,
which is generally on despatch of goods and there is no significant
uncertainty regarding amount of the consideration that will be derived.
Revenue from technical and service charges are recognised as and when
the services are provided. Sales include excise duty but exclude trade
discounts, rebates and sales tax. Interest income is recognised on a
time proportion basis taking into account the amounts invested and the
rate of interest.
(d) Fixed assets and depreciation
Fixed Assets are recorded at cost net of Cenvat credit wherever
eligible and are stated net of accumulated depreciation and impairment
losses, if any. Cost includes all expenses attributable to the
construction, acquisition and installation (including eligible
borrowing cost) till the date the asset is ready to use.
Depreciation on fixed assets is calculated on a straight-line basis
considering the following useful lives estimated by the management
based on technical evaluation which are different than those indicated
in Schedule II of the Act (Also refer note 10(A))
Buildings  30 years
Plant & Machinery  5 to 20 years
Computers  4 years
Vehicles  4 years
Furniture and Fixtures  8 years
Office Equipment  5 years
Assets Individually costing Rs. 5,000 or below are fully depreciated in
the year of purchase. Depreciation on additions/deletions is calculated
on a monthly pro-rata basis. Accelerated depreciation is charged on
certain assets based on periodic review of estimated useful life.
Leasehold land and Leasehold Improvements are amortised over the period
of lease or useful life whichever is lower.
(e) Intangible assets and amortization
Intangible Assets are stated at acquisition cost, net of accumulated
amortization and accumulated impairment losses, if any. Intangible
assets are amortized on a straight line basis over their estimated
useful lives. Goodwill arising on acquisition is being amortized over a
period of five years. Software is being amortized over a period of four
years.
(f) Impairment
The carrying amounts of assets are reviewed at each balance sheet date
for any indication of impairment based on internal/external factors.
Where the carrying value exceeds the estimated recoverable amount,
provision for impairment is made to adjust the carrying value to the
recoverable amount. The recoverable amount is the greater of the assets
estimated net realizable value and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present
value using an appropriate discounting rate. If at the Balance sheet
date there is an indication that a previously assessed impairment loss
no longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount subject to a maximum of depreciable
historical cost.
(g) Borrowing costs
Borrowing costs that are attributable to the acquisition and
construction of qualifying assets are capitalised. Other borrowing
costs are recognised as an expense in the period in which they are
incurred.
(h) Inventories
Inventories are valued at cost or estimated net realisable value,
whichever is lower. The costs are determined on weighted average basis.
Fixed production overheads are allocated on the basis of normal
capacity of production facilities. Excise duty on goods manufactured by
the Company and remaining in inventory is included as a part of
valuation of finished goods.
(i) Foreign Currency
Transactions in foreign currencies are recorded at the exchange rates
prevailing on the date of transaction. Monetary items in foreign
currencies are stated at the closing exchange rate. Gains/losses on
conversion/ translation are recognised in the Statement of Profit and
Loss. All forward exchange contracts are backed by underlying
transactions and the premium or discount arising at inception of such a
forward exchange contract is amortised as expense or income over the
life of the contract and the exchange differences on such contracts are
recognised in the statement of profit and loss in the reporting period
in which the exchange rates change.
With effect from 1st April 2012, the Company has availed of the option
provided under paragraph 46A of AS 11: The Effects of Changes in
Foreign Exchange Rates inserted vide Notification dated December 29,
2011. Consequently, the exchange differences arising on long-term
foreign currency borrowings attributable to the acquisition of
depreciable assets, which were until then being recognized in the
Statement of Profit and Loss, are being adjusted in the cost of the
depreciable asset with effect from 1 April 2012, and are being
depreciated over the balance life of such assets. In other cases, if
any, the foreign exchange difference is accumulated in a Foreign
Currency Monetary Item Translation Difference Account, and amortised
over the balance period of such long-term monetary asset/liability.
Pursuant to this, foreign exchange differences amounting to Rs. 536.0
Million (previous year Rs. 354.4 Million) have been adjusted in the
cost of the depreciable fixed assets/capital work in progress with
corresponding decrease in loss for the year. (Previous year increase in
profits for the year.)
(j) Employee Benefits
(A) Short Term Employee Benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short term employee benefits and are
recognized in the Statement of Profit and Loss as an expense at the
undiscounted amount on an accrual basis.
(B) Post Employment Employee Benefits
Company's contributions to defined contribution plans such as
Superannuation Fund, Family Pension Fund, Group Mediclaim Insurance
Policy, Employee State Insurance and Labour Welfare Fund are recognized
in the Statement of Profit and Loss on an accrual basis.
Company's liability towards Gratuity, which is a defined benefit plan,
is determined on the basis of valuations, as at balance sheet date,
carried out by an independent actuary using Projected Unit Credit
Method. Actuarial gains and losses comprise experience adjustments and
the effects of changes in actuarial assumptions and are recognised
immediately in the Statement of Profit and Loss.
Eligible employees receive benefits from a provident fund which is a
defined benefit/contribution plan. Both the employee and the Company
make monthly contributions to the provident fund plan equal to a
specified percentage of the covered employee's salary. The Company
contributes a part of the contributions to the BASF India Limited
Provident Fund Trust ('the Trust'). The rate at which the annual
interest is payable to the beneficiaries by the Trust is being
determined by the Government. The Company has an obligation to make
good the shortfall, if any, between the return from the investments of
the Trust and the notified interest rate. The remaining portion is
contributed to the Government administered pension fund in respect of
which the Company has no further obligations.
(C) Other Long Term Employee Benefits
Company's liabilities towards Compensated Absences and Long Service
Awards to employees are determined on the basis of valuations, as at
balance sheet date, carried out by an independent actuary using
Projected Unit Credit Method. Actuarial gains and losses comprise
experience adjustments and the effects of changes in actuarial
assumptions and are recognised immediately in the Statement of Profit
and Loss.
(D) Termination Benefits
Compensation paid to employees under Voluntary Retirement
Scheme/Severance payments are recognised as an expense when employees
accept the scheme/payments.
(k) Assets taken on lease
Lease rentals payable as per agreements for assets taken on operating
lease are charged as expenditure on straight line basis over the lease
term.
(l) Taxation
Current tax is determined as the amount of tax payable in respect of
taxable income for the year computed in accordance with relevant
provisions of Income Tax Act, 1961.
