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Accounting Policies of Deepak Nitrite Ltd. Company

Mar 31, 2013

Accounting Convention

The accompanying Financial Statements have been prepared under the historical cost convention, in accordance with Generally Accepted Accounting Principles in India. The Company has prepared these Financial Statements to comply in all material respects with the Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006, and the relevant provisions of the Companies Act, 1956.

a) Use of Estimates

The preparation of Financial Statements in conformity with Generally Accepted Accounting Principles requires the management to make estimates and assumptions that affect the reported balances of Assets and Liabilities as of the date of Financial Statements and reported amounts of income and expenses during the period. Management believes that the estimates used in the preparation of Financial Statements are prudent and reasonable. Actual results could differ from those estimates. Difference between the actual results and estimates are recognised in theyear in which the results are known/materialised.

b) Presentation and Disclosure of Financial Statements

Assets and Liabilities are classified as Current or Non-Current as per the provisions of the Revised Schedule VI notified under the Companies Act, 1956 and Company''s normal operating cycle. Based on the nature of business and its activities, the Company has ascertained its operating cycle as twelve months for the purpose of Current & Non-Current classification of Assets & Liabilities.

c) (i) Tangible Fixed Assets and Depreciation

Fixed Assets are stated at their original cost of acquisition, less accumulated depreciation and impairment losses. Cost includes all incidental expenses related to acquisition and installation and other pre-operative expenses.

Depreciation is provided, pro rata for the period of use, by the Straight Line Method (SLM) based on management''s estimate of useful lives of the Fixed Assets at the following annual rates as prescribed in Schedule XIV to the Act, except in respect of Aromatics Amines plant where Depreciation in respect of Plant & Machinery is provided on Written Down Value basis. The items of continuous process plant are identified by the technical officials of the Company.

The excess depreciation provided on revalued fixed assets over the amount computed on the above basis is withdrawn from the Revaluation Reserve and transferred to the Statement of Profit & Loss. Premium paid on leasehold land is amortised equally over the tenure ofthe Lease.

In respect of depreciable assets for which Impairment Loss is recognised, depreciation/amortisation is charged on the revised carrying amount overthe remaining useful life ofthe assets.

(ii) Intangible Fixed Assets

Intangible Assets other than software are stated at their cost of acquisition, less accumulated amortisation and impairment losses thereon. An Intangible Asset is recognised, where it is probable that the future economic benefits attributable to the Asset will flow to the enterprise and where its cost can be reliably measured.

The depreciable amount of intangible assets other than software is allocated over the best estimate of its useful life on a straight-line basis.

The Company capitalises software and related implementation costs where it is reasonably estimated that the software has an enduring useful life. Software is depreciated over management''s estimate of its useful life of six years.

d) Impairment of Assets

The carrying amount of cash generating units/assets is reviewed at the Balance Sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount is estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, is recognised whenever carrying amount exceeds the recoverable amount. The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.

e) Inventories

(i) Raw Materials, Packing Materials and Stores & Spares are valued at cost determined on monthly-moving weighted average basis and are net of Cenvat and VAT.

(ii) Finished Goods and Stock-in-process are valued at cost of purchase of raw materials and conversion thereof, including the cost incurred in the normal course of business in bringing the inventories up to the present condition or at the net realisable value, whichever is lower. The inventories of joint products are valued by allocating the costs to the joint products by 4Relative Sales Value'' method. By-products are valued at net realisable price.

f) Revenue Recognition

(i) Sales are recognised when goods are supplied and are recorded net of trade discounts, rebates, sales taxes, VAT and excise duties (recovery of which is shown separately) but include, where applicable, export incentives. Conversion income is recognised on completion of production.

(ii) Revenue in respect of export incentive, overdue interest, insurance claim, etc. is recognised to the extent that the Company is reasonably certain of its ultimate realisation.

(iii) Expenses are accounted for on accrual basis.

(iv) Provisions are recognised when a present legal or constructive obligation exists and the payment is probable and can be reliably estimated.

g) Employee Retirement Benefits

(i) Defined Contribution Plans

Company''s contributions paid/payable during the year to Provident Fund, Superannuation Fund are recognised in the Statement of Profitand Loss.

