Accounting Policies of Khaitan Chemicals & Fertilizers Ltd. Company
Mar 31, 2019
1. Significant Accounting Policies for the year ended 31st March, 2019.
a) Revenue Recognition
i. Sale -Revenue from the sale of goods is recognised, when all the significant risks and rewards of ownership of the goods have passed to the buyer, the Company no longer has effective control over the goods sold, the amount of revenue and costs associated with the transaction can be measured reliably and no significant uncertainty exists regarding the amount of Consideration that will be derived from the sales of Goods. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. The sales amount includes the excise duty and exclude Value added tax/sales tax. Export incentives, Duty drawbacks, Goods and Service Tax and other benefits are recognized in the Statement of Profit and Loss.
ii. Interest - Interest income is recognized on a time proportion basis taking into account the amount outstanding and rate applicable, effective interest method, wherever applicable.
iii. Subsidy - Fertilizer Subsidy, wherever applicable, is accounted for on actual sales and is net off of any subsequent non receipt reversal.
iv. Dividend - Dividends are accounted for when the right to receive the dividend payment is established
In March 2018, the Ministry of Corporate Affairs has notified the Companies (Indian Accounting Standards) amended rules, 2018 (âAmended Rulesâ). As per amended rules, Ind AS 115 âRevenue from Contracts with Customersâ supersedes Ind AS 11, âConstruction Contractsâ and Ind AS 18, âRevenueâ and is applicable for all accounting periods commencing on or after April 1, 2018.
Ind AS 115 introduces a new framework of five step model for the analysis of Revenue transactions. The model specifies that revenue should be recognised when (or as) an entity transfer control of goods or services to a customer at the amount to which the entity expects to be entitled. Further the new standard requires enhanced disclosures about the nature, amount, timing, and uncertainty of revenue and cash flows arising from the entityâs contracts with customers.
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.
The Company has evaluated the requirement of the amendment and the impact on the financial statements. The effect on adoption of Ind AS 115 is expected to be insignificant.
Revenues in excess of invoicing are classified as contract assets (which we refer as unbilled revenue) while invoicing in excess of revenues are classified as contract liabilities (which we refer to as unearned revenues).
Deferred contract costs are incremental costs of obtaining a contract which are recognized as assets and amortized over the term of the contract.
Contract modifications are accounted for when additions, deletions or changes are approved either to the contract scope or contract price. The accounting for modifications of contracts involves assessing whether the services added to an existing contract are distinct and whether the pricing is at the standalone selling price.
Services added that are not distinct are accounted for on a cumulative catch up basis, while those that are distinct are accounted for prospectively, either as a separate contract, if the additional services are priced at the standalone selling price, or as a termination of the existing contract and creation of a new contract if not priced at the standalone selling price.
b) Government Grants and Subsidies
Grants and Capital subsidy from the government is recognized on receipt basis with the reasonable assumption that the Company will comply with conditions attached to them and such amount is credited to capital reserves. Further, in accordance with the guidelines issued by ICAI, proportionate amount to the extent of depreciation charged, is being transferred to retained earnings in case of grant received in relation to acquisition of any assets.
c) Excise Duty
Excise duty payable on products is accounted for at the time of dispatch of goods from the factories but is accrued for stocks held at the year end.
d) Employee Benefits
i. Short term employee benefits obligations are estimated and provided for.
ii. Post-employment benefits and other long term benefits:
a) Defined contribution plans:
Companyâs contribution to provident fund, superannuation fund, employee state insurance and other funds are determined under the relevant schemes and/or statute and charged to revenue.
b) Defined benefits plans:
Companyâs Liability towards gratuity and leave encashment is actuarially determined at each balance sheet date using the projected unit credit method. Actuarial gains and losses are recognized in Other Comprehensive Income and other costs are recognized in statement of profit and loss. Gratuity and Leave encashment liabilities are funded and administered through Group Gratuity Scheme with Life Insurance Corporation of India.
e) Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Finance Lease
Finance Lease is a lease that transfer substantially all of the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and a reduction in the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the statement of profit and loss unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Companyâs policy on borrowing costs.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating Lease
Assets acquired on leases where a significant portion of the risks and rewards of ownership are retained by lessor are classified as operating leases. Lease rentals paid for operating leases are charged to Statement of Profit and Loss with reference to lease term and other consideration.
f) Borrowing Cost
Borrowing costs that are attributable to the acquisition or constructions of qualifying assets are capitalised as part of the cost of assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue.
g) Property, plant and equipment
i. Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing cost if capitalization criteria are met and directly attributable cost of bringing the assets to its working condition for the intended use. Any trade discounts, rebates & cenvat availed, are deducted in arriving at the purchase price.
ii. Capital work-in-progress comprises of the cost of fixed assets that are not yet ready for their intended use at the reporting date.
iii. Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the costs to the item can be measured reliably. Repairs and maintenance costs are recognized in net profit in the statement of profit and loss when incurred. The cost and related accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset and the resultant gain or losses are recognized in the statement of profit and loss.
iv. Gains or losses arising from de-recognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the assets is derecognized.
v. Machinery Spares /Standby equipmentâs which are used only in connection with Property, plant and equipment and are of material value to the overall value of the asset are capitalized.
h) Intangible assets
IntangibleAssets are carried at cost, net of accumulated amortization and impairment losses, if any. Cost of intangible asset comprises of purchase price and attributable expenditure on making the asset ready for its intended use.
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from de-recognition of intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the assets is derecognized.
i) Research and Development cost
Revenue expenditure on Research and Development is charged to statement of Profit and loss in the year in which it is incurred and capital expenditure is added to Fixed Asset.
j) Depreciation and Amortisation
i. Depreciation on tangible assets is provided on the straight-line method over the useful lives of assets as prescribed in Schedule II of the Companies Act, 2013.
ii. Depreciation for assets purchased/sold during a period are proportionately charged.
iii. Intangible Assets are amortized on straight-line basis over the estimated useful economic life not exceeding 10 years. The Intangible Assets are assessed for impairment whenever there is an indication that the Intangible assets impaired.
iv. The leasehold land is amortised over the primary lease period excluding on perpetual lease. Freehold land is not depreciated.
v. Assets individually costing Rs 5000 or less are depreciated fully in the year of purchase.
k) Impairment of tangible and intangible assets
The carrying amounts of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its estimated recoverable amount and such assets are written down to their recoverable amount.
Reversal of impairment losses recognized in prior years is recorded when there is an indication that the impairment losses, recognized for the assets, no longer exists or have decreased to the extent of previously recognized impairment losses.
Impairment losses of continuing operations, including impairment on inventories, are recognized in the statement of profit and loss.
l) Inventories
Inventories are valued at the lower of cost and estimated net realisable value. However, material and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated / used are expected to be sold at or above cost. Net realisable value is the estimated selling price in the ordinary course of business reduced by estimated cost of completion and selling expenses. The cost of inventories is generally arrived at on the following basis:
Raw Material Quarterly weighted average method for Fertilizer Division and FIFO method forAgri Division.
Packing material and Stores & Spares Monthly weighted average method.
Finished goods and work-in-progress Raw material cost and proportion of manufacturing overheads. Excise duty, if any, is included in the value of Finished goods Inventory,
m) Financial Assets & Liabilities
A Financial Instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
At initial recognition, all financial assets are measured at fair value. Such financial assets are subsequently classified under following three categories according to the purpose for which they are held. The classification is reviewed at the end of each reporting period.
i. Financial Assets at Amortised Cost
At the date of initial recognition, are held to collect contractual cash flows of principal and interest on principal amount outstanding on specified dates. These financial assets are intended to be held until maturity. Therefore, they are subsequently measured at amortised cost by applying the Effective Interest Rate (EIR) method to the gross carrying amount of the financial asset. The EIR amortisation is included as interest income in the profit or loss. The losses arising from impairment are recognised in the profit or loss.
ii. Financial Assets at Fair value through Other Comprehensive Income
At the date of initial recognition, are held to collect contractual cash flows of principal and interest on principal amount outstanding on specified dates, as well as held for selling. Therefore, they are subsequently measured at each reporting date at fair value, with all fair value movements recognised in Other Comprehensive Income (OCI). Interest income calculated using the effective interest rate (EIR) method, impairment gain or loss and foreign exchange gain or loss are recognised in the Statement of Profit and Loss. On derecognition of the asset, cumulative gain or loss previously recognised in Other Comprehensive Income is reclassified from the OCI to Statement of Profit and Loss.
iii. Financial Assets at Fair value through Profit or Loss
At the date of initial recognition, financial assets are held for trading, or which are measured neither at Amortised Cost nor at Fair Value through OCI. Therefore, they are subsequently measured at each reporting date at fair value, with all fair value movements recognised in the Statement of Profit and Loss.
Trade Receivables.
A Receivable is classified as a âtrade receivableâ if it is in respect to the amount due from customers on account of goods sold or services rendered in the ordinary course of business. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. For some trade receivables the Company may obtain security in the form of guarantee, security deposit or letter of credit which can be called upon if the counterparty is in default under the terms of the agreement.
Impairment is made on the expected credit losses, which are the present value of the cash shortfalls over the expected life of financial assets. The estimated impairment losses are recognised in a separate provision for impairment and the impairment losses are recognised in the Statement of Profit and Loss within other expenses. Subsequent changes in assessment of impairment are recognised in provision for impairment and the change in impairment losses are recognised in the Statement of Profit and Loss within other expenses.
Investment in Equity Shares.
Investments in Equity Securities are initially measured at cost. Any subsequent fair value gain or loss is recognized through Profit or Loss if such investments in Equity Securities are held for trading purposes. The fair value gains or losses of all other Equity Securities are recognized in Other Comprehensive Income. Derecognition.
Financial Asset is primarily derecognised when:
i. The right to receive cash flows from asset has expired, or.
ii. The Company has transferred its right to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a â pass-throughâ arrangement and either:
a) The Company has transferred substantially all the risks and rewards of the asset, or
b) The Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Company has transferred its right to receive cash flows from an asset or has entered into a pass through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Companyâs continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Financial Liabilities
Initial recognition and measurement
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Companyâs financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, and derivative financial instruments. Subsequent Measurement.
The measurement of financial liabilities depends on their classification, as described below:
i. Financial Liabilities at Fair Value through Profit or Loss.
Financial liabilities at fair value through profit or loss include financial liabilities held for trading. The Company has not designated any financial liabilities upon initial measurement recognition at fair value through profit or loss. Financial liabilities at fair value through profit or loss are at each reporting date with all the changes recognized in the Statement of Profit and Loss.
ii. Financial Liabilities measured at Amortised Cost.
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method (âEIRââ) except for those designated in an effective hedging relationship. The carrying value of borrowings that are designated as hedged items in fair value hedges that would otherwise be carried at amortised cost are adjusted to record changes in fair values attributable to the risks that are hedged in effective hedging relationship.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the Statement of Profit and Loss.
iii. Loans and Borrowings.
After initial recognition, interest-bearing borrowings are subsequently measured at amortised cost using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least twelve months after the reporting period.
iv. Trade and Other Payables.
A payable is classified as âtrade payableâ if it is in respect of the amount due on account of goods purchased or services received in the normal course of business. These amounts represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
De-recognition of Financial Liability
A Financial Liability is derecognised when the obligation under the liability is discharged or cancelled or expires. 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 profit or loss as other income or finance costs.
Offsetting of Financial Instruments
Financial Assets and Financial Liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Derivative Financial Instruments
The company uses derivative instruments as a part of its management of exposure to fluctuations in foreign currency exchange rates. The company does not acquire or issue derivative instruments for trading or speculative purposes. The company does not enter into complex derivative transactions to manage the treasury.
All derivative financial instruments are recognised as assets or liabilities on the balance sheet and measured at fair value, generally based on quotation obtained from financial institutions. The accounting for changes in the fair value of a derivative instruments depends on the intended use of the derivatives and the resulting designation.
The fair values of all derivatives are separately recorded in the balance sheet within current and non-current assets and liabilities. Derivatives that are designated as hedges are classified as current and non-current depending upon the maturity of the derivatives.
The use of derivative can give rise to credit and market risk. The company tries to control credit risk as far as possible by only entering into the contract with reputable bank and financial institution. The use of derivative instrument is subject to limits, authorities and regular monitoring by appropriate levels of management. The limits, authorities and monitoring systems are periodically reviewed by the management and board. The market risk on derivatives are mitigated by changes in the valuation of the underlying assets, liabilities or transactions, as derivatives are used only for risk management purposes.
(i) Cash flow hedge
The Company designates certain foreign exchange forward as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast cash transactions.
When a derivative is designated as a cash flow hedge instrument, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and accumulated in the cash flow hedge reserve. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in the net profit in the Statement of Profit and Loss. If the hedging instrument no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument recognized in cash flow hedge reserve till the period the hedge was effective remains in cash flow hedge reserve until the forecasted transaction occurs. The cumulative gain or loss previously recognized in the cash flow hedge reserve is transferred to the net profit in the Statement of Profit and Loss upon the occurrence of the related forecasted transaction. If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow hedge reserve is reclassified to net profit in the Statement of Profit and Loss. n) Foreign Currency Transactions/ Hedge Accounting
Financial statements are presented in Indian Rupee, which is Companyâs functional currency. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Financial instruments designated as Hedge Instruments are mark to market using the valuation given by the bank on the reporting date. Exchange differences arising on settlement of monetary items on actual payments / realisations and year end translations including on forward contracts are dealt with in Profit and Loss Statement.
o) Taxation Income Tax
The current tax is determined as the amount of tax payable in respect of the estimated taxable income for the year in accordance with the provisions of Income Tax Act, 1961. Current income tax relating to items recognised directly in equity is recognised in equity and not in the statement of profit and loss.