In accordance with the guidance note issued by the Institute of
Chartered Accountants of India ('ICAI') on accounting for credit
available in respect of Minimum Alternate Tax (MAT) under the Income
tax Act, 1961, the Company recognises MAT credit as an asset only when
and to the extent there is convincing evidence that the Company will be
liable to pay normal income tax during the specified period.
Deferred tax charge or credit and correspondingly deferred tax
liability or asset is recognised using tax rates that have been enacted
or substantively enacted at the balance sheet date. Deferred tax is
recognised, subject to the consideration of prudence, on timing
differences, being the difference between taxable income and accounting
income that originate in one period and are capable of reversal in one
or more subsequent periods. In the event of unabsorbed depreciation or
carried forward loss under taxation laws, deferred tax assets are
recognised only if there is virtual certainty supported by convincing
evidence that sufficient future taxable income will be available
against which such deferred tax assets can be realised. Deferred tax
assets are reviewed at each balance sheet date and written down or
written up to reflect the amount i.e. reasonable/virtually certain (as
the case may be) to be realised.
(m) Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised only when there is a present obligation as a
result of past events, it is more likely than not that an outflow of
resources will be required to settle the obligation and when a reliable
estimate of the amount of the obligation can be made.
Contingent Liability is disclosed for (i) Possible obligations which
will be confirmed only by future events not wholly within the control
of the Company or (ii) Present obligations arising from past events
where it is not probable that an outflow of resources will be required
to settle the obligation or a reliable estimate of the amount of the
obligation cannot be made.
Contingent Assets are not recognised in the financial statements.
(n) Research & Development Expenditure
Research expenditure is recognised as an expense in the period in which
it is incurred.
(o) Earnings per share
The basic earnings per share are computed by dividing the net profit
attributable to the equity shareholders for the year by the weighted
average number of equity shares outstanding during the reporting
period. Diluted EPS is computed by dividing the net profit attributable
to the equity shareholders for the year by the weighted average number
of equity and dilutive equity equivalent shares outstanding during the
year, except where the results would be anti-dilutive.
b. Rights, preferences and restrictions attached to the shares
The Company has one class of equity shares having a par value of Rs.
10/- per share. Each shareholder is eligible for one vote per share
held. The dividend proposed by the Board of Directors is subject to the
approval of the shareholders in the ensuing Annual General Meeting,
except in case of interim dividend. In the event of liquidation, the
equity shareholders are eligible to receive remaining assets of the
Company after distribution of all preferential amounts, in proportion
to their shareholding.
c. Equity shares held by Ultimate Holding Company/Holding Company
and/or their associates or subsidiaries
e. Information on equity shares allotted without receipt of cash or
allotted as bonus shares or shares bought back
 2,515,653 equity shares were allotted to the erstwhile shareholders
of BASF Coatings India Private Limited and BASF Construction Chemicals
India Private Limited consequent to the Scheme of Amalgamation from
Appointed Date: April 1, 2010.
Terms of repayment
* Repayment of USD 2 million has been done on 14th December 2014.
Interest was payable half yearly on 31st March and 30th September at
LIBOR plus 0.325%.
** The Company has drawn down the entire USD 150 million of External
Commercial Borrowings loan as at 31st March 2015. Interest is payable
half yearly on 15th June and 15th December at 4.93%. The repayment
schedule is as follows:
Overdraft facilities and Short term loan from banks carries average
interest ranging from 9% to 10% p.a. (Previous year 9% to 13% p.a.)
computed on daily basis on the actual amount utilised and is repayable
on demand.
Commercial papers carries average interest ranging from 8% to 9% p.a.
repayable on maturity in June/July 2015.
* represents current maturity of term loan taken (Refer Note 4).
** there are no amounts due and outstanding to be credited to the
Investor Education and Protection Fund.
1) Buildings include Rs. 0.03 million (Previous Year Rs. 0.03 million)
being the value of shares in various co-operative societies.
2) Plant & machinery includes Gross Block Rs. 73.1 million (Previous
Year Rs. 73.1 million), Accumulated Depreciation - Rs. 73.1 million
(Previous Year Rs. 73.1 million) and Net Block Rs. Nil (Previous Year
Rs. Nil) being the Company's share of an asset jointly owned with
another company.
3) Borrowing costs of Rs. 105.5 million (net of interest income Rs.
26.0 million) (previous year Rs. 262.3 million (net of interest income
Rs. 32.6 million)) have been included in the additions to the capital
work in progress/fixed assets.
4) Exchange differences of Rs. 536.0 million (previous year Rs. 354.4
million) has been included in the additions to the capital work in
progress/fixed assets post the exercise of option in terms of Para 46A
of AS11 (pursuant to notification dated 29 December 2011 issued by the
Ministry of Corporate Affairs.) (Refer Note 1(i) of significant
accounting policies).
5) With effect from 1 April 2014, considering the requirements of
Schedule II the management has reassessed the remaining useful life of
its fixed assets based on an internal technical evaluation.
Accordingly, Rs. 3.7 million is adjusted in opening reserves of the
Company in respect of such assets whose net book value had become Rs.
Nil as at that date and the additional depreciation on assets whose
useful life has been reassessed is Rs. 18.3 million.
6) Building includes Net book Value of Rs. 4.3 million (previous year
Rs. Nil) residential apartments held for sale.
1) Buildings include Rs. 0.03 million (Previous Year Rs. 0.03 million)
being the value of shares in various co-operative societies.
2) Plant & machinery includes Gross Block Rs. 73.1 million (Previous
Year Rs. 73.1 million), Accumulated Depreciation - Rs. 73.1 million
(Previous Year Rs. 73.1 million) and Net Block Rs. Nil (Previous Year
Rs. Nil) being the Company's share of an asset jointly owned with
another company.
3) Borrowing costs of Rs. 262.3 million (net of interest income Rs.
32.6 million) (previous year Rs. 27.7 million (net of interest income
Rs. 33.1 million)) have been included in the additions to the capital
work in progress.
4) Exchange differences of Rs. 354.4 million (previous year Rs. 76.5
million) has been included in the additions to the capital work in
progress/fixed assets post the exercise of option in terms of Para 46A
of AS11 (pursuant to notification dated 29 December 2011 issued by the
Ministry of Corporate Affairs.) (Refer Note 1(i) of significant
accounting policies).
In the absence of virtual certainty of realisation, deferred tax assets
on carry forward losses and other timing differences have been
recognised to the extent of deferred tax liability.
Long term trade receivables represent the value of materials filled in
CED tank with the customer, which is receivable upon termination of the
contract.