(ii) Defined Benefit Plan

Company''s liabilities towards gratuity and leave encashment are determined on actuarial basis using the projected unit credit method, which consider each period of service as giving rise to an additional unit of benefit and measure each unit separately to build up the final obligation. Past services are recognised on straight-line basis over the average period until the amended benefits become vested. Actuarial gain and losses are recognised immediately in the Statement of Profit and Loss Account as income or expense. Obligation is measured at the present value of estimated future cash flow using a discount rate that is determined by reference to market yields at the Balance Sheet date on government bonds, where the currency and terms of the government bonds are consistent with the currency and estimated terms of the defined benefit obligation.

h) Investments

Investments that are readily realisable and intended to be held for not more than a year are classified as Current Investments. All other investments are classified as Long Term Investments.

Current Investments are carried at lower of cost and fair value determined on an individual investment basis. Long Term Investments are carried at cost. However, provision for diminution is made to recognise a decline, other than temporary in nature, in the carrying amount of such Long Term Investments.

i) Foreign Currency transactions

(i) Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of the transaction. Foreign Currency monetary assets and liabilities are translated at year end exchange rates. Exchange difference arising on settlement of transactions and translation of monetary items are recognised as income or expense in the year in which they arise. However, exchange difference arising either on settlement or on translation, in case of Long-Term Foreign Currency Borrowings, in so far as they relate to fixed asset are capitalised and in other cases, are accumulated in a "Foreign Currency Monetary Item Translation Difference Account". The balance in "Foreign Currency Monetary Item Translation Difference Account" is amortised over the balance period of the related Long-Term Borrowings. Similar treatment to gain or loss on forward and hedge contracts relatable to Long-term Borrowings is given. Gain or Loss on otherforward and hedge contracts are recognised in the Statement of Profitand Loss.

(ii) Company uses foreign exchange forward contracts and options to hedge its actual underlying exposures to reduce exchange risk and/or cost to the Company.

(iii) The difference between the forward rate and the exchange rate at the inception of the forward contract for underlying transactions is recognised as perthe principles set outin (i) (i) above.

(iv) In respect of hedge contracts, for firm commitment or forecasted transactions, the attributable gain or loss is accrued on periodic settlement and/or completion of contract and is recognised as perthe principles set out in (i) (i) above.

j) Income Tax

Tax expense comprises of both Current and Deferred Tax.

Provision for Current tax is measured at the amount computed under the Income Tax Act, 1961, or Book Profit computed under Section 115JB, whichever is higher, and correspondingly set-off available under Section 115JAA is credited to the Statement of Profit & Loss of the Financial Year.

MAT Credit is recognised as an asset only when, and to the extent, there is convincing evidence that the Company will pay normal income tax during the specified period. In the year in which the MAT Credit becomes eligible to be recognised as an asset in accordance with the recommendations contained in guidance Note issued bythe Institute of Chartered Accountants of India, the said asset is created by way of a credit to the Statement Profit and Loss and shown as MAT Credit Entitlement. The Company reviews the same at each Balance Sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent that there is no longer convincing evidence to the effect that Company will pay Normal Income Tax during the specified period.

Deferred Tax Assets and Liabilities are recognised for future tax consequences attributable to the timing differences between taxable income and accounting income that are capable of reversal in one or more subsequent periods and are measured using tax rates enacted or substantively enacted as at the Balance Sheet date. Deferred Tax assets are not recognised unless, in the management judgment, there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. The carrying amount of Deferred Tax is reviewed at each Balance Sheet date.

k) Earnings PerShare

The company reports Basic and Diluted Earning per Share (EPS) in accordance with Accounting Standard 20 on Earning per Share. Basic Earning Per Equity Share is computed by dividing net income bythe weighted average number of equity shares outstanding for the period. Diluted Earning Per Equity Share are computed by dividing net income by the weighted average number of equity shares adjusted for the effects of all dilutive potential equity shares.

l) Segment Reporting - Basis of Information

The Company has disclosed business segment as primary segment. The Company operates in three segments: Inorganic Intermediates, Organic Intermediates and Fine & Speciality Chemicals. Segments have been identified and reported taking into account the nature of the product, the differential risks and return of the segments, the organisation structure and the internal financial reporting systems.

Inter-segment transfer prices are normally negotiated amongst the segments with reference to the costs, market prices and business risks, within an overall optimisation objective ofthe company.