Deferred Tax
Deferred tax is provided using the balance sheet approach on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purpose at reporting date.
Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect of changes in tax rates on deferred income tax assets and liabilities is recognized as income or expense in the period that includes the enactment or the substantive enactment date. A deferred income tax asset is recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilized.
The Company offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Minimum Alternate Tax
Minimum Alternate Tax credit is recognized, 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. p) Pre project expenditure
The expenses on pre-feasibility study reports, market survey reports, and techno-economic feasibility reports etc. on new projects are allocated to the Fixed Assets on completion of the projects. Where the projects are proved in-fructuous, they are charged to the revenue in the year in which the decision is taken to scrap the same. q) Earning per share
The Company reports basic and diluted earnings per equity share in accordance withIndian Accounting Standard 33-âEarning per shareâ. Basic earnings per equity share is computed by dividing net profit after tax by the weighted average number of equity shares outstanding during the year. The Company does not have any diluted equity share, hence Basic and Dilutive earning per share is same. r) Provisions and Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resourcesembodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost
Contingent Assets are not recognised in financial statements but are disclosed, since the former treatment may result in the recognition of income that may or may not be realised. However, when the realisation of income is virtually certain, then the related asset is not a contingent asset and its recognition is appropriate. s) Cash and Cash Equivalents
Cash and cash equivalents for the purpose of cash flow statements comprises cash at bank and in hand and short term investments with an original maturity of 3 months or less. t) Cash Flow Statements
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated. u) Derivatives Instruments
The Company holds derivative financial instruments such as Foreign Currency Forward Contracts to mitigate the risk of changes in exchange rates on Foreign currency exposures. The counter party for these contracts is bank. The Company initially recognised such derivative instruments at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value with changes in fair value recognised in the Statement of Profit &Loss, except for the effective portion of cash flow hedge which is recognised in Other Comprehensive Income and later to statement of profit and loss in the period when they arise. Derivatives are carried as Financial Assets when the fair value is positive and as financial liabilities when the fair value is negative.
v) Segment Reporting
The Company is organized into three primary business segments mainly Fertilizer and Chemicals, Agro (Soya) and others, based on nature of products. The management and administration are centralized and considered as part of âFertilizer & Chemicalsâ segment, being major activities. Unallocated items include general corporate income, expense, assets and liabilities items which are not allocated to any business segment.
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as whole. w) Fair Value Measurements
The Company measures financial instruments such as derivatives and certain investments, at fair value at each balance sheet date.
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:
i. In the principal market for the asset or liability, or
ii. In the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Company.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole;
i. Level 1- Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
ii. Level 2- Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
iii. Level 3- Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. x) Significant Accounting Judgments, Estimates and Assumptions
In the process of applying the Companyâs accounting policies, management has made the following estimates, assumptions and judgements which have significant effect on the amounts recognized in the financial statement:
I. Income taxes
Judgment of the Management is required for the calculation of provision for income taxes and deferred tax assets and liabilities. The company reviews at each balance sheet date the carrying amount of deferred tax assets. The factors used in estimates may differ from actual outcome which could lead to significant adjustment to the amounts reported in the standalone financial statements.
ii. Contingencies
Judgment of the Management is required for estimating the possible outflow of resources, if any, in respect of contingencies/claim/litigations against the company as it is not possible to predict the outcome of pending matters with accuracy.
iii. Allowance for uncollected accounts receivable and advances
Trade receivables do not carry any interest and are stated at their normal value as reduced by appropriate allowances for estimated irrecoverable amounts. Individual trade receivables are written off when management deems them not collectible. Impairment is made on ECL, which are the present value of the cash shortfall over the expected life of the financial assets.
iv. Defined Benefit Plans.
The cost of the defined benefit plan and other post-employment benefits and the present value of such obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in future. These Includes the determination of the discount rate, future salary increases, mortality rates and attrition rate. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
v. Fair Value Measurement of Financial Instruments.
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted Cash Flow (DCF) model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.
y) Recent accounting pronouncements Ind AS 116 Leases:
On March 30, 2019, Ministry of Corporate Affairs has notified Ind AS 116, Leases. Ind AS 116 will replace the existing leases Standard, Ind AS 17 Leases, and related Interpretations. The Standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract i.e., the lessee and the lessor. Ind AS 116 introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than twelve months, unless the underlying asset is of low value. Currently, operating lease expenses are charged to the statement of Profit & Loss. The Standard also contains enhanced disclosure requirements for lessees. Ind AS 116 substantially carries forward the lessor accounting requirements in Ind AS 17.
The effective date for adoption of Ind AS 116 is annual periods beginning on or after April 1, 2019. The standard permits two possible methods of transition:
- Full retrospective - Retrospectively to each prior period presented applying Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors
- Modified retrospective - Retrospectively, with the cumulative effect of initially applying the Standard recognized at the date of initial application.
Under modified retrospective approach, the lessee records the lease liability as the present value of the remaining lease payments, discounted at the incremental borrowing rate and the right of use asset either as:
- Its carrying amount as if the standard had been applied since the commencement date, but discounted at lesseeâs incremental borrowing rate at the date of initial application or
- An amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments related to that lease recognized under Ind AS 17 immediately before the date of initial application.
Certain practical expedients are available under both the methods.
The Company is currently evaluating the effect of this amendment on the financial statements.
Ind AS 12 Appendix C, Uncertainty over Income Tax Treatments:
On March 30, 2019, Ministry of Corporate Affairs has notified Ind AS 12 Appendix C, Uncertainty over Income Tax Treatments which is to be applied while performing the determination of taxable profit (or loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under Ind AS 12. According to the appendix, companies need to determine the probability of the relevant tax authority accepting each tax treatment, or group of tax treatments, that the companies have used or plan to use in their income tax filing which has to be considered to compute the most likely amount or the expected value of the tax treatment when determining taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates.
The standard permits two possible methods of transition - i) Full retrospective approach - Under this approach, Appendix C will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors, without using hindsight and ii) Retrospectively with cumulative effect of initially applying Appendix C recognized by adjusting equity on initial application, without adjusting comparatives.
The effective date for adoption of Ind AS 12 Appendix C is annual periods beginning on or after April 1, 2019. The Company will adopt the standard on April 1, 2019 and has decided to adjust the cumulative effect in equity on the date of initial application i.e. April 1, 2019 without adjusting comparatives.
The effect on adoption of Ind AS 12 Appendix C would be insignificant in the financial statements.
Amendment to Ind AS 12 - Income taxes:
On March 30, 2019, Ministry of Corporate Affairs issued amendments to the guidance in Ind AS 12, âIncome Taxesâ, in connection with accounting for dividend distribution taxes.
The amendment clarifies that an entity shall recognise the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised those past transactions or events.
Effective date for application of this amendment is annual period beginning on or after April 1, 2019. The Company is currently evaluating the effect of this amendment on the financial statements.
Amendment to Ind AS 19 - plan amendment, curtailment or settlement-
On March 30, 2019, Ministry of Corporate Affairs issued amendments to Ind AS 19, âEmployee Benefitsâ, in connection with accounting for plan amendments, curtailments and settlements.
The amendments require an entity:
- to use updated assumptions to determine current service cost and net interest for the remainder of the period after a plan amendment, curtailment or settlement; and
- to recognise in profit or loss as part of past service cost, or a gain or loss on settlement, any reduction in a surplus, even if that surplus was not previously recognised because of the impact of the asset ceiling.
Effective date for application of this amendment is annual period beginning on or after April 1, 2019. The Company does not have any impact on account of this amendment.
Mar 31, 2018
1. Significant Accounting Policies for the year ended 31st March, 2018.
a) Revenue Recognition
i. Sale -Revenue from the sale of goods is recognised, when all the significant risks and rewards of ownership of the goods have passed to the buyer, the Company no longer has effective control over the goods sold,the amount of revenue and costs associated with the transaction can be measured reliably and no significant uncertainty exists regarding the amount of Consideration that will be derived from the sales of Goods. Revenue from the saleof goods is measured at the fair value of the consideration received orreceivable, net of returns and allowances, trade discounts and volume rebates. The sales include the excise duty and exclude Value added tax/sales tax/Goods and services tax. Export incentives, Duty drawbacks and other benefits are recognized in the Statement of Profit and Loss.
ii. Interest - Interest income is recognized on a time proportion basis taking into account the amount outstanding and rate applicable, effective interest method, wherever applicable.
iii. Subsidy-Fertilizer Subsidy, wherever applicable, is accounted for on actual sales and is net off of any subsequent non receipt reversal.
iv. Dividend - Dividends are accounted for when the right to receive the dividend payment is established.
b) Government Grants and Subsidies
Grants and Capital subsidy from the government is recognized on receipt basis with the reasonable assumption that the Company will comply with conditions attached to them and such amount is credited to capital reserves. Further, in accordance with the guidelines issued by ICAI, proportionate amount to the extent of depreciation charged, is being transferred to retained earnings in case of grant received in relation to acquisition of any assets.
c) Excise Duty
Excise duty payable on products is accounted for at the time of dispatch of goods from the factories but is accrued for stocks held at the year end, if applicable.
d) Employee Benefits
i. Short term employee benefits obligations are estimated and provided for.
ii. Post-employment benefits and other long term benefits:
a) Defined contribution plans:
Companyâs contribution to provident fund, superannuation fund, employee state insurance and other funds are determined under the relevant schemes and/or statute and charged to revenue.
b) Defined benefits plans:
Companyâs Liability towards gratuity and leave encashment is actuarially determined at each balance sheet date using the projected unit credit method. Actuarial gains and losses are recognized in Other Comprehensive Income and other costs are recognized in statement of profit and loss. Gratuity and Leave encashment liabilities are funded and administered through Group Gratuity Scheme with Life Insurance Corporation of India.
e) Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfillmentof the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Finance Lease
Finance Lease that transfer substantially all of the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and a reduction in the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability .Finance charges are recognised in finance costs in the statement of profit and loss unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Company''s policy on borrowing costs.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating Lease
Assets acquired on leases where a significant portion of the risks and rewards of ownership are retained by lessor are classified as operating leases. Lease rentals paid for operating leases are charged to Statement of Prof it and Loss with reference to lease term and other consideration.
f) Borrowing Cost
Borrowing costs that are attributable to the acquisition or constructions of qualifying assets are capitalised as part of the cost of assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue.
g) Property, plant and equipment
i. On transition to IND AS, the company has adopted optional exception under IND AS 101 to measure Property, Plant and Equipment at carrying value. Consequently the carrying value has been assumed to be deemed cost of Property, Plant and Equipment on the date of transition. Subsequently Property.
ii. Property, plant and equipment acquired after the transition date are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing cost if capitalization criteria are met and directly attributable cost of bringing the assets to its working condition forthe intended use. Any trade discounts, rebates & cenvat availed, are deducted in arriving atthe purchase price.
iii. Capital work-in-progress comprises of the costoffixed assets that are not yet ready for their intended use atthe reporting date.
iv. Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the costs to the item can be measured reliably. Repairs and maintenance costs are recognized in net profit in the statement of profit and loss when incurred. The cost and related accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset and the resultant gain or losses are recognized in the statement of profit and loss.
v. Gains or losses arising from de-recognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the assets is derecognized.
vi. Machinery Spares /Standby equipments which are used only in connection with Property, plant and equipment and are of material value to the overall value of the asset are capitalized.
h) Intangible assets
Intangible Assets are carried at cost, net of accumulated amortization and impairment losses, if any. Cost of intangible asset comprises of purchase price and attributable expenditure on making the asset ready for its intended use.
An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from de-recognition of intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the assets is derecognized.
i) Research and Development cost
Revenue expenditure on Research and Development is charged to statement of Profit and loss in the year in which it is incurred and capital expenditure is added to Fixed Asset,
j) Depreciation and Amortisation
i. Depreciation on tangible assets is provided on the straight-line method over the useful lives of assets as prescribed in Schedule II of the Companies Act, 2013, except in respect of following categories of assets in whose case the life of certain assets has been assessed based on technical advice taking into account the nature of the asset, the estimated usage of the asset, the operating condition of the asset, past history of replacement, maintenance support etc.
ii. Depreciation for assets purchased/sold during a period are proportionately charged.
iii. Intangible Assets are amortized on straight-line basis over the estimated useful economic life not exceeding 10 years. The Intangible Assets are assessed for impairment whenever there is an indication that the Intangible Assets impaired.
iv. The leasehold land is amortised over the primary lease period excluding on perpetual lease. Freehold land is not depreciated.
v. Assets individually costing Rs 5000 or less are depreciated fully in the year of purchase,
k) Impairment of tangible and intangible assets
The carrying amounts of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized whereverthe carrying amount of an asset exceeds its estimated recoverable amountand such assets are written down to their recoverable amount.
Reversal of impairment losses recognized in prior years is recorded when there is an indication that the impairment losses, recognized forthe assets, no longer exists or have decreased to the extent of previously recognized impairment losses.