Mar 31, 2014
(a) Basis of Accounting
The financial statements are prepared under the historical cost
convention, on accrual basis, in accordance with provisions of the
Companies Act,1956 and the accounting principles generally accepted in
India and comply with the Accounting Standards prescribed in the
Companies (Accounting Standards) Rules, 2006 issued by the Central
Government, in consultation with the National Advisory Committee on
Accounting Standards, to the extent applicable. The financial
statements are presented in Millions of Indian Rupees.
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 VI to the Companies Act, 1956.
(b) Use of estimates
The presentation of financial statements in conformity with the
generally accepted accounting principles requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities, revenue and expenses and disclosure of contingent
liabilities as on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period.
Differences between the actual result and estimates are recognized in
the period in which the results are known/materialize.
(c) Revenue Recognition
Sales of products and Indent Commission are recognised when risk and
rewards of ownership of the products are passed on to the customers,
which is generally on despatch of goods. Revenue from technical and
service charges are recognised as and when the services are provided.
Sales include excise duty but exclude trade discounts, rebates and
sales tax. Interest income is recognised on a time proportion basis
taking into account the amounts invested and the rate of interest.
(d) Fixed assets and depreciation
Fixed Assets are recorded at cost net of Cenvat credit wherever
eligible and are stated net of accumulated depreciation and impairment
losses, if any. Cost includes all expenses attributable to the
acquisition and installation till the date the asset is ready to use.
Depreciation is charged on straight-line basis at the following rates:
Buildings  3.34%
Plant & Machinery  10.34% - 20%
Computers  25.00%
Vehicles  25.00%
Furniture & Fixtures  12.50%
Office Equipments  12.50%
Assets Individually costing Rs. 5,000 or below  100.00%
Depreciation on additions/deletions is calculated on a monthly pro-rata
basis. Accelerated depreciation is charged on certain assets based on
periodic review of estimated useful life.
Leasehold land and Leasehold Improvements are amortised over the period
of lease or useful life whichever is lower.
(e) Intangible assets and amortization
Intangible Assets are stated at acquisition cost, net of accumulated
amortization and accumulated impairment losses, if any. Intangible
assets are amortized on a straight line basis over their estimated
useful lives. Goodwill is being amortized over a period of five years.
Software is being amortized over a period of four years.
(f) Impairment
The carrying amounts of assets are reviewed at each balance sheet date
for any indication of impairment based on internal/external factors.
Where the carrying value exceeds the estimated recoverable amount,
provision for impairment is made to adjust the carrying value to the
recoverable amount. The recoverable amount is the greater of the assets
estimated net realizable value and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present
value using an appropriate discounting rate. If at the Balance sheet
date there is an indication that a previously assessed impairment loss
no longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount subject to a maximum of depreciable
historical cost.
(g) Borrowing costs
Borrowing costs that are attributable to the acquisition and
construction of qualifying assets are capitalised. Other borrowing
costs are recognised as an expense in the period in which they are
incurred.
(h) Inventories
Inventories are valued at cost or estimated net realisable value,
whichever is lower. The costs are worked out on weighted average basis.
Fixed production overheads are allocated on the basis of normal
capacity of production facilities. Excise duty on goods manufactured by
the Company and remaining in inventory is included as a part of
valuation of finished goods.
(i) Foreign Currency
Transactions in foreign currencies are recorded at the exchange rates
prevailing on the date of transaction. Monetary items in foreign
currencies are stated at the closing exchange rate. Gains/losses on
conversion/ translation are recognised in the Statement of Profit and
Loss. All forward exchange contracts are backed by underlying
transactions and the premium or discount arising at inception of such a
forward exchange contract is amortised as expense or income over the
life of the contract and the difference between the year end rate and
rate on the date of the contract is recognised as exchange difference
in the Statement of Profit and Loss.
With effect from 1st April, 2012, the Company has availed of the option
provided under paragraph 46Aof AS 11:The Effects of Changes in Foreign
Exchange Rates inserted vide Notification dated December 29, 2011.
Consequently,
the exchange differences on long-term foreign currency monetary items
on account of depreciable assets, which were until now being recognized
in the Statement of Profit and Loss, are being adjusted in the cost of
the depreciable asset with effect from 1st April, 2012, and are being
depreciated over the balance life of such assets. In other cases, if
any, the foreign exchange difference is accumulated in a Foreign
Currency Monetary Item Translation Difference Account, and amortised
over the balance period of such long-term monetary asset/liability
Pursuant to this, foreign exchange differences amounting to Rs. 354.4
Million (Previous Year Rs. 76.5 Million) have been adjusted in the cost
of the depreciable fixed assets/capital work in progress with
corresponding increase in profits.
(j) Employee Benefits
(A) Short Term Employee Benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short term employee benefits and are
recognized in the Statement of Profit and Loss as an expense at the
undiscounted amount on an accrual basis.
(B) Post Employment Employee Benefits
Company''s contributions to defined contribution plans such as
Superannuation Fund, Family Pension Fund, Group Mediclaim Insurance
Policy, Employee State Insurance and Labour Welfare Fund are recognized
in the Statement of Profit and Loss on an accrual basis.
Company''s liability towards Gratuity, which is a defined benefit plan,
is determined on the basis of valuations, as at balance sheet date,
carried out by independent actuary using Projected Unit Credit Method.
Actuarial gains and losses comprise experience adjustments and the
effects of changes in actuarial assumptions and are recognised
immediately in the Statement of Profit and Loss.
Eligible employees receive benefits from a provident fund, which is a
defined benefit plan. Both the employee and the Company make monthly
contributions to the provident fund plan equal to a specified
percentage of the covered employee''s salary. The Company contributes a
part of the contributions to the BASF India Limited Provident Fund
Trust. The remaining portion is contributed to the Government
administered pension fund. The rate at which the annual interest is
payable to the beneficiaries by the Trust is being administered by the
Government. The Company has an obligation to make good the shortfall,
if any, between the return from the investments of the Trust and the
notified interest rate.
(C) Other Long Term Employee Benefits
Company''s liabilities towards Compensated Absences and Long Service
Awards to employees are determined on the basis of valuations, as at
balance sheet date, carried out by independent actuary using Projected
Unit Credit Method. Actuarial gains and losses comprise experience
adjustments and the effects of changes in actuarial assumptions and are
recognised immediately in the Statement of Profit and Loss.
(D) Termination Benefits
Compensation paid to employees under Voluntary Retirement
Scheme/Severance payments are recognised as an expense when employees
accept the scheme/payments.