Revenue and expenses have been accounted on the basis of their relationship to the operating activities of the segment. Revenue and expenses, which relate to the enterprise as a whole and are not allocable to segments on the reasonable basis, have been included under "Unallocable Expenses". Assets and Liabilities which relate to the enterprise as a whole but are not allocable to segments on a reasonable basis, have been included under "Unallocable Assets/Liabilities".

Secondary segment have been identified with reference to geographical location of external customers. Composition of secondary segment is as follows:

i. India

ii. Outside India

m) Borrowing Costs

Borrowing Costs directly attributable to the acquisition/construction of qualifying assets as also the Borrowing Costs of funds borrowed generally and used for the purpose of acquisition/construction of such assets is capitalised up to the date the assets are ready for use. Other Borrowing Costs are recognised as an expense in the period in which they are incurred.

n) Operating Lease

Operating Lease payments are recognised as an expense in the Statement of Profit & Loss on a straight-line basis, which is representative of the time pattern ofthe user''s benefit.

o) Cash Flow Statement

The Cash Flow Statement is prepared by the indirect method set out in Accounting Standard 3, whereby Net Profit before Tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The Cash flows from regular revenue generating, investing and financing activities ofthe Company are segregated.

p) Provisions and Contingent Liabilities

Provisions are recognised in the accounts in respect of present probable obligations, the amount for which can be reliably estimated.

Contingent Liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company.


Mar 31, 2012

The accompanying Financial Statements have been prepared under the historical cost convention, in accordance with Generally Accepted Accounting Principles in India. The Company has prepared these Financial Statements to comply in all material respects with Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 and the relevant provisions of the Companies Act, 1956.

a) Use of Estimates

The preparation of Financial Statements in conformity with Generally Accepted Accounting Principles requires the management to make estimates and assumptions that affect the reported balances of Assets and Liabilities as of the date of Financial Statements and reported amounts of income and expenses during the period. Management believes that the estimates used in the preparation of Financial Statements are prudent and reasonable. Actual results could differ from those estimates. Difference between the actual results and estimates are recognised in the year in which the results are known / materialised.

b) Presentation and Disclosure of Financial Statements

Assets and Liabilities are classified as Current or Non-Current as per the provisions of the Revised Schedule VI notified under the Companies Act, 1956 and Company's normal operating cycle. Based on the nature of business and its activities, the Company has ascertained its operating cycle as twelve months for the purpose of Current & Non-Current classification of Assets & Liabilities.

c) (i) Tangible Fixed Assets and Depreciation

Fixed Assets are stated at their original cost of acquisition less accumulated depreciation and impairment losses. Cost includes all incidental expenses related to acquisition and installation and other pre operative expenses.

Depreciation is provided, pro rata for the period of use, by the straight line method (SLM) based on management's estimate of useful lives of the Fixed Assets at the following annual rates as prescribed in Schedule XIV to the Act, except in respect of Aromatics Amines plant where Depreciation in respect of Plant & Machinery is provided on Written Down Value basis. The items of continuous process plant are identified by the technical officials of the Company.

The excess depreciation provided on revalued fixed assets over the amount computed on the above basis is withdrawn from the Revaluation Reserve and transferred to the Profit & Loss Account.

Premium paid on leasehold land is amortised equally over the tenure of the Lease.

In respect of depreciable assets for which Impairment Loss is recognised, depreciation/amortisation is charged on the revised carrying amount over the remaining useful life of the assets.

(ii) Intangible Fixed Assets

Intangible Assets other than software are stated at their cost of acquisition, less accumulated amortisation and impairment losses thereon. An Intangible Asset is recognised, where it is probable that the future economic benefits attributable to the Asset will flow to the enterprise and where its cost can be reliably measured.

The depreciable amount of intangible assets other than software is allocated over the best estimate of its useful life on a straight-line basis. Goodwill is amortised over a period of 60 months.