Impairment losses of continuing operations, including impairment on inventories, are recognized in the statement of profit and loss.
I) Inventories
Inventories are valued at the lower of cost and estimated realisable value. However material and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated / used are expected to be sold at or above cost. The cost of Inventories is generally arrived at on the following basis:
m) Financial Assets & Liabilities
A Financial Instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
At initial recognition, all financial assets are measured at fair value. Such financial assets are subsequently classified under following three categories according to the purpose for which they are held. The classification is reviewed atthe end of each reporting period.
i. Financial Assets at Amortised Cost
At the date of initial recognition, are held to collect contractual cash flows of principal and interest on principal amount outstanding on specified dates. These financial assets are intended to be held until maturity. Therefore, they are subsequently measured at amortised cost by applying the Effective Interest Rate (EIR) method to the gross carrying amount of the financial asset. The ElR amortisation is included as interest income in the profit or loss. The losses arising from impairment are recognised in the profit or loss.
ii. Financial Assets at Fair value through OtherComprehensive Income
At the date of initial recognition, are held to collect contractual cash flows of principal and interest on principal amount outstanding on specified dates, as well as held for selling. Therefore, they are subsequently measured at each reporting date at fair value, with all fair value movements recognised in Other Comprehensive Income (OCI). Interest income calculated using the effective interest rate (EIR) method, impairment gain or loss and foreign exchange gain or loss are recognised in the Statement of Profit and Loss. On derecognition of the asset, cumulative gain or loss previously recognised in Other Comprehensive Income is reclassified from the OCI to Statement of Profit and Loss.
iii. Financial Assets at Fair value through Profit or Loss
At the date of initial recognition, financial assets are held for trading, or which are measured neither at Amortised Cost nor at Fair Value through OCI. Therefore, they are subsequently measured at each reporting date at fair value, with all fair value movements recognised in the Statement of Profit and Loss.
Trade Receivables.
A Receivable is classified as a âtrade receivableâ if it is in respect to the amount due from customers on account of goods sold or services rendered in the ordinary course of business. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. For some trade receivables the Company may obtain security in the form of guarantee, security depositor letter of credit which can be called upon if the counterparty is in default under the terms of the agreement.
Impairment is made on the expected credit losses, which are the present value of the cash shortfalls over the expected life of financial assets. The estimated impairment losses are recognised in a separate provision for impairment and the impairment losses are recognised in the Statement of Profit and Loss within other expenses.
Subsequent changes in assessment of impairment are recognised in provision for impairment and the change in impairment losses are recognised in the Statement of Profit and Loss within other expenses.
Investment in Equity Shares.
Investments in Equity Securities are initially measured at cost. Any subsequent fair value gain or loss is recognized through Profit or Loss if such investments in Equity Securities are held for trading purposes. The fair value gains or losses of ail other Equity Securities are recognized in Other Comprehensive Income.
Derecognition.
Financial Asset is primarily derecognised when:
i. The right to receive cash flows from asset has expired, or.
ii. The Company has transferred its right to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a â pass-throughâ arrangement and either:
a) The Company has transferred substantially all the risks and rewards of the asset, or
b) The Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Company has transferred its right to receive cash flows from an asset or has entered into a pass through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially ailof the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognise the transferred asset to the extent of the Companyâs continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Financial Liabilities
Initial recognition and measurement
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Company''s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, and derivative financial instruments. Subsequent Measurement.
The measurement of financial liabilities depends on their classification, as described below:
i. Financial Liabilities at Fair Value through Profit or Loss.
Financial liabilities at fair value through profit or loss include financial liabilities held for trading. The Company has not designated any financial liabilities upon initial measurement recognition at fair value through profit or loss. Financial liabilities at fair value through profit or loss are at each reporting date with all the changes recognized in the Statement of Profit and Loss.
ii. Financial Liabilities measured at Amortised Cost.
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method ("EIRâ) except for those designated in an effective hedging relationship. The carrying value of borrowings that are designated as hedged items in fair value hedges that would otherwise be carried at amortised cost are adjusted to record changes in fair values attributable to the risks that are hedged in effective hedging relationship.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the Statement of Profit and Loss.
iii. Loans and Borrowings.
After initial recognition, interest-bearing borrowings are subsequently measured at amortised cost using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extentthatit is probable thatsome or all of thefacility will bedrawn down.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least twelve months after the reporting period.
iv. Trade and Other Payables.
A payable is classified as âtrade payableâ if it is in respect of the amount due on account of goods purchased or services received in the normal course of business. These amounts represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
De-recognition of Financial Liability
A Financial Liability is derecognised when the obligation under the liability is discharged or cancelled or expires. 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 profit or loss as other income or finance costs.
Offsetting of Financial Instruments
Financial Assets and Financial Liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
Derivative Financial Instruments
The Company uses derivative financial instruments, such as forward currency contracts and interest rate swaps to hedge its foreign currency risks and interest rate risks. Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value atthe end of each period. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, on the nature of the item being hedged. Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss,
n) Foreign Currency Transactions/ Hedge Accounting
Financial statements are presented in Indian Rupee, which is Companyâs functional currency. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Financial instruments designated as Hedge Instruments are mark to market using the valuation given by the bank on the reporting date. Exchange differences arising on settlement of monetary items on actual payments / realisations and year end translations including on forward contracts are dealt with in Profit and Loss Statement,
o) Taxation
Income Tax
The current tax is determined as the amount of tax payable in respect of the estimated taxable income for the year in accordance with the provisions of Income TaxAct, 1961 .Current income tax relating to items recognised directly in equity is recognised in equity and notin the statement of profit and loss. Deferred Tax
Deferred tax is provided using the balance sheet approach on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts forfinancial reporting purpose at reporting date.
Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect of changes in tax rates on deferred income tax assets and liabilities is recognized as income or expense in the period that includes the enactment or the substantive enactment date. A deferred income tax asset is recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilized.
The Company offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Minimum Alternate Tax
Minimum Alternate Tax credit is recognized, 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,
p) Pre project expenditure
The expenses on pre-feasibility study reports, market survey reports, and techno-economic feasibility reports etc. on new projects are allocated to the Fixed Assets on completion of the projects. Where the projects are proved in-fructuous, they are charged to the revenue in the year in which the decision is taken to scrap the same,
q) Earning per share
The Company reports basic and diluted earnings per equity share in accordance withlndian Accounting Standard 33-âEarning per shareâ. Basic earnings per equity share is computed by dividing net profit after tax by the weighted average number of equity shares outstanding during the year. The Company does not have any diluted equity share, hence Basic and Dilutive earning per share is same,
r) Provisions and Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resourcesembodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost Contingent Assets are not recognised in financial statements but are disclosed, since the former treatment may result in the recognition of income that may or may not be realised. However, when the realisation of income is virtually certain, then the related asset is not a contingent asset and its recognition is appropriate.
s) Cash and Cash Equivalents
Cash and cash equivalents for the purpose of cash flow statements comprises cash at bank and in hand and short term investments with an original maturity of 3 months or less,
t) Cash Flow Statements
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated,
u) Derivatives Instruments
In accordance with the ICAI announcement, derivative contracts, other than foreign currency forward contracts covered under AS 11, are marked to market on a portfolio basis, and the net loss, if any, after considering the offsetting effect of gain on the underlying hedged itemed, is charged to the statement ofprofit and loss. Net gain, if any, after considering the offsetting effects of loss on the underlying hedged item, is ignored,
v) Segment Reporting
The Company is organized into three primary business segments mainly Fertilizer and Chemicals, Agro (Soya) and others, based on nature of products. The management and administration are centralized and considered as part ofâFertilizer & Chemicals''segment, being major activities. Unallocated items include general corporate income, expense, assets and liabilities items which are not allocated to any business segment.
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as whole,
w) Fair Value Measurements
The Company measures financial instruments such as derivatives and certain investments, at fair value at each balance sheet date.
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:
i. I n the principal market for the asset or liability, or
ii. In the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Company.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole;
i. Level 1-Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
ii. Level 2- Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
iii. Level 3-Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
Forthe purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above,
x) Significant Accounting Judgments, Estimates and Assumptions
In the process of applying the Companyâs accounting policies, management has made the following estimates, assumptions and judgements which have significant effect on the amounts recognized in the financial statement:
i. Income taxes
Judgment of the Management is required for the calculation of provision for income taxes and deferred tax assets and liabilities. The company reviews at each balance sheet date the carrying amount of deferred tax assets. The factors used in estimates may differ from actual outcome which could lead to significant adjustment to the amounts reported in the standalone financial statements.
ii. Contingencies
Judgment of the Management is required for estimating the possible outflow of resources, if any, in respect of contingencies/claim/litigations against the company as it is not possible to predict the outcome of pending matters with accuracy.
iii. Allowance for uncollected accounts receivable and advances
Trade receivables do not carry any interest and are stated at their normal value as reduced by appropriate allowances for estimated irrecoverable amounts. Individual trade receivables are written off when management deems them not collectible. Impairment is made on ECL, which are the present value of the cash shortfall over the expected life of the financial assets.
iv. Defined Benefit Plans.
The cost of the defined benefit plan and other post-employment benefits and the present value of such obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in future. These Includes the determination of the discount rate, future salary increases, mortality rates and attrition rate. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
v. Fair Value Measurementof Financial Instruments.
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted Cash Flow (DCF) model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.
Mar 31, 2017
1. Corporate Information
Khaitan Chemicals and Fertilizers Limited (the Company) is engaged in the manufacturing of Single Super Phosphate Fertilizers (Plain, Zincated and Boronated in powder form and granulated form), SulphuricAcid and its variants, Trading of NPK Fertilizers, Processing of Oil Seed (mainly Soybean)and crude edible oil, selling of De-oiled Cake and Crude/Refined Oil & Generation and selling of Wind Power.
The Company is a public limited company incorporated and domiciled in India under the provisions of Companies Act, 2013. Its shares are listed on the Bombay Stock Exchange Limited, Mumbai (BSE).
2. Significant Accounting Policies
a) Basis of preparation of financial statements
The financial statements of the Company are prepared in accordance with Indian Generally Accepted Accounting Principles (GAAP)to comply in all material aspects prescribed under Section 133 of the Companies Act, 2013 (âActâ) read with Rule 7 of the Companies (Accounts) Rules, 2014.
The financial statements are prepared on historical cost convention on an accrual basis. The accounting policies have been consistently applied by the Company except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use
b) Use of Estimates
The preparation of financial statements is in conformity with the generally accepted accounting principles (âGAAPâ) requires estimates and assumptions to be made that affect the reportable amount of assets and liabilities and disclosures relating to contingent liabilities as at the date of the financial statements and the reportable amount of revenue and expenses during the reporting period. Difference between the actual results and estimates are recognized in the year in which the results are known/materialized.
c) Revenue Recognition
i. Sale - The Company recognizes sale of goods on transfer of significant risks and reward of ownership to the customers. Sales (Gross) are inclusive of excise duty, fertilizer subsidy, and net off trade discounts and sales return, wherever applicable.
ii. Interest â Interest income is recognized on a time proportion basis taking into account the amount out standing and rate applicable.
iii. Subsidy â Fertilizer Subsidy, wherever applicable, is accounted for on actual sales and is net off of any subsequent non receipt reversal.
iv. Dividend âDividends are accounted for when the right to receive the dividend payment is established.
d) Government Grants and Subsidies
Grants and Capital subsidy from the government is recognized on receipt basis with the reasonable assumption that the Company will comply with conditions attached to them and such amount is credited to capital reserves. Further, in accordance with the guidelines issued by ICAI, proportionate amount to the extent of depreciation charged, is being transferred to surplus in the statement of profit and loss in case of grant received in relation to acquisition of any assets.
e) Excise Duty
Excise duty payable on products is accounted for at the time of dispatch of goods from the factories but is accrued for stocks held at the year end.
f) Employee Benefits
i. Short-term employee benefits obligations are estimated and provided for.
ii. Post employment benefits and other long term benefits:
(a) Defined contribution plans:
Companyâs contribution to provident fund, superannuation fund, employee state insurance and other funds are determined under the relevant schemes and/or statute and charged to revenue.
(b) Defined benefits plans:
Companyâs Liability towards gratuity and leave encashment is actuarially determined at each balance sheet date using the projected unit credit method. Actuarial gains and losses are recognized in revenue. Gratuity and Leave encashment liabilities are funded and administered through Group Gratuity Scheme with Life Insurance Corporation of India.
g) Operating Lease
Lease rental in respect of assets taken on operating lease are charged to the statement of profit and loss with reference to lease term and other considerations.
h) Borrowing Cost
Borrowing costs that are attributable to the acquisition or constructions of qualifying assets are capitalized as part of the cost of assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue.
i) Tangible Fixed Assets and Capital Working Progress
Tangible Fixed assets are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing cost if capitalization criteria are met and directly attributable cost of bringing the assets to its working condition for the intended use. Any trade discounts, rebates& cenvat availed, are deducted in arriving at the purchase price. Gains or losses arising from de-recognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the assets is derecognized. Machinery Spares/Standby equipments which are used only in connection with the fixed assets and whose use is expected to be irregular are capitalized.
Capital work-in progress comprises of the cost of fixed assets that are not yet ready for the irintended use at there porting date.
j) Intangible assets
Intangible Assets acquired separately are measured and initially recognized at cost.