(k) Assets taken on lease
Lease rentals payable as per agreements for assets taken on operating
lease are charged as expenditure on straight line basis over the lease
term.
(I) Taxation
Current tax is determined as the amount of tax payable in respect of
taxable income for the year computed in accordance with relevant
provisions of Income Tax Act, 1961.
In accordance with the guidance note issued by the Institute of
Chartered Accountants of India (''ICAI'') on accounting for credit
available in respect of Minimum Alternate Tax (MAT) under the Income
tax Act, 1961, the Company recognises MAT credit as an asset only when
and to the extent there is convincing evidence that the Company will be
liable to pay normal income tax during the specified period.
Deferred tax charge or credit and correspondingly deferred tax asset or
liability is recognised using tax rates that have been enacted or
substantively enacted at the balance sheet date. Deferred tax is
recognised, subject to the consideration of prudence, on timing
differences, being the difference between taxable income and accounting
income that originate in one period and are capable of reversal in one
or more subsequent periods. Deferred tax assets are not recognised on
unabsorbed depreciation and carry forward of losses unless there is
virtual certainty that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
Deferred tax assets are reviewed at each balance sheet date and written
down or written up to reflect the amount i.e. reasonable/virtually
certain (as the case may be) to be realised.
(m) Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised only when there is a present obligation as a
result of past events, it is more likely than not that an outflow of
resources will be required to settle the obligation and when a reliable
estimate of the amount of the obligation can be made.
Contingent Liability is disclosed for (i) Possible obligations which
will be confirmed only by future events not wholly within the control
of the Company or (ii) Present obligations arising from past events
where it is not probable that an outflow of resources will be required
to settle the obligation or a reliable estimate of the amount of the
obligation cannot be made.
Contingent Assets are not recognised in the financial statements, (n)
Research & Development Expenditure
Research expenditure is recognised as an expense in the period in which
it is incurred and the expenditure on capital assets is capitalised and
depreciated over the useful lives of the assets.
(o) Earnings per share
The basic and diluted earnings per share is computed by dividing the
net profit attributable to equity shareholders for the year, by the
weighted average number of equity shares outstanding during the year.
e. Information on equity shares allotted without receipt of cash or
allotted as bonus shares or shares bought back
 12,579,839 equity shares were allotted to the erstwhile shareholders
of Ciba India Limited and Ciba Research (India) Private Limited
consequent to the amalgamation w.e.f. February 1, 2010.
 2,515,653 equity shares were allotted to the erstwhile shareholders
of BASF Coatings India Private Limited and BASF Construction Chemicals
India Private Limited consequent to the amalgamation w.e.f. April 1,
2010.
Mar 31, 2013
(a) Basis of Accounting
The financial statements are prepared under the historical cost
convention, on accrual basis, in accordance with provisions of the
Companies Act,1956 and the accounting principles generally accepted in
India and comply with the Accounting Standards prescribed in the
Companies (Accounting Standards) Rules, 2006 issued by the Central
Government, in consultation with the National Advisory Committee on
Accounting Standards, to the extent applicable. The financial
statements are presented in Millions of Indian Rupees.
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 VI to the Companies Act, 1956.
(b) Use of estimates
The presentation of financial statements in conformity with the
generally accepted accounting principles requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities, revenue and expenses and disclosure of contingent
liabilities as on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Difference
between the actual result and estimates are recognized in the period in
which the results are known/materialize.
(c) Revenue Recognition
Sales of products and Indent Commission are recognised when risk and
rewards of ownership of the products are passed on to the customers,
which is generally on despatch of goods. Revenue from technical and
service charges are recognised as and when the services are provided.
Sales include excise duty but exclude trade discounts, rebates and
sales tax. Interest income is recognised on a time proportion basis
taking into account the amounts invested and the rate of interest.
(d) Fixed assets and depreciation
Fixed Assets are recorded at cost net of Cenvat credit wherever
eligible and are stated net of accumulated depreciation and impairment
losses if any. Cost includes all expenses attributable to the
acquisition and installation till the date the asset is ready to use.
Depreciation is charged on straight-line basis at the following rates:
Buildings  3.34%
Plant & Machinery  10.34% - 20%
Computers  25.00%
Vehicles  25.00%
Furniture & Fixtures  12.50%
Office Equipments  12.50%
Assets Individually costing Rs. 5,000 or below  100.00%
Depreciation on additions/deletions is calculated on a monthly pro-rata
basis. Accelerated depreciation is charged on certain assets based on
periodic review of estimated useful life.
Leasehold land and Leasehold Improvements are amortised over the period
of lease or useful life whichever is lower.
(e) Intangible assets and amortization
Intangible Assets are stated at acquisition cost, net of accumulated
amortization and accumulated impairment losses, if any. Intangible
assets are amortized on a straight line basis over their estimated
useful lives. Goodwill is being amortized over a period of five years.
Software is being amortized over a period of four years.
(f) Impairment
The carrying amounts of assets are reviewed at each balance sheet date
for any indication of impairment based on internal/external factors.
Where the carrying value exceeds the estimated recoverable amount,
provision for impairment is made to adjust the carrying value to the
recoverable amount. The recoverable amount is the greater of the assets
estimated net realizable value and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present
value using an appropriate discounting rate. If at the Balance sheet
date there is an indication that a previously assessed impairment loss
no longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount subject to a maximum of depreciable
historical cost.
(g) Borrowing costs
Borrowing costs that are attributable to the acquisition and
construction of qualifying assets are capitalised. Other borrowing
costs are recognised as an expense in the period in which they are
incurred.
(h) Inventories
Inventories are valued at cost or estimated net realisable value,
whichever is lower. The costs are worked out on weighted average basis.
Fixed production overheads are allocated on the basis of normal
capacity of production facilities. Excise duty on goods manufactured by
the Company and remaining in inventory is included as a part of
valuation of finished goods.
(i) Foreign Currency
Transactions in foreign currencies are recorded at the exchange rates
prevailing on the date of transaction. Monetary items in foreign
currencies are stated at the closing exchange rate. Gains/losses on
conversion/ translation are recognised in the Statement of Profit and
Loss. All forward exchange contracts are backed by underlying
transactions and the premium or discount arising at inception of such a
forward exchange contract is amortised as expense or income over the
life of the contract and the difference between the year end rate and
rate on the date of the contract is recognised as exchange difference
in the Statement of Profit and Loss.
With effect from 1st April, 2012, the Company has availed of the option
provided under paragraph 46A of AS 11: The Effects of Changes in
Foreign Exchange Rates inserted vide Notification dated December 29,
2011.