The company capitalises software and related implementation costs where it is reasonably estimated that the software has an enduring useful life. Software is depreciated over management's estimate of its useful life of 6 years.

d) Impairment of Assets

The carrying amount of cash generating units / assets is reviewed at the Balance Sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount is estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, is recognised whenever carrying amount exceeds the recoverable amount.

e) Inventories

i) Raw Materials, Packing Materials and Stores & Spares are valued at cost determined on monthly moving weighted average basis and are net of Cenvat and VAT.

ii) Finished Goods and Stock-in-process are valued at cost of purchase of raw materials and conversion thereof including the cost incurred in the normal course of business in bringing the inventories up to the present condition or at the net realisable value whichever is lower. The inventories of joint products are valued by allocating the costs to the joint products by 'Relative Sales Value' method. By-products are valued at net realisable price.

f) Revenue Recognition

(i) Sales are recognised when goods are supplied and are recorded net of trade discounts, rebates, sales taxes, VAT and excise duties (recovery of which is shown separately) but include, where applicable, export incentives.

Conversion income is recognised on completion of production.

(ii) Revenue in respect of export incentive, overdue interest, insurance claim, etc. is recognised to the extent, the Company is reasonably certain of its ultimate realisation.

(iii) Expenses are accounted for on accrual basis.

(iv) Provisions are recognised when a present legal or constructive obligation exists and the payment is probable and can be reliably estimated.

g) Employee Retirement Benefits

(i) Defined Contribution Plans

The Company's contributions paid / payable during the year to Provident Fund, Superannuation Fund are recognised in the Profit and Loss Account.

(ii) Defined Benefit Plan

The Company's liabilities towards gratuity and leave encashment are determined on actuarial basis using the projected unit credit method, which consider each period of service as giving rise to an additional unit of benefit and measure each unit separately to build up the final obligation. Past services are recognised on straight-line basis over the average period until the amended benefits become vested. Actuarial gain and losses are recognised immediately in the Statement of Profit and Loss Account as income or expense. Obligation is measured at the present value of estimated future cash flow using a discount rate that is determined by reference to market yields at the Balance Sheet date on government bonds where the currency and terms of the government bonds are consistent with the currency and estimated terms of the defined benefit obligation.

h) Investments

Long term investments are valued at cost after appropriate adjustment, if necessary, for permanent diminution in their value. Current Investments are stated at lower of cost and fair value.

i) Foreign Currency transactions

(i) Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of the transaction. Foreign Currency monetary assets and liabilities are translated at year end exchange rates. Exchange difference arising on settlement of transactions and translation of monetary items are recognised as income or expense in the year in which they arise. However exchange difference arising either on settlement or on translation, in case of Long-Term Foreign Currency Borrowings, in so far as they relate to fixed asset are capitalised and in other cases, are accumulated in a "Foreign Currency Monetary Item Translation Difference Account". The balance in "Foreign Currency Monetary Item Translation Difference Account" is amortised over the balance period of the related Long-Term Borrowings. Similar treatment to gain or loss on forward and hedge contracts relatable to long-term borrowings is given. Gain or loss on other forward and hedge contracts are recognised in Statement of Profit and Loss.

(ii) The Company uses foreign exchange forward contracts and options to hedge its actual underlying exposures to reduce exchange risk and / or cost to the Company.

(iii) The difference between the forward rate and the exchange rate at the inception of the forward contract for underlying transactions is recognised as per the principles set out in i) (i) above.

(iv) In respect of hedge contracts, for firm commitment or forecasted transactions, the attributable gain or loss is accrued on periodic settlement and/or completion of contract and is recognised as per the principles set out in i) (i) above.

j) Income Tax

Tax expense comprises both Current and Deferred Tax.

Current Tax is measured at the amount expected to be paid to the tax authorities, using the applicable tax rates and tax laws.

Deferred Tax Assets and Liabilities are recognised for future tax consequences attributable to the timing differences between taxable income and accounting income that are capable of reversal in one or more subsequent periods and are measured using tax rates enacted or substantively enacted as at the Balance Sheet date. Deferred Tax assets are not recognised unless, in the management judgment, there is virtual certainty that sufficient future taxable income will be available against which such Deferred Tax Assets can be realised. The carrying amount of Deferred Tax is reviewed at each Balance Sheet date.

k) Earnings per Share

The Company reports Basic and Diluted Earnings per Share (EPS) in accordance with Accounting Standard 20 on Earnings per Share. Basic Earnings per Equity Share are computed by dividing net income by the weighted average number of equity shares outstanding for the period. Diluted Earnings per Equity Share are computed by dividing net income by the weighted average number of equity shares adjusted for the effects of all dilutive potential equity shares.

l) Segment Reporting- Basis of Information

The Company operates in three segments: Inorganic Intermediates, Organic Intermediates and Fine & Speciality Chemicals. Segments have been identified and reported taking into account the nature of the product, the differential risks and return of the segments, the organisation structure and the internal financial reporting systems.