Gains or losses arising from de-recognition of intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the assets is derecognized.
k) Depreciation and Amortization
Depreciation on tangible assets is provided on the straight-line method over the useful lives of assets as prescribed in Schedule II of the Companies Act, 2013. Depreciation for assets purchased/sold during a period are proportionately charged.
Intangible Assets are amortized on straight-line basis over the estimated useful economic life not exceeding 10 years. The Intangible Assets are assessed for impairment whenever there is an indication that the Intangible Assets impaired.
The leasehold land is amortized over the primary lease period excluding on perpetual lease.
Assets individually costing Rs 5000 or less are depreciated fully in the year of purchase.
l) Impairment of tangible and intangible assets
The carrying amounts of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its estimated recoverable amount and such assets are written down to their recoverable amount.
Reversal of impairment losses recognized in prior years is recorded when there is an indication that the impairment losses, recognized for the assets, no longer exists or have decreased to the extent of previously recognized impairment losses.
Impairment losses of continuing operations, including impairment on inventories, are recognized in the statement of profit and loss.
m) Inventories
Inventories are valued at the lower of cost and estimated realizable value. However material and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated/ used are expected to be sold at or above cost. The cost of inventories is generally arrived at on the following basis:
n) Investments
Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments and are stated at the lower of cost and fair value on individual investment basis. All other investments are classified as non-current/ long-term investments and stated at cost less provision for diminution in value, other than temporary.
On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to statement of profit and loss.
o) Foreign Currency Transactions
1.) Foreign Currency Transactions are recorded by applying the exchange rate prevailing on the date of transaction.
2.) Monetary items denominated in foreign currency are translated at the exchange rate prevailing on the last day of the accounting year. In respect of items covered by forward contracts, the premium or discount arising at the inception of such a forward exchange contract is amortized as an expense or income over the life of contract. Any profit or loss arising on settlement / cancellation of such a forward exchange contract is recognized as an income or expense for the period.
3.) Non-Monetary items, which are carried in terms of historical cost denominated in a foreign currency, are reported using exchange rate at the date of transaction.
4.) Gain or loss arising out of translation/conversion and on settlement is taken credit for or charged to the statement of profit and loss.
p) Taxation
Income Tax
The current tax is determined as the amount of tax payable in respect of the estimated taxable income for the year in accordance with the provisions of Income Tax Act, 1961.
Deferred Tax
Deferred tax charge or credit is recognized using prevailing enacted or substantially enacted tax rates. Where there is unabsorbed depreciation or carry forward losses, deferred tax assets are recognized only if there is virtual certainty of realization of such assets. Other deferred tax assets are recognized only to the extent there is reasonable certainty of realization in future.
Deferred tax assets/liabilities are reviewed at each Balance Sheet date based on developments during the year and available case laws, to reassess realization/liabilities.
q) Pre project expenditure
The expenses on pre feasibility study reports, market survey reports, techno-economic feasibility reports etc. on new projects are allocated to the Fixed Assets on completion of the projects. Where the projects are proved in-fructuous, they are charged to the revenue in the year in which the decision is taken to scrap the same.
r) Earning per share
The Company reports basic and diluted earnings per equity share in accordance with Accounting Standard 20-âEarning per shareâ. Basic earning per equity share is computed by dividing net profit after tax by the weighted average number of equity shares outstanding during the year. the company does not have any diluted equity share, hence Basic and Dilutive earning per share is same.
s) Provisions and Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past results and it is probable that there will be an outflow of resources.
Contingent liabilities are disclosed, unless the possibility of an outflow of resource embodying the economic benefit is remote. Contingent assets are neither recognized nor disclosed in the financial statements.
t) Cash and Cash Equivalents
Cash and cash equivalents for the purpose of cash flow statements comprises cash at bank and in hand and short-term investments with an original maturity of 3 months or less.
u) Cash Flow Statements
Cash flow statement is prepared in accordance with the in direct method prescribed in Accounting Standard (AS)3on âCash Flow Statementsâ.
v) Derivatives Instruments
In accordance with the ICAI announcement, derivative contracts, other than foreign currency forward contracts covered under AS 11, are marked to market on a portfolio basis, and the net loss, if any, after considering the offsetting effect of gain on the underlying hedged itemed, is charged to the statement of profit and loss. Net gain, if any, after considering the off setting effects of loss on the underlying hedged item, is ignored.
w) Segment Reporting
The Company is organized into three primary business segments mainly Fertilizer and Chemicals, Agri-(Soya) and Others, based on nature of products.
The management and administration are centralized and considered as part of âFertilizer &Chemicalsâ segment, being major activities.
Unallocated items include general corporate income, expense, assets and liabilities items which are not allocated to any business segment.
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as whole.
Mar 31, 2016
Summary of significant accounting policies and Notes on accounts for the year ended 31st March, 2016,
1. Corporate Information
Khaitan Chemicals & Fertilizers Ltd. (the Company) is engaged in the manufacturing of Single Super Phosphate Fertilizers (Powder & Granulated) and Sulphuric Acid and its variants, Processing of Oil Seed (mainly Soybean) and crude edible oil, selling of De-oiled Cake and Crude/Refined Oil & Generation and selling of Wind Power.
The Company is a public limited company incorporated and domiciled in India under the provisions of Companies Act, 2013. Its shares are listed on the Bombay Stock Exchange Limited, Mumbai (BSE).
2. Significant Accounting Polices
a) Basis of preparation of financial statements
The financial statements of the Company are prepared in accordance with Indian Generally Accepted Accounting Principles (GAAP) to comply in all material aspects prescribed under Section 133 of the Companies Act, 2013 (âAct'') read with Rule 7 of the Companies (Accounts) Rules, 2014. The financial statements are prepared on historical cost convention on an accrual basis. The accounting policies have been consistently applied by the Company except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires change in the accounting policy hitherto in use.
b) Use of Estimates
The preparation of financial statements is in conformity with the generally accepted accounting principles (âGAAP'') requires estimates and assumptions to be made that affect the reportable amount of assets and liabilities and disclosures relating to contingent liabilities as at the date of the financial statements and the reportable amount of revenue and expenses during the reporting period. Difference between the actual results and estimates are recognized in the year in which the results are known / materialized.
c) Revenue Recognition
i. Sale - The Company recognizes sale of goods on transfer of significant risks and reward of ownership to the customers. Sales (Gross) are inclusive of excise duty, fertilizer subsidy ,and net off traded is counts and sales return, wherever applicable.
ii. Interest-Interest income is recognized on a time proportion basis taking into account the amount outstanding and rate applicable.
iii. Subsidy-FertilizerSubsidy,whereverapplicable,isaccountedforonactualsalesandisnetoffofanysubsequentnonreceiptreversal.
iv. Dividend âDividends are accounted for when the right to receive the dividend payment disestablished.
d) Government Grants and Subsidies
Grants and Capital subsidy from the government is recognized on receipt basis with the reasonable assumption that the Company will comply with conditions attached to them and such amount is credited to capital reserves. Further, in accordance with the guidelines issued by ICAI, proportionate amount to the extent of depreciation charged, is being transferred to surplus in the statement of profit and loss in case of grant received in relation to acquisition of any assets.
e) Excise Duty
Excise duty payable on products is accounted for at the time of dispatch of goods from the factories but is accrued for stock shield at the yearend.
f) Employee Benefits
i. Short term employee benefits obligation sere estimated and provided for.
ii. Post employment benefits and other long term benefits:
(a) Defined contribution plans:
Company''s contribution to provident fund, superannuation fund, employee state insurance and other funds are determined under the relevant schemes and/or statute and charged to revenue.
(b) Defined benefits plans:
Company''s Liability towards gratuity and leave encashment is actuarially determined at each balance sheet date using the projected unit credit method. Actuarial gains and losses are recognized in revenue. Gratuity and Leave encashment liabilities are funded and administered through Group Gratuity Scheme with Life Insurance Corporation of India.
g) Operating Lease
Lease rental in respect of assets taken on operating lease are charged to the statement of profit and loss with reference to lease term and other considerations.
h) Borrowing Cost
Borrowing costs that are attributable to the acquisition or constructions of qualifying assets are capitalized as part of the cost of assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to revenue.
i) Tangible Fixed Assets and Capital Work in Progress
Tangible Fixed assets are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing cost if capitalization criteria are met and directly attributable cost of bringing the assets to its working condition for the intended use. Any trade discounts, rebates & cenvat availed, are deducted in arriving at the purchase price. Gains or losses arising from de-recognition of fixed assets are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the assets is derecognized. Machinery Spares/Standby equipments which are used only In connection with the fixed assets and whose use is expected to be irregular are capitalized.
Capital work-in-progress comprises of thecostoffixedassetsthatarenotyetreadyfortheirintendeduseatthereportingdate. j) Intangible assets
Intangible Assets acquired separately are measured and initially recognized at cost.
Gains or losses arising from de-recognition of intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the assets is derecognized. k) Depreciation and Amortization
Depreciation on tangible assets is provided on the straight-line method over the useful lives of assets as prescribed in Schedule II of the Companies Act, 2013. Depreciation for assets purchased/sold during period are proportionately charged.
Intangible Assets are amortized on straight-line basis over the estimated useful economic life not exceeding 10 years. The Intangible Assets are assessed forimpairmentwheneverthereisanindicationthattheIntangibleAssetsimpaired.
The leasehold land is amortized over the primary lease period excluding on perpetual lease.
Assets individually costing Rs. 5000 or less are depreciated fully in the year of purchase.
l) Impairment of tangible and intangible assets
The carrying amounts of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external actors. An impairment loss is recognized where ever the carrying amount of an asset exceeds its estimated recoverable amount and such assets rewritten down to the irrecoverable amount.
Reversal of impairment losses recognized in prior years is recorded when there is an indication that the impairment losses, recognized forth assets, no longer exists or have decreased to the extent of previously recognized impairment losses.
Impairment losses of continuing operations, including impairment on inventories, are recognized in the statement of profit and loss. m) Inventories
Inventories are valued at the lower of cost and estimated realizable value. However material and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated / used are expected to be sold at or above cost. The cost of inventories is generally arrived at on the following basis:
n) Investments
Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments and are stated at the lower of cost and fair value on individual investment basis. All other investments are classified as non-current/long term investments and stated at cost less provision for diminution in value, other than temporary.
On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to statement of profit and loss. o) Foreign Currency Transactions
1.) Foreign Currency Transactions are recorded by applying the exchange rate prevailing on the date of transaction.
2.) Monetary items denominated in foreign currency are translated at the exchange rate prevailing on the last day of the accounting year. In respect of items covered by forward contracts, the premium or discount arising at the inception of such a forward exchange contract is amortized as an expense or income over the life of contract. Any profit or loss arising on settlement / cancellation of such a forward exchange contract is recognized as an income or expense for the period.
3.) Non-Monetary items, which are carried in terms of historical cost denominated in foreign currency, are reported using exchange rate at the date of transaction.
4.) Gain or loss arising out of translation/conversion and unsettlement is taken credit for or charged to the statement of profit and loss. p) Taxation
Income Tax
The current tax is determined as the amount of tax payable in respect of the estimated taxable income for the year in accordance with the provisions of Income Tax Act, 1961.
Deferred Tax
Deferred tax charge or credit is recognized using prevailing enacted or substantially enacted tax rates. Where there is unabsorbed depreciation or carry forward losses, deferred tax assets are recognized only if there is virtual certainty of realization of such assets. Other deferred tax assets are recognized only to the extent there is reasonable certainty of realization in future.
Deferred tax assets/liabilities are reviewed at each Balance Sheet date based on developments during the year and available case laws, to reassess realization/liabilities. q) Pre project expenditure
The expenses on pre feasibility study reports, market survey reports, techno-economic feasibility reports etc. on new projects are allocated to the Fixed Assets on completion of the projects. Where the projects are proved in-fructuous, they are charged to the revenue in the year in which the decision is taken to scrap the same.
r) Earnings per share
The Company reports basic and diluted earning spree equity share in accordance with Accounting Standard 20-âEarning per shareâ. Basic earnings per equity share is computed by dividing net profit after tax by the weighted average number of equity shares outstanding during the year. The Company does not have any diluted equity share, hence Basic and Dilutive earning per share is same. s) Provisions and Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past results and it is probable that there will be an outflow of resources.
Contingent liabilities are disclosed, unless the possibility of an outflow of resource embodying the economic benefit is remote. Contingent assets are neither recognized nor disclosed in the financial statements. t) Cash and Cash Equivalents
Cash and cash equivalents for the purpose of cash flow statements comprises cash at bank and in hand and short term investments with an original maturityof3monthsorless. u) Cash Flow Statements
Cash flow statement is prepared in accordance with the indirect method prescribed in Accounting Standard (AS)3on âCash Flow Statements''.
v) Derivatives Instruments
In accordance with the ICAI announcement, derivative contracts, other than foreign currency forward contracts covered under AS 11, are marked to market on a portfolio basis, and the net loss, if any, after considering the offsetting effect of gain on the underlying hedged itemed, is charged to the statement of profit and loss. Net gain, if any, after considering the offsetting effects Olsson the underlying hedged item, is ignored. w) Segment Reporting
The Company is organized into two primary business segments mainly Fertilizer and Chemicals & Agri (Soya), based on nature of products.
The management and administration are centralized and considered as part ofâ Fertilizer & Chemicals'' segment, being major activities.