Consequently, the exchange differences on long-term foreign currency
monetary items on account of depreciable assets, which were until now
being recognized in the Statement of Profit and Loss, are being
adjusted in the cost of the depreciable asset with effect from 1st
April, 2012, and are being depreciated over the balance life of such
assets. In other cases, if any, the foreign exchange difference is
accumulated in a Foreign Currency Monetary Item Translation Difference
Account, and amortised over the balance period of such long-term
monetary asset/ liability. Pursuant to this change, foreign exchange
differences amounting to Rs. 76.5 Million have been adjusted in the
cost of the depreciable fixed assets with corresponding increase in
profits.
(j) Employee Benefits
(A) Short Term Employee Benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short term employee benefits and are
recognized in the Statement of Profit and Loss as an expense at the
undiscounted amount on an accrual basis.
(B) Post Employment Employee Benefits
Company''s contributions to defined contribution plans such as
Superannuation Fund, Family Pension Fund, Group Mediclaim Insurance
Policy, Employee State Insurance and Labour Welfare Fund are recognized
in the Statement of Profit and Loss on an accrual basis.
Company''s liability towards Gratuity, which is a defined benefit plan,
is determined on the basis of valuations, as at balance sheet date,
carried out by independent actuary using Projected Unit Credit Method.
Actuarial gains and losses comprise experience adjustments and the
effects of changes in actuarial assumptions and are recognised
immediately in the Statement of Profit and Loss.
Eligible employees receive benefits from a provident fund, which is a
defined benefit plan. Both the employee and the Company make monthly
contributions to the provident fund plan equal to a specified
percentage of the covered employee''s salary. The Company contributes a
part of the contributions to the BASF India Limited Provident Fund
Trust. The remaining portion is contributed to the Government
administered pension fund. The rate at which the annual interest is
payable to the beneficiaries by the trust is being administered by the
Government. The Company has an obligation to make good the shortfall,
if any, between the return from the investments of the trust and the
notified interest rate.
(C) Other Long Term Employee Benefits
Company''s liabilities towards Compensated Absences and Long Service
Awards to employees are determined on the basis of valuations, as at
balance sheet date, carried out by independent actuary using Projected
Unit Credit Method. Actuarial gains and losses comprise experience
adjustments and the effects of changes in actuarial assumptions and are
recognised immediately in the Statement of Profit and Loss.
(D) Termination Benefits
Compensation paid to employees under Voluntary Retirement
Scheme/Severance payments are recognised as an expense when employees
accept the scheme/payments.
(k) Assets taken on lease
Lease rentals payable as per agreements for assets taken on operating
lease are charged as expenditure on straight line basis over the lease
term.
(l) Taxation
Current tax is determined as the amount of tax payable in respect of
taxable income for the year computed in accordance with relevant
provisions of Income Tax Act, 1961.
In accordance with the guidance note issued by the Institute of
Chartered Accountants of India (''ICAI'') on accounting for credit
available in respect of Minimum Alternate Tax (MAT) under the Income
tax Act, 1961, the Company recognises MAT credit as an asset only when
and to the extent there is convincing evidence that the Company will be
liable to pay normal income tax during the specified period.
Deferred tax charge or credit and correspondingly deferred tax asset or
liability is recognised using tax rates that have been enacted or
substantively enacted at the balance sheet date. Deferred tax is
recognised, subject to the consideration of prudence, on timing
differences, being the difference between taxable income and accounting
income that originate in one period and are capable of reversal in one
or more subsequent periods. Deferred tax assets are not recognised on
unabsorbed depreciation and carry forward of losses unless there is
virtual certainty that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
Deferred tax assets are reviewed at each balance sheet date and written
down or written up to reflect the amount i.e. reasonable/virtually
certain (as the case may be) to be realised.
(m) Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised only when there is a present obligation as a
result of past events, it is more likely than not that an outflow of
resources will be required to settle the obligation and when a reliable
estimate of the amount of the obligation can be made.
Contingent Liability is disclosed for (i) Possible obligations which
will be confirmed only by future events not wholly within the control
of the Company or (ii) Present obligations arising from past events
where it is not probable that an outflow of resources will be required
to settle the obligation or a reliable estimate of the amount of the
obligation cannot be made.
Contingent Assets are not recognised in the financial statements.
(n) Research & Development Expenditure
Research expenditure is recognised as an expense in the period in which
it is incurred and the expenditure on capital assets is depreciated
over the useful lives of the assets.
(o) Earnings per share
The basic and diluted earnings per share is computed by dividing the
net profit attributable to equity shareholders for the year, by the
weighted average number of equity shares outstanding during the year.
Mar 31, 2012
(a) Basis of Accounting
The financial statements are prepared under the historical cost
convention, on accrual basis, in accordance with provisions of
Companies Act, 1956 and the accounting principles generally accepted in
India and comply with the Accounting Standards prescribed in the
Companies (Accounting Standards) Rules, 2006 issued by the Central
Government, in consultation with the National Advisory Committee on
Accounting Standards, to the extent applicable. The financial
statements are presented in Millions of Indian Rupees.
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 VI to the Companies Act, 1956.
(b) Use of estimates
The presentation of financial statements in conformity with the
generally accepted accounting principles requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities, revenue and expenses and disclosure of contingent
liabilities as on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Difference
between the actual result and estimates are recognised in the period in
which the results are known/materialise.
(c) Revenue Recognition
Sales of products and Indent Commission are recognised when risk and
rewards of ownership of the products are passed on to the customers,
which is generally on despatch of goods. Revenue from technical and
service charges are recognised as and when the services are provided.
Sales include excise duty but exclude trade discounts, rebates and
sales tax. Interest income is recognised on a time proportion basis
taking into account the amounts invested and the rate of interest.
(d) Fixed assets and depreciation
Fixed Assets are recorded at cost net of Cenvat credit wherever
eligible. Cost includes all expenses attributable to the acquisition
and installation till the date the asset is ready to use.
Depreciation is charged on straight-line basis at the following rates:
Buildings à 3.34%
Plant & Machinery à 10.34% - 20%
Computers à 25.00%
Vehicles à 25.00%
Furniture, Fixtures & Equipment à 12.50%
Assets Individually costing Rs. 5,000 or below à 100.00%
Depreciation on additions/deletions is calculated on a monthly pro-rata
basis. Accelerated depreciation is charged on certain assets based on
periodic review of estimated useful life.