Inter segment transfer prices are normally negotiated amongst the segments with reference to the costs, market prices and business risks, within an overall optimisation objective of the Company.

Revenue and expenses have been accounted on the basis of their relationship to the operating activities of the segment. Revenue and expenses, which relate to the enterprise as a whole and are not allocable to segments on the reasonable basis, have been included under "Unallocable Expenses". Assets and Liabilities which relate to the enterprise as a whole but not allocable to segments on a reasonable basis, have been included under "Unallocable Assets / Liabilities".

m) Borrowing Costs

Borrowing Costs directly attributable to the acquisition/construction of qualifying assets as also the Borrowing Costs of funds borrowed generally and used for the purpose of acquisition/construction of such assets is capitalised up to the date the assets are ready for use. Other Borrowing Costs are recognised as an expense in the period in which they are incurred.

n) Operating Lease

Operating Lease payments are recognised as an expense in the Profit & Loss Account on a straight-line basis, which is representative of the time pattern of the user's benefit.

o) Cash Flow Statement

The Cash Flow Statement is prepared by the indirect method set out in Accounting Standard 3, whereby Net Profit before Tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The Cash flows from regular revenue generating, investing and financing activities of the Company are segregated.

p) Provisions and Contingent Liabilities

Provisions are recognised in the accounts in respect of present probable obligations, the amount of which can be reliably estimated.

Contingent Liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company.


Mar 31, 2011

(a) Revenue Recognition :

(i) Sales are recognised when goods are supplied and are recorded net of trade discounts, rebates, sales taxes, VAT and excise duties (recovery of which is shown separately) but include, where applicable, export incentives. Conversion income is recognised on completion of production.

(ii) Revenue in respect of export incentive, overdue interest, insurance claim, etc. is recognised to the extent, Company is reasonably certain of its ultimate realisation.

(iii) Expenses are accounted for on accrual basis.

(iv) Provisions are recognised when a present legal or constructive obligation exists and the payment is probable and can be reliably estimated.

(b) Fixed Assets :

(i) Cost:

Fixed assets are recorded at historical cost of acquisition or construction including borrowing cost and expenditure incidental and related to such construction/acquisition except in respect of certain Fixed Assets which have been revalued.

(ii) Impairment of Assets :

The carrying amounts of Cash Generating Units/Assets are reviewed at Balance Sheet date to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount is estimated at the higher of net selling price and value in use. Impairment loss is recognised wherever carrying amount exceeds the recoverable amount.

(iii) Depreciation/Amortisation :

i) Depreciation is provided on Straight Line basis by applying the rates prescribed in Schedule XIV to the Companies Act, 1956 except in respect of Aromatics Amines plant where depreciation in respect of plant & machinery is provided on Written Down Value basis. The items of continuous process plant are identified by the technical officials of the Company.

The excess depreciation provided on revalued fixed assets over the amount computed on the above basis is withdrawn from the Revaluation Reserve and transferred to the Profit & Loss Account.

In respect of depreciable assets for which Impairment Loss is recognised, depreciation/amortization is charged on the revised carrying amount over the remaining useful life of the assets.

ii) Goodwill is amortised over a period of 60 months.

iii) Premium paid on leasehold land is amortised equally over the tenure of the lease.

(c) Foreign Currency Transaction :

(i) Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of the transaction. Foreign currency monetary assets and liabilities are translated at year end exchange rates. Exchange difference arising on settlement of transactions and translation of monetary items are recognised as income or expense in the year in which they arise.

(ii) In respect of forward exchange contracts, the difference between the forward rate and the exchange rate at the inception of the contract is recognised as income or expense over the period of the contract.

(iii) Gains or losses on cancellation / settlement of forward exchange contracts are recognised as income or expense.

(d) Cost of borrowing :

Borrowing costs directly attributable to the acquisition/construction of qualifying assets as also the borrowing costs of funds borrowed generally and used for the purpose of acquisition/construction of such assets is capitalised up to the date the assets are ready for use. Other borrowing costs are recognised as an expense in the period in which they are incurred.