Unallocated items include general corporate income, expense, assets and liabilities items which are not allocated to any business segment.
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the company as whole.
Equity Shares
a) The Company has only one class of equity shares having a par value of Re.1/- 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 shareholder in the ensuing annual general meeting. In the event of liquidation, the equity shareholder are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.
b) The Company has not allotted any equity shares for consideration other than cash, bonus shares, nor have any shares been bought back during the period of five years immediately preceding the balance sheet date.
Note: The Company has proposed final dividend fortheyear2015-16@ Re.0.05 per equity share of Re. 1/- each (previous year Re. 0.05 per equity share).
Net Deferred Tax Liabilities 389.44 295.78
Mar 31, 2015
A) Basis of preparation of financial statements
The financial statements of the Company are prepared in accordance with
Indian Generally Accepted Accounting Principles (GAAP) to comply in all
material aspects prescribed under Section 133 of the Companies Act,
2013 ('Act') read with Rule 7 of the Companies (Accounts) Rules,
2014.
The financial statements are prepared on historical cost convention on
an accrual basis. The accounting policies have been consistently
applied by the Company except where a newly issued accounting standard
is initially adopted or a revision to an existing accounting standard
requires a change in the accounting policy hitherto in use
b) Use of Estimates
The preparation of financial statements is in conformity with the
Generally Accepted Accounting Principles ('GAAP') requires
estimates and assumptions to be made that affect the reportable amount
of assets and liabilities and disclosures relating to contingent
liabilities as at the date of the financial statements and the
reportable amount of revenue and expenses during the reporting period.
Difference between the actual results and estimates are recognized in
the year in which the results are known / materialized.
c) Revenue Recognition
i. Sale - The Company recognises sale of goods on transfer of
significant risks and reward of ownership to the customers. Sales
(Gross) are inclusive of excise duty, fertilizer subsidy, and net off
trade discounts and sales return, wherever applicable.
ii. Interest- Interest income is recognized on a time proportion basis
taking into account the amount outstanding and rate applicable.
iii. Subsidy - Fertilizer Subsidy, wherever applicable, is accounted
for on actual sales and is net off of any subsequent non receipt
reversal.
iv. Dividend-Dividends are accounted for when the right to receive the
dividend payment is established.
d) Government Grants and Subsidies
Grants and Capital subsidy from the Government is recognized on receipt
basis with the reasonable assumption that the Company will comply with
conditions attached to them and such amount is credited to capital
reserves. Further, in accordance with the guidelines issued by ICAI,
proportionate amount to the extent of depreciation charged, is being
transferred to surplus in the statement of profit and loss in case of
grant received in relation to acquisition of any assets.
e) Excise Duty
Excise duty payable on products is accounted for at the time of
dispatch of goods from the factories but is accrued for stocks held at
the year end.
f) Employee Benefits
i. Shortterm employee benefits obligations are estimated and provided
for.
ii. Post employment benefits and other long term benefits:
(a) Defined contribution plans:
Company's contribution to provident fund, superannuation fund,
employee state insurance and other funds are determined under the
relevant schemes and/or statute and charged to revenue.
(b) Defined benefits plans:
Company's Liability towards gratuity and leave encashment is
actuarially determined at each Balance Sheet date using the projected
unit credit method. Actuarial gains and losses are recognized in
revenue. Gratuity and Leave encashment liabilities are funded and
administered through Group Gratuity Scheme with Life Insurance
Corporation of India.
g) Operating Lease
Lease rental in respect of assets taken on operating lease are charged
to the statement of profit and loss with reference to lease term and
other considerations.
h) Borrowing Cost
Borrowing costs that are attributable to the acquisition or
constructions of qualifying assets are capitalised as part of the cost
of assets. A qualifying asset is one that necessarily takes substantial
period of time to get ready for intended use. All other borrowing costs
are charged to revenue.
i) Tangible Fixed Assets and Capital Work in Progress
Tangible Fixed assets are stated at cost, net of accumulated
depreciation and accumulated impairment losses, if any. The cost
comprises purchase price, borrowing cost if capitalization criteria are
met and directly attributable cost of bringing the assets to its
working condition for the intended use. Any trade discounts, rebates &
cenvat availed, are deducted in arriving at the purchase price. Gains
or losses arising from de-recognition of fixed assets are measured as
the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the assets is derecognized. Machinery Spares /Standby
equipments which are used only in connection with the fixed assets and
whose use is expected to be irregular are capitalized.
Capital work-in-progress comprises of the cost of fixed assets that are
not yet ready for their intended use at the reporting date.
j) Intangible assets
Intangible Assets acquired separately are measured and initially
recognized at cost.
Gains or losses arising from de-recognition of intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the assets is derecognized.
k) Depreciation and Amortisation
Depreciation on tangible assets is provided on the straight-line method
over the useful lives of assets as prescribed in Schedule il of the
Companies Act, 2013. Depreciation for assets purchased/sold during a
period are proportionately charged.
Intangible Assets are amortized on straight-line basis over the
estimated useful economic life not exceeding 10 years. The Intangible
Assets are assessed for impairment whenever there is an indication that
the Intangible Assets impaired.
The leasehold land is amortised overthe primary lease period excluding
on perpetual lease.
Assets individually costing Rs 5000 or less are depreciated fully in
the year of purchase.
l) Impairment of tangible and intangible assets
The carrying amounts of assets are reviewed at each Baiance Sheet date
if there is any indication of impairment based on internal/external
factors. An impairment toss is recognized wherever the carrying amount
of an asset exceeds its estimated recoverable amount and such assets
are written down to their recoverable amount.
Reversal of impairment tosses recognized in prior years is recorded
when there is an indication that the impairment losses, recognized for
the assets, no longer exists or have decreased to the extent of
previously recognized impairment losses.
Impairment losses of continuing operations, including impairment on
inventories, are recognized in the statement of profit and loss.
m) Inventories
Inventories are valued at the lower of cost and estimated realisable
value. However material and other items held for use in the production
of inventories are not written down below cost if the finished products
in which they will be incorporated / used are expected to be sold at or
above cost. The cost of inventories is generally arrived at on the
following basis:
n) Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments and are stated at the lower
of cost and fair value on Individual investment basis. All other
Investments are classified as non-current/long term Investments and
stated at cost less provision for diminution in value, other than
temporary.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to statement of
profit and loss.
o) Foreign Currency Transactions
1) Foreign Currency Transactions are recorded by applying the exchange
rate prevailing on the date of transaction.
2) Monetary items denominated in foreign currency are translated at the
exchange rate prevailing on the last day of the accounting year. In
respect of items covered by forward contracts, the premium or discount
arising at the inception of such a forward exchange contract is
amortised as an expense or income over the life of contract. Any profit
or loss arising on settlement / cancellation of such a forward exchange
contract Is recognized as an income or expense for the period.
3) Non-Monetary items, which are carried in terms of historical cost
denominated in a foreign currency, are reported using exchange rate at
the date of transaction.
4) Gain or loss arising out of transtation/conversion and on settlement
is taken credit for or charged to the statement of profit and loss.
p) Taxation Income Tax
The current tax is determined as the amount of tax payable in respect
of the estimated taxable income for the year in accordance with the
provisions of Income TaxAct, 1961.
Deferred Tax
Deferred tax charge or credit is recognized using prevailing enacted or
substantially enacted tax rates. Where there is unabsorbed depreciation
or carry forward losses, deferred tax assets are recognized only if
there is virtual certainty of realisation of such assets. Other
deferred tax assets are recognized only to the extent there is
reasonable certainty of realisation in future. Deferred tax
assets/liabilities are reviewed at each Balance Sheet date based on
developments during the year and available case laws, to reassess
realisation/liabilities.
q) Pre project expenditure
The expenses on pre feasibility study reports, market survey reports,
techno-economic feasibility reports etc. on new projects are allocated
to the Fixed Assets on completion of the projects. Where the projects
are proved in-fructuous, they are charged to the revenue in the year in
which the decision is taken to scrap the same.
r) Earning per share
The Company reports basic and diluted earnings per equity share in
accordance with Accounting Standard 20-"Earning per share". Basic
earning per equity share is computed by dividing net profit after tax
by the weighted average number of equity shares outstanding during the
year. The Company does not have any diluted equity share, hence Basic
and Dilutive earning per share is same.
s) Provisions and Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
results and it is probable that there will bean outflow of resources.
Contingent liabilities are disclosed, unless the possibility of an
outflow of resource embodying the economic benefit is remote.
Contingent assets are neither recognized nor disclosed in the financial
statements.
t) Cash and Cash Equivalents
Cash and cash equivalents for the purpose of cash flow statements
comprises cash at bank and in hand and short term investments with an
original maturity of 3 months or less.
u) Cash Flow Statements
Cash flow statement is prepared in accordance with the indirect method
prescribed in Accounting Standard (AS) 3 on 'Cash Flow Statements'.
v) Derivatives Instruments
' In accordance with the ICAI announcement, derivative contracts, other
than foreign currency forward contracts covered under AS 11, are marked
to market on a portfolio basis, and the net loss, if any, after
considering the offsetting effect of gain on the underlying hedged
itemes, is charged to the statement of profit and loss. Net gain, if
any, after considering the offsetting effects of loss on the underlying
hedged item, is ignored.
w) Segment Reporting
The Company is organized into two primary business segments mainly
Fertilizer and Chemicals & Soya, based on nature of products.
The management and administration are centralized and considered as
part of'Fertilizer & Chemicals' segment, being major activities.
Unallocated items include general corporate income, expense, assets and
liabilities items which are not allocated to any business segment. The
Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as whole.
(i) Rupee Term Loan of Rs.511.15 Lacs and Foreign Currency Term Loan of
Rs.688.50 Lacs (Sanctioned Rs.2,250.00 Lacs) from State Bank of India,
is primarily secured by way of first charge on entire immovable assets
and moveable fixed assets of the Company, both present and future on
pari- passu basis with existing charge holders and repayable in 16
installments comprising of 10 installments of Rs 150 Lacs each and 5
installments of Rs 100 Lacs each and balance in last installment ending
on 15*'July, 2017.
(ii) Rupee Term Loan of Rs..200.00 Lacs (Sanctioned Rs.1,000.00 Lacs)
from IDBI Bank Ltd. is primarily secured by way of first charge on
entire immovable assets and moveable fixed assets of the Company, both
present and future on pari- passu basis with existing charge holders
and repayable in 20 equal quarterly installment of Rs.50.00 Lacs each
ending on 1" January, 2016.
(iii) Rupee Term Loan of Rs.500.00 Lacs (Sanctioned Rs. 1,000.00 Lacs
disbursed till 31.03.2015 Rs.500.00 Lacs) by IDBI Bank Ltd., is
primarily to be secured by way of first charge on entire immovable
assets and movable fixed assets of the Company both present and future
on pari-passu with existing charge holder and repayable in 28 equal
quarterly installment of Rs.35.71 Lacs each ending on 1 " January,
2022.
All the above loans are collaterally secured through second charge by
way of hypothecation on the entire current assets of the company on
pari- passu basis with existing charge holder. These loans are
irrevocably and unconditionally guaranteed by Chairman & Managing
Director, Shri Shailesh Khaitan. Fresh loan of Rs.1,000 Lacs sanctioned
in FY2014-15 is collaterally secured by mortgage of two properties of
Shradha projects Ltd., situated at I ndore and pledge of 12 lacs equity
shares of the Company
(iv) Rupee Term Loan of Rs 5.07 Lacs (sanctioned Rs 18 Lacs) have been
availed from HDFC Bank with tenure of 60 months ending 7*' May, 2016.
The Loan is secured by the hypothecation of the car.
(v) Unsecured Loan & Advances of Rs 1120.50 Lacs has been procured from
various parties including related party viz Shradha Projects Ltd &Aarti
Marketing Pvt Ltd as promoter fund infusion towards Rajnandgaon Unit
and proposed SBI Loan repayable after the maturity of the Loan.
There is no continuing default as on the balance sheet date in
repayment of above loans and interest.
NOTES:
a) Vehicles include one car purchased for Rs. 100.65 Lacs forwhich
registration in the name of the Company is still pending.
b) Vehicles include motorcars taken on hire purchase of Rs Nil Lacs
(previous year Rs 20.70 Lacs).
c) Consequent to Schedule II to the Companies Act, 2013 becoming
applicable w.e.f. April 1,2014, depreciation for the year has been
provided on the basis of the useful lives as prescribed in Schedule II.
An amount of Rs 172.30 Lacs (net of deferred tax of Rs 82.80 lacs) has
been recognized in the opening balance of retained earning/ general
reserves for the assets where remaining useful life as per Schedule II
was Nil. There is no material impact on the depreciation charge for
the year ended on March 31 st, 2015.
Other Assumptions:
a) Future salary increases considered in actuarial valuation take in to
account inflation, seniority, promotion and other relevant factors,
such as supply and demand in the employment market
b) Expected Return on Plan asses is based on market expectations, at
the beginning of the year, far returnes aver the entire life of the
related Obligations.
c) Gratuity is payable to all employees at the rate of 15 days salary
far each completed years of service. In respect of employees covered by
the Payment of Gratuity Act, 1965, the same is subject to a maximum of
Rs. 10 lacs.