Leasehold land and Leasehold Improvements are amortised over the period
of lease or useful life whichever is lower.
(e) Intangible assets and amortization
Intangible Assets are stated at acquisition cost, net of accumulated
amortization and accumulated impairment losses, if any. Intangible
assets are amortised on a straight line basis over their estimated
useful lives. Goodwill is being amortized over a period of five years.
(f) Impairment
The carrying amounts of assets are reviewed at each balance sheet date
for any indication of impairment based on internal/external factors.
Where the carrying value exceeds the estimated recoverable amount,
provision for impairment is made to adjust the carrying value to the
recoverable amount. The recoverable amount is the greater of the assets
estimated net realizable value and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present
value using an appropriate discounting rate. If at the Balance sheet
date there is an indication that a previously assessed impairment loss
no longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount subject to a maximum of depreciable
historical cost.
(g) Borrowing costs
Borrowing costs that are attributable to the acquisition, construction
of qualifying assets are capitalised. Other borrowing costs are
recognised as an expense in the period in which they are incurred.
(h) Inventories
Inventories are valued at cost or estimated net realisable value,
whichever is lower. The costs are worked out on weighted average basis.
Fixed production overheads are allocated on the basis of normal
capacity of production facilities. Excise duty on goods manufactured by
the Company and remaining in inventory is included as a part of
valuation of finished goods.
(i) Foreign Currency
Transactions in foreign currencies are recorded at the exchange rates
prevailing on the date of transaction. Monetary items in foreign
currencies are stated at the closing exchange rate. All forward
exchange contracts are backed by underlying transactions, premium or
discount arising at inception of such a forward exchange contract is
amortised as expense or income over the life of the contract and the
difference between the year end rate and rate on the date of the
contract is recognised as exchange difference in the Profit and Loss
Account. Gains/ losses on conversion/translation are recognised in the
Profit and Loss Account.
(j) Employee Benefits
(A) Short-Term Employee Benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short term employee benefits and are
recognized in the Profit and Loss Account as an expense at the
undiscounted amount on an accrual basis.
(B) Post Employment Employee Benefits
Company's contributions to defined contribution plans such as
Superannuation Fund, Family Pension Fund, Group Mediclaim Insurance
Policy, Employee State Insurance and Labour Welfare Fund are recognized
in the Profit and Loss Account on an accrual basis.
Company's liability towards Gratuity, which is a defined benefit plan,
is determined on the basis of valuations, as at balance sheet date,
carried out by independent actuary using Projected Unit Credit Method.
Actuarial gains and losses comprise experience adjustments and the
effects of changes in actuarial assumptions and are recognised
immediately in the Profit and Loss Account.
Eligible employees receive benefits from a provident fund, which is a
defined benefit plan. Both the employee and the Company make monthly
contributions to the provident fund plan equal to a specified
percentage of the covered employee's salary. The Company contributes a
part of the contributions to the BASF India Limited Provident Fund
Trust. The remaining portion is contributed to the Government
administered pension fund. The rate at which the annual interest is
payable to the beneficiaries by the trust is being administered by the
Government. The Company has an obligation to make good the shortfall,
if any, between the return from the investments of the trust and the
notified interest rate.
(C) Other Long Term Employee Benefits
Company's liabilities towards Compensated Absences & Long Service
Awards to employees are determined on the basis of valuations, as at
balance sheet date, carried out by independent actuary using Projected
Unit Credit Method. Actuarial gains and losses comprise experience
adjustments and the effects of changes in actuarial assumptions and are
recognised immediately in the Profit and Loss Account.
(D) Termination Benefits
Compensation paid to employees under Voluntary Retirement
Scheme/Severance payments are recognised as an expense when employees
accept the scheme/payments.
(k) Assets taken on lease
Lease rentals payable as per agreements for assets taken on operating
lease are charged as expenditure on Straight Line basis over the lease
term.
(l) Taxation
Current tax is determined as the amount of tax payable in respect of
taxable income for the year computed in accordance with relevant
provisions of Income Tax Act, 1961.
In accordance with the guidance note issued by the Institute of
Chartered Accountants of India ('ICAI') on accounting for credit
available in respect of Minimum Alternate Tax (MAT) under the Income
tax Act, 1961, the Company recognises MAT credit as an asset only when
and to the extent there is convincing evidence that the Company will be
liable to pay normal income tax during the specified period.
Deferred tax charge or credit and correspondingly deferred tax asset or
liability is recognised using tax rates that have been enacted or
substantively enacted at the balance sheet date. Deferred tax is
recognised, subject to the consideration of prudence, on timing
differences, being the difference between taxable income and accounting
income that originate in one period and are capable of reversal in one
or more subsequent periods. Deferred tax assets are not recognised on
unabsorbed depreciation and carry forward of losses unless there is
virtual certainty that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
Deferred tax assets are reviewed at each balance sheet date and written
down or written up to reflect the amount i.e. reasonable/virtually
certain (as the case may be) to be realised.
(m) Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised only when there is a present obligation as a
result of past events, it is more likely than not that an outflow of
resources will be required to settle the obligation and when a reliable
estimate of the amount of the obligation can be made.
Contingent Liability is disclosed for (i) Possible obligations which
will be confirmed only by future events not wholly within the control
of the Company or (ii) Present obligations arising from past events
where it is not probable that an outflow of resources will be required
to settle the obligation or a reliable estimate of the amount of the
obligation cannot be made.
Contingent Assets are not recognised in the financial statements.
(n) Research & Development Expenditure
Research expenditure is recognised as an expense in the period in which
it is incurred and the expenditure on capital assets is depreciated
over the useful lives of the assets.
(o) Earning per share
The basic and diluted earnings per share is computed by dividing the
net profit attributable to equity shareholders for the year, by the
weighted average number of equity shares outstanding during the year.
Mar 31, 2011
(a) Basis of Accounting
The financial statements are prepared under the historical cost
convention, on accrual basis, in accordance with provisions of
Companies Act, 1956 and the accounting principles generally accepted in
India and comply with the Accounting Standards prescribed in the
Companies (Accounting Standards) Rules, 2006 issued by the Central
Government, in consultation with the National Advisory Committee on
Accounting Standards, to the extent applicable. The financial
statements are presented in Millions of Indian Rupees.
(b) Use of estimates
The presentation of financial statements in conformity with the
generally accepted accounting principles requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities and disclosure of contingent liabilities as on the date of
the financial statements and the reported amount of revenues and
expenses during the reporting period. Difference between the actual
result and estimates are recognised in the period in which the results
are known/materialise.