(e) Valuation of Inventories :

i) Raw materials, packing materials and stores & spares are valued at cost determined on monthly moving weighted average basis and is net of CENVAT and VAT.

ii) Finished goods and stock-in-process are valued at cost of purchase of raw materials and conversion thereof including the cost incurred in the normal course of business in bringing the inventories up to the present condition or at the net realisable value whichever is lower. The inventories of joint products are valued by allocating the costs to the joint products by 'Relative Sales Value' method. By-products are valued at net realisable price.

(f) Employee Benefits:

Short term employee benefits are recognised as an expense at the undiscounted amount in the profit and loss account of the year in which the related service is rendered.

Post-employment and other long term benefits are recognised as an expense in the profit and loss account for the year in which the employee has rendered services. The expense is recognised at the Present Value of the amount payable determined using actuarial valuation techniques. Actuarial Gains and Losses in respect of post employment and other long term benefits are charged to profit and loss account.

(g) Investments:

Long term investments are valued at cost after appropriate adjustment, if necessary, for permanent diminution in their value. Current Investments are stated at lower of cost and fair value.

(h) Income Tax:

Company provides for deferred tax in respect of timing differences between taxable income and accounting income for a period that are capable of reversal in one or more subsequent period subject to consideration of prudence. The provision for deferred tax also includes the effect of change in tax rate. Provision for current Income Tax is made on current tax rate based on assessable income computed under the Income Tax Act 1961 or Book Profit computed under section 115JB, whichever is higher and correspondingly set-off available under section 115 JAA is credited to profit and loss account of the year.

(i) Earnings Per Share:

Basic earnings per equity share are computed by dividing net income by the weighted average number of equity shares outstanding for the period. Diluted earnings per equity share are computed by dividing net income by the weighted average number of equity shares adjusted for the effects of all dilutive potential equity shares.

(j) Segment Reporting- Basis of Information :

The Company operates in three segments: Inorganic Intermediates, Organic Intermediates and Fine & Speciality Chemicals. Segments have been identified and reported taking into account the nature of the product, the differential risks and return of the segments, the organisation structure and the internal financial reporting systems.

Inter segment transfer prices are normally negotiated amongst the segments with reference to the costs, market prices and business risks, within an overall optimisation objective of the Company.

Revenue and expenses have been accounted on the basis of their relationship to the operating activities of the segment. Revenue and expenses, which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis, have been included under "Unallocable Expenses". Assets and Liabilities which relate to the enterprise as a whole but not allocable to segments on a reasonable basis, have been included under "Unallocable Assets / Liabilities".

(k) Contingent liabilities:

Contingent liabilities are disclosed by way of notes to accounts. Provision is made if it becomes probable that an outflow of future economic benefits will be required for an item previously dealt with as contingent liability.

(l) Cash Flow Statements:

Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating, investing and financing activities of the Company are segregated.


Mar 31, 2010

(a) Revenue Recognition:

(i) Sales are recognised when goods are supplied and are recorded net of trade discounts, rebates, sales taxes, VAT and excise duties (recovery of which is shown separately) but include, where applicable, export incentives. Conversion income is recognised on completion of production.

(ii) Revenue in respect of export incentive, overdue interest, insurance claim, etc. is recognised to the extent the Company is reasonably certain of its ultimate realisation.

(iii) Expenses are accounted for on accrual basis.

(iv) Provisions are recognised when a present legal or constructive obligation exists and the payment is probable and can be reliably estimated.

(b) Fixed Assets:

(i) Cost:

Fixed assets are recorded at historical cost of acquisition or construction, including borrowing cost and expenditure, incidental and related to such construction/acquisition, except in respect of certain Fixed Assets which have been revalued.

(ii) Impairment of Assets:

The carrying amounts of Cash Generating Units/Assets are reviewed at Balance Sheet date to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount is estimated at the higher of net selling price and value in use. Impairment loss is recognised wherever carrying amount exceeds the recoverable amount.

(iii) Depreciation/Amortisation:

i) Depreciation is provided on Straight Line basis by applying the rates prescribed in Schedule XIV to the Companies Act, 1956 except in respect of Aromatics Amines plant where depreciation in respect of plant and machinery is provided on Written Down Value basis. The items of continuous process plant are identified by the technical officials of the Company.