Mar 31, 2014
1. Corporate Information
Khaitan Chemicals & Fertilizers Ltd. (the Company) is a public Company
domicile in India and incorporated under the provisions of Companies
Act, 1956. Its shares are listed on the Bombay Stock Exchange Ltd.
(BSE). The Company is engaged in the manufacturing and selling of
Single Super Phosphate and Sulphuric Acid, Processing of Oil Seed
(mainly Soybean) and crude edible oil, selling of De-oiled Cake and
Crude/Refined Oil & Generation and selling of Wind Power.
2. Basis of preparation of financial statements
The financial statements of the Company have been prepared to comply in
all material respects with the notified accounting standards by the
Companies (Accounting Standard) Rule, 2006 and relevant provisions of
the Companies Act, 1956. The financial statements are prepared on
historical cost convention on an accrual basis. The Accounting Policies
have been consistently applied by the Company. 2.1 Summary of
significant accounting polices:
a) Use of Estimates
The preparation of financial statements is in conformity with the
generally accepted accounting principles (''GAAP'') requires estimates
and assumptions to be made that affect the reportable amount of assets
and liabilities on the date of financial statements and the reportable
amount of revenue and expenses during the reporting period. Difference
between the actual results and estimates are recognized in the year in
which the results are known/materialized.
b) Revenue Recognition
(a) Sale - The Company recognises sale of goods on transfer of
significant risks and reward of ownership to the customers. Sales
(Gross) are inclusive of excise duty, fertilizer subsidy, and net off
trade discounts and sales return, wherever applicable.
(b) Interest- Interest income is recognized on a time proportion basis
taking into account the amount outstanding and rate applicable.
(c) Subsidy - Fertilizer Subsidy, wherever applicable, is accounted for
on actual sales and is net off of any subsequent non receipt reversal.
(d) Dividend - Dividends are accounted for when the right to receive
the dividend payment is established.
c) Government Grants and Subsidies
Grants and Capital subsidy from the government is recognized on receipt
basis with the reasonable assumption that the Company will comply with
conditions attached to them and such amount is credited to capital
reserves. Further, in accordance with the guidelines issued by ICAI,
proportionate amount to the extent of depreciation charged, is being
transferred to surplus in the statement of profit and loss in case of
grant received in relation to acquisition of any assets.
d) Excise Duty
Excise duty payable on products is accounted for at the time of
dispatch of goods from the factories but is accrued for stocks held at
the year end.
e) Employee Benefits
(a) Short term employee benefits obligations are estimated and provided
for.
(b) Post employment benefits and other long term benefits: i. Defined
contribution plans:
Company''s contribution to provident fund, superannuation fund, employee
state insurance and other funds are determined under the relevant
schemes and/or statute and charged to revenue. ii. Defined benefits
plans:
Company''s Liability towards gratuity and leave encashment is
actuarially determined at each balance sheet date using the projected
unit credit method. Actuarial gains and losses are recognized in
revenue. Gratuity and Leave encashment liabilities are funded and
administered through Group Gratuity Scheme with Life Insurance
Corporation of India.
f) Borrowing Cost
Borrowing costs that are attributable to the acquisition or
constructions of qualifying assets are capitalised as part of the cost
of assets. A qualifying asset is one that necessarily takes substantial
period of time to get ready for intended use. All other borrowing costs
are charged to revenue.
g) Tangible Fixed Assets
Fixed assets (including capital work in progress) are stated at cost,
net of accumulated depreciation and accumulated impairment losses, if
any. The cost comprises purchase price, borrowing cost if
capitalization criteria are met and directly attributable cost of
bringing the assets to its working condition for the intended use. Any
trade discounts, rebates & cenvat availed are deducted in arriving at
the purchase price. Gains or losses arising from de-recognition of
fixed assets are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognized in the
statement of profit and loss when the assets is derecognized.
Fixed assets (including capital work in progress) are stated at cost,
net of accumulated depreciation and accumulated impairment losses, if
any. The cost comprises purchase price, borrowing cost if
capitalization criteria are met and directly attributable cost of
bringing the assets to its working condition for the intended use. Any
trade discounts, rebates & cenvat availed are deducted in arriving at
the purchase price. Gains or losses arising from de-recognition of
fixed assets are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognized in the
statement of profit and loss when the assets is derecognized.
Depreciation on fixed assets is calculated on straight-line method the
rates and manner as prescribed under the Schedule XIV of the Companies
Act, 1956.
The Company has treated its Sulphuric Acid Plant, Oil Plant and Turbo
Generator as a continuous process plant and the depreciation is charged
accordingly.
Assets individually costing Rs 5000 or less are depreciated fully in
the year of purchase. The leasehold land is amortised overthe primary
lease period excluding on perpetual lease.
Machinery Spares /Standby equipments which are used only in connection
with the fixed assets and whose use is expected to be irregular are
capitalized.
h) Intangible Assets
Intangible Assets acquired separately are measured on initial
recognized at cost. Intangible Assets are amortized on straight-line
basis over the estimated useful economic life not exceeding 10 years.
The Intangible Assets are assessed for impairment whenever there is an
indication thatthe Intangible Assets impaired.
Gains or losses arising from de-recognition of intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the assets is derecognized.
i) Impairment of tangible and intangible assets
The carrying amount of assets are reviewed at each Balance Sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its estimated recoverable amount and such assets
are written down to their recoverable amount.
Reversal of impairment losses recognized in prior years is recorded
when there is an indication that the impairment losses, recognized for
the assets, no longer exists or have decreased to the extent of
previously recognized impairment losses.
Impairment losses of continuing operations, including impairment on
inventories, are recognized in the statement of profit and loss.
j) Inventories
Inventories are valued at the lower of cost and estimated realisable
value. However material and other items held for use in the production
of inventories are not written down below cost if the finished products
in which they will be incorporated/used are expected to be sold at or
above cost. The cost of inventories is generally arrived at on the
following basis:
k) Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments and are stated at the lower
of cost and fair value on individual investment basis. All other
investments are classified as non-current/long term investments and
stated at cost less provision for diminution in value, other than
temporary.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to statement of
profit and loss.
I) Foreign Currency Transactions
1.) Foreign Currency Transactions are recorded by applying the exchange
rate prevailing on the date of transaction.
2.) Monetary items denominated in foreign currency are translated at
the exchange rate prevailing on the last day of the accounting year. In
respect of items covered by forward contracts, the premium or discount
arising at the inception of such a forward exchange contract is
amortised as an expense or income over the life of contract. Any profit
or loss arising on settlement / cancellation of such a forward exchange
contract is recognized as an income or expense forthe period.
3.) Non-Monetary items, which are carried in terms of historical cost
denominated in a foreign currency, are reported using exchange rate at
the date of transaction.
4.) Gain or loss arising out of transaction/conversion and on
settlement is taken credit for or charged to the statement of profit
and loss.
m) Taxation
Income Tax
The current tax is determined as the amount of tax payable in respect
of the estimated taxable income for the year in accordance with the
provisions of Income TaxAct, 1961.
Deferred Tax
Deferred tax charge or credit is recognized using prevailing enacted or
substantially enacted tax rates. Where there is unabsorbed depreciation
or carry forward losses, deferred tax assets are recognized only if
there is virtual certainty of realisation of such assets. Other
deferred tax assets are recognized only to the extent there is
reasonable certainty of realisation in future. Deferred tax
assets/liabilities are reviewed at each Balance Sheet date based on
developments during the year and available case laws, to reassess
realisation/liabilities. n) Pre project expenditure
The expenses on pre feasibility study reports, market survey reports,
techno- economic feasibility reports etc, on new projects are allocated
to the Fixed Assets on completion of the projects. Where the projects
are proved in-fructuous, they are charged to the revenue in the year in
which the decision is taken to scrap the same.
o) Earning per share
The Company reports basic and diluted earnings per equity share in
accordance with Accounting Standard 20-"Earning per share". Basic
earning per equity share is computed by dividing net profit after tax
by the weighted average number of equity shares outstanding during the
year. The Company does not have any diluted equity share, hence Basic
and Dilutive earning per share is same.
p) Provisions and Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
results and it is probable that there will be an outflow of resources.
Contingent liabilities are disclosed, unless the possibility of an
outflow of resource embodying the economic benefit is remote.
Contingent assets are neither recognized nor disclosed in the financial
statements.
q) Cash and Cash Equivalents and Cash Flow Statements
Cash and cash equivalents for the purpose of cash flow statements
comprises cash at bank and in hand and short term investments with an
original maturity of 3 months or less. Cash flow statement is prepared
in accordance with the indirect method prescribed in Accounting
Standard (AS) 3 on ''Cash Flow Statements''.
r) Derivatives Instruments
In accordance with the ICAI announcement, derivative contracts, other
than foreign currency forward contracts covered under AS 11, are marked
to market on a portfolio basis, and the net loss, if any, after
considering the offsetting effect of gain on the underlying hedged
itemed, is charged to the statement of profit and loss. Net gain, if
any, afterconsidering the offsetting effects of loss on the underlying
hedged item, is ignored. s) Segment Reporting
The Company is organized into two primary business segments mainly
Fertilizer and Chemicals & Soya, based on nature of products.
The management and administration are centralized and considered as
part of''Fertilizer & Chemicals'' segment, being major activities.
Unallocated items include general corporate income, expense, assets and
liabilities items which are not allocated to any business segment.
The Company prepares its segment information is conformity with the
accounting policies adopted for preparing and presenting the
financial statements of the Company as whole.
(i) Rupee Term Loan of Rs. 1784.99 Lacs (Sanctioned Rs. 2250 Lacs) from
State Bank of India is primarily secured by way of first charge on
entire immovable assets and moveable fixed assets of the Company, both
present and future on pari- passu basis with existing charge holders
and repayable in 17 installments comprising of 11 installments of Rs
150 Lacs each and 6 installments of Rs 100 Lacs each ending on 15th
September,2017
(ii) Rupee Term Loan of Rs.400 Lacs (Sanctioned Rs.1000 Lacs) from IDBI
Bank Ltd. is primarily secured by way of first charge on entire
immovable assets and moveable fixed assets of the Company, both present
and future on pari- passu basis with existing charge holders and
repayable in 20 equal quarterly installment of Rs 50 Lacs each ending
on 1 st January, 2016
(iii) Rupee Term Loan of Rs.300 Lacs (Sanctioned Rs.1200 Lacs) from
IDBI Bank Ltd. is primarily secured by way of first charge on entire
immovable assets and moveable fixed assets of the Company, both present
and future on pari- passu basis with existing charge holders and
repayable in 12 equal quarterly installments of Rs 100 Lacs each ending
on 1 st October, 2014.
(iv) Rupee Term Loan of Rs.325.03 Lacs (sanctioned Rs800 Lacs) from
Axis Bank Ltd., is primarily secured by way of first charge on the
entire fixed assets of the Company, both present and future on
pari-passu basis with existing charge holders and repayable in 12
quarterly installments of 66.67 Lacs each ending on 31 th March,2015.
All the above loans are collaterally secured and through second charge
by way of hypothecation on the entire current assets of the company on
pari- passu basis with existing charge holder. These loans are
irrevocably and unconditionally guaranteed by Chairman & Managing
Director Mr Shailesh Khaitan
(v) Rupee Term Loan of Rs. 11.77 Lacs (sanctioned Rs.115.59 Lacs) and
Rs.8.94 Lacs (sanctioned Rs.18 Lacs) have been availed from Kotak
Mahindra Bank and HDFC Bank respectively with tenure of 60 months
ending on 1st August, 2014 and 7th May, 2016 respectivly. The loan is
secured by the hypothecation of the car.
(vi) Unsecured Loan & Advances of Rs.620 Lacs has been procured from
various parties including related party viz. Shradha Projects Ltd.,
Aarti Marketing Pvt. Ltd. STribhuvan Properties Ltd. as promoters fund
infusion towards Rajnandgaon Unit & Dahej Unit repayable on or after
01.01.2016. There is no continuing default as on the balance sheet
date in repayment of above loans and interest.
Mar 31, 2013
A) Use of Estimates
The preparation of financial statements is in conformity with the
generally accepted accounting principles (''GAAP''] requires estimates
and assumptions to be made that affect the reportable amount of assets
and liabilities on the date of financial statements and the reportable
amount of revenue and expenses during the reporting period. Difference
between the actual results and estimates are recognized in the year in
which the results are known/materialized.
b) Revenue Recognition
(a) Sale - The Company recognises sale of goods on transfer of
significant risks and reward of ownership to the customers. Sales
(Gross] are inclusive of excise duty, fertilizer subsidy, and net off
trade discounts and sales return, wherever applicable.
(b) Interest- Interest income is recognized on a time proportion basis
takinginto account the amount outstanding and rate applicable.
(c) Subsidy - Fertilizer Subsidy, wherever applicable, is accounted for
on actual sales and is net off of any subsequent non receipt reversal.
(d) Dividend - Dividends are accounted for when the right to receive
the dividend payment is established.
c) Government Grants and Subsidies
Grants and Capital subsidy from the government is recognized on receipt
basis with the reasonable assumption that the Company will comply with
conditions attached to them and such amount is credited to capital
reserves. Further, in accordance with the guidelines issued by 1CA1,
proportionate amount to the extent of depreciation charged, is being
transferred to surplus in the statement of profit and loss in case of
grant received in relation to acquisition of any assets.
d] Excise Duty
Excise duty payable on products is accounted for at the time of
dispatch of goods from the factories but is accrued for stocks held at
the year end.
e) Employee Benefits
(a) Short term employee benefits obligations are estimated and provided
for.