(c) Revenue Recognition
Sales of products and Indent Commission are recognised when risk and
rewards of ownership of the products are passed on to the customers,
which is generally on despatch of goods. Revenue from technical and
service charges are recognised as and when the services are provided.
Sales include excise duty but exclude trade discounts, rebates and
sales tax. Interest income is recognised on a time proportion basis
taking into account the amounts invested and the rate of interest.
(d) Fixed assets and depreciation
Fixed Assets are recorded at cost net of Cenvat credit wherever
eligible. Cost includes all expenses attributable to the acquisition
and installation till the date the asset is ready to use.
Depreciation is charged on straight-line basis at the following rates:
Buildings à 3.34%
Plant & Machinery à 10.34% - 20%
Computers à 25.00%
Vehicles à 25.00%
Furniture, Fixtures & Equipment à 12.50%
Assets Individually costing Rs. 5,000 or below à 100.00%
Depreciation on additions/deletions is calculated on a monthly pro-rata
basis. Accelerated depreciation is charged on certain assets based on
periodic review of estimated useful life.
Leasehold land and Leasehold Improvements are amortised over the period
of lease or useful life whichever is lower.
(e) Impairment
The carrying amounts of assets are reviewed at each balance sheet date
for any indication of impairment based on internal/external factors.
Where the carrying value exceeds the estimated recoverable amount,
provision for impairment is made to adjust the carrying value to the
recoverable amount. The recoverable amount is the greater of the assets
estimated net realizable value and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present
value using an appropriate discounting rate. If at the Balance sheet
date there is an indication that a previously assessed impairment loss
no longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount subject to a maximum of depreciable
historical cost.
(f) Borrowing costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalised. Other borrowing
costs are recognised as an expense in the period in which they are
incurred.
(g) Investments
Long-term Investments are stated at cost. Provision is made to
recognise a decline, other than temporary, in the value of Long-term
Investments. Current Investments are stated at lower of cost or fair
value.
(h) Inventories
Inventories are valued at cost or estimated net realisable value,
whichever is lower. The costs are worked out on weighted average basis.
Fixed production overheads are allocated on the basis of normal
capacity of production facilities. Excise duty on goods manufactured by
the Company and remaining in inventory is included as a part of
valuation of finished goods.
(i) Foreign Currency
Transactions in foreign currencies are recorded at the exchange rates
prevailing on the date of transaction. Monetary items in foreign
currencies are stated at the closing exchange rate. All forward
exchange contracts are backed by underlying transactions, premium or
discount arising at inception of such a forward exchange contract is
amortised as expense or income over the life of the contract and the
difference between the year end rate and rate on the date of the
contract is recognised as exchange difference in the Profit and Loss
Account. Gains/losses on conversion/translation are recognised in the
Profit and Loss Account.
(j) Employee Benefits
(A) Short-Term Employee Benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short-term employee benefits and are
recognized in the Profit and Loss Account as an expense at the
undiscounted amount on an accrual basis.
(B) Post Employment Employee Benefits
Company's contributions to defined contribution plans such as
Superannuation Fund, Family Pension Fund, Group Mediclaim Insurance
Policy, Employee State Insurance and Labour Welfare Fund are recognized
in the Profit and Loss Account on an accrual basis.
Company's liability towards Gratuity, which is a defined benefit plan,
is determined on the basis of valuations, as at balance sheet date,
carried out by independent actuary using Projected Unit Credit Method.
Actuarial gains and losses comprise experience adjustments and the
effects of changes in actuarial assumptions and are recognised
immediately in the Profit and Loss Account.
Company's contribution to Provident Fund is recognised in the Profit
and Loss Account on accrual basis.
(C) Other Long-Term Employee Benefits
Company's liabilities towards Compensated Absences & Long Service
Awards to employees are determined on the basis of valuations, as at
balance sheet date, carried out by independent actuary using Projected
Unit Credit Method. Actuarial gains and losses comprise experience
adjustments and the effects of changes in actuarial assumptions and are
recognised immediately in the Profit and Loss Account.
(D) Termination Benefits
Compensation paid to employees under Voluntary Retirement
Scheme/Severance payments are recognised as an expense when employees
accept.
(k) Assets taken on lease
Lease rentals payable as per agreements for assets taken on operating
lease are charged as expenditure on Straight Line basis over the lease
term.
(I) Taxation
Current tax is determined as the amount of tax payable in respect of
taxable income for the year computed in accordance with relevant
provisions of Income Tax Act, 1961.
In accordance with the guidance note issued by the Institute of
Chartered Accountants of India ('ICAI') on accounting for credit
available in respect of Minimum Alternate Tax (MAT) under the Income
tax Act, 1961, the Company recognises MAT credit as an asset only when
and to the extent there is convincing evidence that the Company will be
liable to pay normal income tax during the specified period.
Deferred tax charge or credit and correspondingly deferred tax asset or
liability is recognised using tax rates that have been enacted or
substantively enacted at the balance sheet date. Deferred tax is
recognised, subject to the consideration of prudence, on timing
differences, being the difference between taxable income and accounting
income that originate in one period and are capable of reversal in one
or more subsequent periods. Deferred tax assets are not recognised on
unabsorbed depreciation and carry forward of losses unless there is
virtual certainty that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
Deferred tax assets are reviewed at each balance sheet date and written
down or written up to reflect the amount i.e. reasonable/virtually
certain (as the case may be) to be realised.
(m) Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised only when there is a present obligation as a
result of past events, it is more likely than not that an outflow of
resources will be required to settle the obligation and when a reliable
estimate of the amount of the obligation can be made.
Contingent Liability is disclosed for (i) Possible obligations which
will be confirmed only by future events not wholly within the control
of the Company or (ii) Present obligations arising from past events
where it is not probable that an outflow of resources will be required
to settle the obligation or a reliable estimate of the amount of the
obligation cannot be made.
Contingent Assets are not recognised in the financial statements.
(n) Research & Development Expenditure
Revenue expenditure is recognised as an expense in the period in which
it is incurred and the expenditure on capital assets is depreciated
over the useful lives of the assets.
(o) Earning per share
The basic and diluted earnings per share is computed by dividing the
net profit attributable to equity shareholders for the year, by the
weighted average number of equity shares outstanding during the year.