The excess depreciation provided on revalued fixed assets over the amount computed on the above basis is withdrawn from the Revaluation Reserve and transferred to the Profit & Loss Account.

In respect of depreciable assets for which Impairment Loss is recognised, depreciation/amortisation is charged on the revised carrying amount over the remaining useful life of the assets.

ii) Goodwill is amortised over a period of 60 months.

iii) Premium paid on leasehold land is amortised equally over the tenure of the lease.

(d) Cost of borrowing:

Borrowing costs directly attributable to the acquisition/construction of qualifying assets as also the borrowing costs of funds borrowed generally and used for the purpose of acquisition/construction of such assets is capitalised up to the date the assets are ready for use. Other borrowing costs are recognised as an expense during the period in which they are incurred.

(e) Valuation of Inventories:

i) Raw materials, packing materials and stores & spares are valued at cost determined on monthly moving weighted average basis and is net of CENVAT and VAT.

ii) Finished goods and stock-in-process are valued at cost of purchase of raw materials and conversion thereof including the cost incurred in the normal course of business in bringing the inventories up to the present condition or at the net realisable value, whichever is lower. The inventories of joint products are valued by allocating the costs to the joint products by Relative Sales Value method. By-products are valued at net realisable price.

(f) Employee Benefits:

Short term employee benefits are recognised as an expense at the undiscounted amount in the Profit and Loss Account of the year in which the related service is rendered.

Post-employment and other long term benefits are recognised as an expense in the Profit and Loss Account for the year in which the employee has rendered services. The expense is recognised at the Present Value of the amount payable determined by using actuarial valuation techniques. Actuarial Gains and Losses in respect of post-employment and other long term benefits are charged to the Profit and Loss Account.

Payments made under Voluntary Retirement Scheme is charged to the Profit and Loss Account over the benefit period estimated at 3 years.

(g) Accounting for lease payments:

The annual accrual of the component of finance cost embedded in the lease rents payable over the primary lease term is charged to the Profit and Loss Account. On the other hand, the component representing the cost of leased assets is amortised over their useful life, estimated on the basis of the SLM rates prescribed in Schedule XIV to the Companies Act, 1956 and accordingly charged to the Profit and Loss Account. The excess of the amount of lease rents falling due and paid during the year over the amounts so debited to the Profit and Loss Account is treated as prepaid expenditure and reflected in the Balance Sheet.

(h) Investments:

Long term investments are valued at cost after appropriate adjustment, if necessary, for permanent diminution in their value. Current investments are stated at lower of cost and fair value.

(i) Income Tax:

Company provides for deferred tax in respect of timing differences between taxable income and accounting income for a period that are capable of reversal in one or more subsequent period subject to consideration of prudence. The provision for deferred tax also includes the effect of change in tax rate. Provision for current Income Tax is made on current tax rate based on assessable income computed under the Income Tax Act 1961 or Book Profit computed under section 115JB, whichever is higher, and correspondingly set-off available under section 115 JAA is credited to profit and loss account of the year.

(j) Earnings Per Share:

Basic earnings per equity share are computed by dividing net income by the weighted average number of equity shares outstanding for the period. Diluted earnings per equity share are computed by dividing net income by the weighted average number of equity shares adjusted for the effects of all dilutive potential equity shares.

(k) Segment Reporting-Basis of Information:

The Company operates in three segments: Inorganic Intermediates, Organic Intermediates and Fine & Speciality Chemicals. Segments have been identified and reported taking into account the nature of the product, the differential risks and return of the segments, the organisation structure and the internal financial reporting systems.

Inter segment transfer prices are normally negotiated amongst the segments with reference to the costs, market prices and business risks, within an overall optimisation objective of the company.

Revenue and expenses have been accounted on the basis of their relationship to the operating activities of the segment. Revenue and expenses, which relate to the enterprise as a whole and are not allocable to segments on a reasonable basis, have been included under "Unallocable Expenses". Assets and Liabilities which relate to the enterprise as a whole but not allocable to segments on a reasonable basis, have been included under "Unallocable Assets / Liabilities".

(l) Contingent Liabilities:

Contingent liabilities are disclosed by way of notes to accounts. Provision is made if it becomes probable that an outflow of future economic benefits will be required for an item previously dealt with as contingent liability.

(m) Cash Flow Statements:

Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating, investing and financing activities of the Company are segregated.

 
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