(b] Postemploymentbeneflts and other long term benefits:
I. Defined contribution plans:
Company''s contribution to provident fund, superannuation fund, employee
state insurance and other funds are determined under the relevant
schemes and/or statute and charged to revenue.
ii. Defined benefits plans:
Company''s Liability towards gratuity and leave encashment is
actuarially determined at each balance sheet date using the projected
unit credit method. Actuarial gains and losses are recognized in
revenue. Gratuity and Leave encashment liabilities are funded and
administered through Group Gratuity Scheme with Life Insurance
Corporation of India.
f) Borrowing Cost
Borrowing costs that are attributable to the acquisition or
constructions of qualifying assets are capitalised as part of the cost
of assets. A qualifying asset is one that necessarily takes substantial
period of time to get ready for intended use. All other borrowing costs
are charged to revenue.
g) Tangible Fixed Assets
Fixed assets (including capital workin progress) are stated at cost,
net of accumulated depreciation and accumulated impairmentlosses, if
any. The cost comprises purchase price, borrowing cost if
capitalization criteria are met and directly attributable cost of
bringing the assets to its working condition for the intended use. Any
trade discounts, rebates & cenvat availed are deducted in arriving at
the purchase price. Gains or losses arising from de-recognition of
fixed assets are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognized in the
statement of profit and loss when the assets is derecognized.
Depreciation on fixed assets is calculated on straight-line method the
rates and manner as prescribed under the Schedule XIV of the Companies
Act, 1956.
The Company has treated its Sulphuric Acid Plant, Oil Plant and Turbo
Generator as a continuous process plant and the depreciation is charged
accordingly.
Assets individually costing Rs 5000 or less are depreciated fully in
the year of purchase.
The leasehold land is amortised over the primary lease period excluding
on perpetual lease.
Machinery Spares /Standby equipments which are used only in connection
with the fixed assets and whose use is expected to be irregular are
capitalized.
h) Intangible Assets
Intangible Assets acquired separately are measured on initial
recognized at cost. Intangible Assets are amortized on straight-line
basis over the estimated useful economic life not exceeding 10 years.
The Intangible Assets are assessed for impairment whenever there is an
indication that the Intangible Assets impaired.
Gains or losses arising from de-recognition of intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the assets is derecognized.
i) Impairment of tangible and intangible assets
The carrying amount of assets are reviewed at each Balance Sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its estimated recoverable amount and such assets
are written down to their recoverable amount.
Reversal of impairment losses recognized in prior years is recorded
when there is an indication that the impairment losses, recognized for
the assets, no longer exists or have decreased to the extent of
previously recognized impairmentlosses.
Impairment losses of continuing operations, including impairment on
inventories, are recognized in the statement of profit and loss.
j) Inventories
Inventories are valued at the lower of cost and estimated realisable
value. However material and other items held for use in the production
of inventories are not written down below cost if the finished products
in which they will be incorporated/used are expected to be sold at or
above cost. The cost of inventories is generally arrived at on the
following basis:
k) Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments and are stated at the lower
of cost and fair value on individual investment basis. All other
investments are classified as non-current/long term investments and
stated at cost less provision for diminution in value, other than
temporary.On disposal of an investment, the difference between its
carrying amount and net disposal proceeds is charged or credited to
statement of profit and loss.
1] Foreign Currency Transactions
1.] Foreign Currency Transactions are recorded by applying the exchange
rate prevailing on the date of transaction.
2.) Monetary items denominated in foreign currency are translated at
the exchange rate prevailing on the last day of the accounting year. In
respect of items covered by forward contracts, the premium or discount
arising at the inception of such a forward exchange contract is
amortised as an expense or income over the life of contract. Any profit
or loss arising on settlement / cancellation of such a forward exchange
contract is recognized as an income or expense for the period.
3.] Non-Monetary items, which are carried in terms of historical cost
denominated in a foreign currency, are reported using exchange rate at
the
date of transaction.
4.) Gain or loss arising out of translation/conversion and on
settlement is taken credit for or charged to the statement of profit
and loss.
m] Taxation
Income Tax
The current tax is determined as the amount of tax payable in respect
of the estimated taxable income for the year in accordance with the
provisions of Income Tax Act, 1961.
Deferred Tax
Deferred tax charge or credit is recognized using prevailing enacted or
substantially enacted tax rates. Where there is unabsorbed depreciation
or carry forward losses, deferred tax assets are recognized only if
there is virtual certainty of realisation of such assets. Other
deferred tax assets are recognized only to the extent there is
reasonable certainty of realisation in future. Deferred tax
assets/liabilities are reviewed at each Balance Sheet date based on
developments during the year and available case laws, to reassess
realisation/liabilities.
n) Pre project expenditure
The expenses on pre feasibility study reports, market survey reports,
techno- economic feasibility reports etc. on new projects are allocated
to the Fixed Assets on completion of the projects. Where the projects
are proved in-fructuous, they are charged to the revenue in the year in
which the decision is taken to scrap the same,
o)Earning per share
The Company reports basic and diluted earnings per equity share in
accordance with Accounting Standard 20-"Earning per share". Basic
earning per equity share is computed by dividing net profit after tax
by the weighted average number of equity shares outstanding during the
year. The Company does not have any diluted equity share, hence Basic
and Dilutive earning per share is same.
p) Provisions and Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
results and it is probable that there will be an outflow of resources.
Contingent liabilities are disclosed, unless the possibility of an
outflow of resource embodying the economic benefit is remote.
Contingent assets are neither recognized nor disclosed in the financial
statements.
q) Cash and Cash Equivalents and Cash How Statements
Cash and cash equivalents for the purpose of cash flow statements
comprises cash at bank and in hand and short term investments with an
original maturity of 3 months or less.
Cash flow statement is prepared in accordance with the indirect method
prescribed in Accounting Standard [AS] 3 on ''Cash Flow Statements''.
r) Derivatives Instruments
In accordance with the ICAI announcement, derivative contracts, other
than foreign currency forward contracts covered under AS 11, are marked
to market on a portfolio basis, and the net loss, if any, after
considering the offsetting effect of gain on the underlying hedged
itemed, is charged to the statement of profit and loss. Net gain, if
any, after considering the offsetting effects of loss on the underlying
hedged item, is ignored.
s) Segment Reporting
The Company is organized into two primary business segments mainly
Fertilizer and Chemicals & Soya, based on nature of products. The
management and administration are centralized and considered as part
of''Fertilizer & Chemicals'' segment, being major activities.
Unallocated items include general corporate income, expense, assets and
liabilities items which are not allocated to any business segment.
The Company prepares its segment information is conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as whole.
Mar 31, 2012
1. Corporate Information
Khaitan Chemicals & Fertilizers Ltd. (the Company) is a public Company
domicile in India and incorporated under the provisions of Companies
Act, 1956. Its shares are listed on the Bombay Stock Exchange Ltd.
(BSE). The Company is engaged in the manufacturing and selling of
Single Super Phosphate and Sulphuric Acid, Processing of Oil Seed
(mainly Soybean) and crude edible oil, selling of De-oiled Cake and
Crude/ Refined Oil & Generation and selling of Wind Power.
2. Basis of preparation of financial statements
The financial statements of the Company have been prepared to comply in
all material respects with the notified accounting standards by the
Companies (Accounting Standard) Rule, 2006 and relevant provisions of
the Companies Act, 1956. The financial statements are prepared on
Historical cost convention on an accrual basis. The Accounting Policies
have been consistently applied by the Company 2.1 Summary of
significant accounting polices:
a) Presentation and Disclosure of Financial Statements
During the year ended 31st March, 2012, the revised schedule VI
notified under the Companies Act, 1956, has become applicable to the
Company, for preparation and presentation of its financial statements.
The adoption of revised schedule VI does not impact recognition and
measurement principles followed for preparation of financial
statements. However it has significant impact on presentation and
disclosures made in financial statements. The Company has also
reclassified the previous year figures in accordance with the
requirements applicable in the Current year.
b) Use of Estimates
The preparation of financial statements is in conformity with the
generally accepted accounting principles ('GAAP') requires estimates
and assumptions to be made that affect the reportable amount of assets
and liabilities on the date of financial statements and the reportable
amount of revenue and expenses during the reporting period. Difference
between the actual results and estimates are recognized in the year in
which the results are known/materialized.
c) Revenue Recognition
(a(Sale - The Company recognizes sale of goods on transfer of
significant risks and reward of ownership to the customers. Sales
(Gross) are inclusive of excise duty, fertilizer subsidy, and net off
trade discounts and sales return, wherever applicable.
(b)lnterest Interest income is recognized on a time proportion basis
taking into account the amount outstanding and rate applicable.
(c)Subsidy - Fertilizer Subsidy, wherever applicable, is accounted for
on actual sales and is net off of any subsequent non receipt reversal.
(d)Dividend - Dividends are accounted for when the right to receive the
dividend payment is established.
d) Government Grants and Subsidies
Grants and Capital subsidy from the government is recognized on receipt
basis with the reasonable assumption that the Company will comply with
conditions attached to them and such amount is credited to capital
reserves. Further, in accordance with the guidelines issued by ICAI,
Proportionate amount to the extent of depreciation charged, is being
transferred to surplus in the statement of profit and loss in case of
grant received in relation to acquisition of any assets.
e) Excise Duty
Excise duty payable on products is accounted for at the time of
dispatch of goods from the factories but is accrued for stocks held at
the year end.
f) Employee Benefits
(a) Short term employee benefits obligations are estimated and provided
for.
(b) Post employment benefits and other long term benefits:
i. defined contribution plans:
Company's contribution to provident fund, superannuation fund, employee
state insurance and other funds are determined under the relevant
schemes and/or statute and charged to revenue.
ii. Defined benefits plans:
Company's Liability towards gratuity and leave encashment is
actuarially determined at each balance sheet date using the projected
unit credit method. Actuarial gains and losses are recognized in
revenue. Gratuity and Leave encashment liabilities are funded and
administered through Group Gratuity Scheme with Life Insurance
Corporation of India.
g) Borrowing Cost
Borrowing costs that are attributable to the acquisition or
constructions of qualifying assets are capitalized as part of the cost
of assets. A qualifying asset is one that necessarily takes substantial
period of time to get ready for intended use. All other borrowing costs
are charged to revenue.
h) Tangible Fixed Assets
Fixed assets (including capital work in progress) are stated at cost,
net of accumulated depreciation and accumulated impairment losses, if
any. The cost comprises purchase price, borrowing cost if
capitalization criteria are met and directly attributable cost of
bringing the assets to its working condition for the intended use. Any
trade discounts, rebates & cenvat availed are deducted in arriving at
the purchase price. Gains or losses arising from de-recognition of
fixed assets are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognized in the
statement of profit and loss when the assets is derecognized.
Depreciation on fixed assets is calculated on straight-line method the
rates and manner as prescribed under the Schedule XIV of the
Companies Act, 1956.
The Company has treated its Sulphuric Acid Plant, Oil Plant and Turbo
Generator as a continuous process plant and the depreciation is charged
accordingly.
Assets individually costing Rs 5000 or less are depreciated fully in
the year of purchase.
The leasehold land is amortized over the primary lease period excluding
on perpetual lease.
Machinery Spares /Standby equipments which are used only in connection
with the fixed assets and whose use is expected to be irregular are
capitalized.
i) Intangible Assets
Intangible Assets acquired separately are measured on initial
recognized at cost. Intangible Assets are amortized on straight-line
basis over the estimated useful economic life not exceeding 10 years.
The Intangible Assets are assessed for impairment whenever there is an
indication that the Intangible Assets impaired.
Gains or losses arising from de-recognition of intangible asset are
measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognized in the statement of
profit and loss when the assets is derecognized.
j) Impairment of tangible and intangible assets
The carrying amount of assets are reviewed at each Balance Sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its estimated recoverable amount and such assets
are written down to their recoverable amount.
Reversal of impairment losses recognized in prior years is recorded
when there is an indication that the impairment losses, recognized for
the assets, no longer exists or have decreased to the extent of
previously recognized impairment losses.
Impairment losses of continuing operations, including impairment on
inventories, are recognized in the statement of profit and loss.
I) Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments and are stated at the lower
of cost and fair value on individual investment basis. All other
investments are classified as non-current/long term investments and
stated at cost less provision for diminution in value, other than
temporary.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to statement of
profit and loss,
m) Foreign Currency Transactions
1.) Foreign Currency Transactions are recorded by applying the exchange
rate prevailing on the date of transaction.
2.) Monetary items denominated in foreign currency are translated at
the exchange rate prevailing on the last day of the accounting year. In
respect of items covered by forward contracts, the premium or discount
arising at the inception of such a forward exchange contract is
amortized as an expense or income over the life of contract. Any profit
or loss arising on settlement / cancellation of such a forward exchange
contract is recognized as an income or expense for the period.
3.) Non-Monetary items, which are carried in terms of historical cost
denominated in a foreign currency, are reported using exchange rate at
the date of transaction.
4.) Gain or loss arising out of translation/conversion and on
settlement is taken credit for or charged to the statement of profit
and loss,
n) Taxation
Income Tax
The current tax is determined as the amount of tax payable in respect
of the estimated taxable income for the year in accordance with the
provisions of Income Tax Act, 1961.