Mar 31, 2010
(a) Basis of Accounting
The financial statements are prepared under the historical cost
convention, on accrual basis, in accordance with provisions of
Companies Act, 1956 and the accounting principles generally accepted in
India and comply with the Accounting Standards prescribed in the
Companies (Accounting Standards) Rules, 2006 issued by the Central
Government, in consultation with the National Advisory Committee on
Accounting Standards, to the extent applicable. The financial
statements are presented in Millions of Indian Rupees.
(b) Use of estimates
The presentation of financial statements in conformity with the
generally accepted accounting principles requires estimates and
assumptions to be made that affect the reported amount of assets and
liabilities and disclosure of contingent liabilities as on the date of
the financial statements and the reported amount of revenues and
expenses during the reporting period. Difference between the actual
result and estimates are recognised in the period in which the results
are known/materialise.
(c) Revenue Recognition
Sales of products and Indent Commission are recognised when risk and
rewards of ownership of the products are passed on to the customers,
which is generally on despatch of goods. Revenue from technical and
service charges are recognised as and when the services are provided.
Sales include excise duty but exclude trade discounts, rebates and
sales tax. Interest on investments is recognised on a time proportion
basis taking into account the amounts invested and the rate of
interest.
(d) Fixed assets and depreciation
Fixed Assets are recorded at cost net of Cenvat credit wherever
eligible. Cost includes all expenses attributable to the acquisition
and installation till the date the asset is ready to use.
Depreciation on additions / deletions is calculated on a monthly
pro-rata basis. Accelerated depreciation is charged on certain assets
based on periodic review of estimated useful life.
Leasehold land and Leasehold Improvements are amortised over the period
of lease.
(e) Impairment
The carrying amounts of assets are reviewed at each Balance Sheet date
for any indication of impairment based on internal/external factors.
Where the carrying value exceeds the estimated recoverable amount,
provision for impairment is made to adjust the carrying value to the
recoverable amount. The recoverable amount is the greater of the assets
estimated net realizable value and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present
value using an appropriate discounting rate. If at the Balance Sheet
date there is an indication that a previously assessed impairment loss
no longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount subject to a maximum of depreciable
historical cost.
(f) Borrowing costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalised. Other borrowing
costs are recognised as an expense in the period in which they are
incurred.
(g) Investments
Long-term Investments are stated at cost. Provision is made to
recognise a decline, other than temporary, in the value of Long-term
Investments. Current Investments are stated at lower of cost or fair
value.
(h) Inventories
Inventories are valued at cost or estimated net realisable value,
whichever is lower. The costs are worked out on weighted average basis.
Fixed production overheads are allocated on the basis of normal
capacity of production facilities. Excise duty on goods manufactured by
the Company and remaining in inventory is included as a part of
valuation of finished goods.
(i) Foreign Currency
Transactions in foreign currencies are recorded at the exchange rates
prevailing on the date of transaction. Monetary items in foreign
currencies are stated at the closing exchange rate. All forward
exchange contracts are backed by underlying transactions, premium or
discount arising at inception of such a forward exchange contract is
amortised as expense or income over the life of the contract and the
difference between the year end rate and rate on the date of the
contract is recognised as exchange difference in the Profit and Loss
Account. Gains/losses on conversion/translation are recognised in the
Profit and Loss Account.
(j) Employee Benefits
(A) Short-Term Employee Benefits
All employee benefits payable wholly within twelve months of rendering
the service are classified as short term employee benefits and are
recognized in the Profit and Loss Account as an expense at the
undiscounted amount on an accrual basis.
(B) Post Employment Employee Benefits
Companys contributions to defined contribution plans such as
Superannuation Fund, Family Pension Fund, Group Mediclaim Insurance
Policy, Employee State Insurance and Labour Welfare Fund are recognized
in the Profit and Loss Account on an accrual basis.
Companys liability towards Gratuity, which is a defined benefit plan,
is determined on the basis of valuations, as at balance sheet date,
carried out by independent actuaries using Projected Unit Credit
Method. Actuarial gains and losses comprise experience adjustments and
the effects of changes in actuarial assumptions and are recognised
immediately in the Profit and Loss Account.
Companys contribution to Provident Fund is recognised in the Profit
and Loss Account on accrual basis.
(C) Other Long-Term Employee Benefits
Companys liabilities towards Compensated Absences & Long Service
Awards to employees are determined on the basis of valuations, as at
balance sheet date, carried out by independent actuaries using
Projected Unit Credit Method. Actuarial gains and losses comprise
experience adjustments and the effects of changes in actuarial
assumptions and are recognised immediately in the Profit and Loss
Account.
(D) Termination Benefits
Compensation paid to employees under Voluntary Retirement Scheme is
recognised as an expense when incurred.
(k) Assets taken on lease
Lease rentals payable as per agreements for assets taken on operating
lease are charged as expenditure on Straight Line basis over the lease
term.
(l) Taxation
Current tax is determined as the amount of tax payable in respect of
taxable income for the year computed in accordance with relevant
provisions of Income Tax Act, 1961.
Deferred tax charge or credit and correspondingly deferred tax asset or
liability is recognised using tax rates that have been enacted or
substantively enacted at the Balance Sheet date. Deferred tax is
recognised, subject to the consideration of prudence, on timing
differences, being the difference between taxable income and accounting
income that originate in one period and are capable of reversal in one
or more subsequent periods. Deferred tax assets are not recognised on
unabsorbed depreciation and carry forward of losses unless there is
virtual certainty that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
Deferred tax assets are reviewed at each Balance Sheet date and written
down or written up to reflect the amount i.e. reasonable / virtually
certain (as the case may be) to be realised.
Provision for Fringe Benefit Tax (FBT) has been recognised on the basis
of harmonious contextual interpretation of the provisions of Income Tax
Act, 1961.
(m) Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised only when there is a present obligation as a
result of past events it is more likely than not that an outflow of
resources will be required to settle the obligation and when a reliable
estimate of the amount of the obligation can be made.
Contingent Liability is disclosed for (i) Possible obligations which
will be confirmed only by future events not Wholly within the control
of the Company or (ii) Present obligations arising from past events
where it is not probable that an outflow of resources will be required
to settle the obligation or a reliable estimate of the amount of the
obligation cannot be made.
Contingent Assets are not recognised in the financial statements.
(n) Research & Development Expenditure
Revenue expenditure is recognised as an expense in the period in which
it is incurred and the expenditure on capital assets is depreciated
over the useful lives of the assets.
(o) Earning per share
The basic and diluted earnings per share is computed by dividing the
net profit attributable to equity shareholders for the year, by the
weighted average number of equity shares outstanding during the year.