Deferred Tax
Deferred tax charge or credit is recognized using prevailing enacted or
substantially enacted tax rates. Where there is unabsorbed depreciation
or carry forward losses, deferred tax assets are recognized only if
there is virtual certainty of realization of such assets. Other
deferred tax assets are recognized only to the extent there is
reasonable certainty of realization in future. Deferred tax
assets/liabilities are reviewed at each Balance Sheet date based on
developments during the year and available case laws, to reassess
realization/liabilities,
o) Pre project expenditure
The expenses on pre feasibility study reports, market survey reports,
techno- economic feasibility reports etc. on new projects are allocated
to the Fixed Assets on completion of the projects. Where the projects
are proved in-fructuous, they are charged to the revenue in the year in
which the decision is taken to scrap the same,
p) Earnings per share
The Company reports basic and diluted earnings per equity share in
accordance with Accounting Standard 20"Earning per share". Basic
earning per equity share is computed by dividing net profit after tax
by the weighted average number of equity shares outstanding during the
year. The Company does not have any diluted equity share, hence Basic
and Dilutive earning per share is same,
q) Provisions and Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
results and it is probable that there will be an outflow of resources.
Contingent liabilities are disclosed, unless the possibility of an
outflow of resource embodying the economic benefit is remote.
Contingent assets are neither recognized nor disclosed in the financial
statements,
r) Cash and Cash Equivalents and Cash Flow Statements Cash and cash
equivalents for the purpose of cash flow statements comprises cash at
bank and in hand and short term investments with an original maturity
of 3 months or less.
Cash flow statement is prepared in accordance with the indirect method
prescribed in Accounting Standard (AS) 3 on 'Cash Flow Statements')
Derivatives Instruments
In accordance with the ICAI announcement, derivative contracts, other
than foreign currency forward contracts covered under AS 11, are marked
to market on a portfolio basis, and the net loss, if any, after
considering the offsetting effect of gain on the underlying hedged
itemed, is charged to the statement of profit and loss. Net gain, if
any, after considering the offsetting effects of loss on the underlying
hedged item, is ignored.
t) Segment Reporting
The Company is organized into two primary business segments mainly
Fertilizer and Chemicals & Soya, based on nature of products. The
management and administration are centralized and considered as part of
'Fertilizer & Chemicals' segment, being major activities. Unallocated
items include general corporate income, expense, assets and liabilities
items which are not allocated to any business segment. The Company
prepares its segment information is conformity with the accounting
policies adopted for preparing and presenting the financial statements
of the Company as whole.
Mar 31, 2011
1. Basis of preparation of financial statements
The financial statements have been prepared to comply in all material
respects with the notified accounting standards by the Companies
(Accounting Standard) Rules, 2006 and relevant provions of the
Companies Act, 1956. The financial statements are prepared on
historical cost convention on an accrual basis. The Accounting Policies
have been consistently applied by the Company.
2. Use of Estimates
The preparation of financial statements is in conformity with the
generally accepted accounting principles (GAAP) requires estimates
and assumptions to be made that affect the reportable amount of assets
and liabilities on the date of financial statements and the reportable
amount of revenue and expenses during the reporting period. Difference
between the actual results and estimates are recognized in the year in
which the results are known/materialised.
3. Revenue Recognition
(a) Sale - The Company recognises sale of goods on transfer of
significant risks and reward of ownership to the customers. Sales
(Gross) are inclusive of excise duty, fertilizer subsidy, and net off
trade discounts and sales return, wherever applicable.
(b) Interest - Interest income is recognized on a time proportion basis
taking into account the amount outstanding and rate applicable.
(c) Subsidy - Fertilizer Subsidy, wherever applicable, is accounted for
on actual sales and is net off of any subsequent non receipt reversal.
(d) Dividend - Dividends are accounted for when the right to receive
the dividend payment is established.
4. Excise Duty
Excise duty payable on products is accounted for at the time of
despatch of goods from the factories but is accrued for stocks held at
the year end.
5. Employee Benefits
(a) Short term employee benefits obligations are estimated and provided
for.
(b) Post employment benefits and other long term benefits: i. Defined
contribution plans:
Companys contribution to provident fund, superannuation fund, employee
state insurance and other funds are determined under the relevant
schemes and/or statute and charged to revenue. ii. Defined benefits
plans:
Companys Liability towards gratuity and leave encashment is
actuarially determined at each balance sheet date using the projected
unit credit method. Actuarial gains and losses are recognised in
revenue. Gratuity and Leave encashment liabilities are funded and
administered through Group Gratuity Scheme with Life Insurance
Corporation of India.
6. Capital Subsidy
Capital subsidy for fixed assets is recognised on receipt basis and is
disclosed under Capital Reserve. Further, in accordance with the
guidelines issued by 1CAI, proportionate amount to the extent of
depreciation charged, is being transferred to the Profit and Loss
Account.
7. Borrowing Cost
Borrowing costs that are attributable to the acquisition or
constructions of qualifying assets are capitalised as part of the cost
of assets. A qualifying asset is one that necessarily takes substantial
period of time to get ready for intended use. Alt other borrowing costs
are charged to revenue.
8. Fixed Assets and Depreciation/Amortisation.
a. All Fixed Assets are stated at cost less depreciation and
impairment loss, wherever applicable. Cost comprises acquisition costs
and any other attributing cost of bringing the assets to its working
condition for its intended use but excluding taxes and duties there on,
wherever applicable.
b. The leasehold land is amortised over the primary lease period
excluding on perpetual lease.
c. Machinery Spares/ Standby equipments which are used only in
connection with the fixed assets and whose use is expected to be
irregular are capitalized.
d. Capital works-in-progress including capital advances is carried at
cost.
e. Depreciation has been calculated on straight line method at the
rates and manner specified under the Schedule XIV of the Companies Act,
1956.
f. The Company has treated its Sulphuric Acid Plant, Oil Plant and
Turbo Generator as a continuous process plant and the depreciation is
charged accordingly.
g. Assets individually costing Rs.5000 or less are depreciated fully
in the yearof purchase.
9. Impairment of Assets
The carrying amounts of assets are reviewed at each Balance Sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognised wherever the carrying amount
of an asset exceeds its estimated recoverable amount. In case of
impairment, assets are written down to their recoverable amount
Reversal of impairment losses recognized in prior years is recorded
when there is an indication that the impairment losses, recognized for
the assets, no longer exists or have decreased.
10. Inventories
Inventories are valued at the lower of cost and estimated realisable
value. The cost of inventories is generally arrived at on the following
basis
Raw Material Quarterly weighted average method for Fertilizer Division
and FIFO method for
Agro Division.
Packing material and Stores & Spares Monthly weighted average method.
Finished goods and Work-in-progress Raw material cost and proportion of
manufacturing overheads. Excise duty, if
any, is included in the value of Finished goods Inventory.
11. Investments
Long term investments are stated at cost less provision for diminution
in value, other than temporary. Current investments are stated at the
lower of cost and fair value on individual investment basis.
12. Foreign Currency Translations
a. Foreign Currency Transactions are recorded at the exchange rate
prevailing on the date of transaction.
b. Monetary items denominated in foreign currency are translated at
the exchange rate prevailing on the last day of the accounting year. In
respect of items covered by forward contracts, the premium or discount
arising at the inception of such a forward exchange contract is
amortised as an expense or income over the life of contract. Any profit
or loss arising on settlement / cancelation of such a forward exchange
contract is recognized as an income or expense for the period.
c. Non-Monetary items, which are carried in terms of historical cost
denominated in a foreign currency, are reported using exchange rate at
the date of transaction.
d. Gain or loss arising out of translation/conversion and on
settlement is taken credit for or charged to the Profit and Loss
Account.
13. Taxation
Income Tax
The current tax is determined as the amount of tax payable in respect
of the estimated taxable income for the year in accordance with the
provisions of Income Tax Act, 1961.
Deferred Tax
Deferred tax charge or credit is recognized using prevailing enacted or
substantially enacted tax rates. Where there is unabsorbed depreciation
or carry forward losses, deferred tax assets are recognised only if
there is virtual certainty of realisation of such assets. Other
deferred tax assets are recognised only to the extent there is
reasonable certainty of realisation in future. Deferred tax
assets/liabilities are reviewed at each Balance Sheet date based on
developments during the year and available case laws, to reassess
realisation/liabilities
14. Pre Project Expenditure
The expenses on pre feasibility study reports, market survey reports,
techno- economic feasibility reports etc. on new projects are allocated
to the Fixed Assets on completion of the projects. Where the projects
are proved in fructuous, they are charged to the revenue in the year in
which the decision is taken to scrap the same.
15. Earning per share
The Company reports basic and diluted earnings per equity share in
accordance with Accounting Standard 20 - "Earning per share". Basic
earning per equity share is computed by dividing net profit after tax
by the weighted average number of equity shares outstanding during the
year. The Company does not have any diluted equity share, hence Basic
and Dilutive earning per share is same.
16. Provisions. Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
results and it is probable that there will be an outflow of resources.
Contingent liabilities are disclosed, unless the possibility of an
outflow of resource embodying the economic benefit is remote.
contigent assets are neither recognized nor disclosed in the financial
statements
Mar 31, 2010
1 Basis Of Preparation Of Financial Statements
The financial statements have been prepared to comply in all material
respects with the notified accounting standards by the Companies
(Accounting Standard) Rules, 2006 and relevant provisions of the
Companies Act, 1956. The financial statements are prepared on
historical cost convention on an accrual basis, except for employees
benefit to the extent as in point-5b(ii) mentioned below. The
Accounting Policies have been consistently applied by the Company.
2 Use of Estimates
The preparation of financial statements is in conformity with the
generally accepted accounting principles (GAAP) requires estimates
and assumptions to be made that affect the reportable amount of assets
and liabilities on the date of financial statements and the reportable
amount of revenue and expenses during the reporting period. Difference
between the actual results and estimates are recognized in the year in
which the results are known/materialised
3 Revenue Recognition
(a) Sale - The Company recognises sale of goods on transfer of
significant risks and reward of ownership to the customers. Sales
(Gross) are inclusive of excise duty, fertilizer subsidy, and net off
trade discounts and sales return, wherever applicable.
(b) Interest - Interest income is recognized on a time proportion basis
taking into account the amount outstanding and rate applicable.
(c) Subsidy - Fertilizer Subsidy, wherever applicable, is accounted for
on actual sales.
(d) Dividend - Dividends are accounted for when the right to receive
the dividend payment is established.
4 Excise Duty
Excise duty payable on products is accounted for at the time of
despatch of goods from the factories but is accrued for stocks held at
the year end.
5 Employee Benefits
(a) Short term employee benefits obligations are estimated and provided
for.
(b) Post employment benefits and other long term benefits:
i. Defined contribution plans:
Companys contribution to provident fund, superannuation fund, employee
state insurance and other funds are determined under the relevant
schemes and/or statute and charged to revenue.
ii. Defined benefits plans and compensated leaves:
Companys Liability towards gratuity is covered with Life Insurance
Corporation of India (LIC) Contribution towards gratuity is charged
to revenue. Leave encashment is charged to profit and loss account
on cash basis.
6 Capital Subsidy
Capital subsidy for fixed assets is recognised on receipt basis and is
disclosed under Capital Reserve. Further, in accordance with the
guidelines issued by ICAI, proportionate amount to the extent of
depreciation charged, is being transferred to the Profit and Loss
Account.
7 Borrowing Cost
Borrowing costs that are attributable to the acquisition or
constructions of qualifying assets are capitalised as part of the cost
of assets. A qualifying asset is one that necessarily takes substantial
period of time to get ready for intended use. All other borrowing
costs are charged to revenue.
8. Fixed Assets and Depreciation/Amortisation.
a. All Fixed Assets are stated at cost less depreciation and
impairment loss, wherever applicable. Cost comprises acquisition costs
and any other attributable cost of bringing the assets to its working
condition for its intended use but excluding taxes and duties there on,
wherever applicable
b. The leasehold land is amortised over the primary lease period
excluding on perpetual lease.
c. Machinery Spares/ Standby equipments which are used only in
connection with the fixed assets and whose use is expected to be
irregular are capitalized.
d. Capital works-in-progress including capital advances is carried at
cost.
e. Depreciation has been calculated on straight line method at the
rates and manner specified under the Schedule XIV of the Companies Act,
1956.
f. The Company has treated its Sulphuric Acid Plant, Oil Plant and
Turbo Generator as a continuous process plant and the depreciation is
charged accordingly.
g. Assets individually costing Rs.5000 or less are depreciated fully
in the year of purchase
9 Impairment of Assets
The carrying amounts of assets are reviewed at each Balance Sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognised wherever the carrying amount
of an asset exceeds its estimated recoverable amount. In case of
impairment, assets are written down to their recoverable amount
Reversal of impairment losses recognized in prior years is recorded
when there is an indication that the impairment losses, recognized for
the assets, no longer exists or have decreased.
11 Investments
Long term investments are stated at cost less provision for diminution
in value, other than temporary current investments are stated at the
lower of cost and fair value on individual investment basis.
12 Foreign Currency Translations
a. Foreign Currency Transactions are recorded at the exchange rate
prevailing on the date of transaction.
b. Monetary items denominated in foreign currency are translated at
the exchange rate prevailing on the last day of the accounting year. In
respect of items covered by forward contracts, the premium or discount
arising at the inception of such a forward exchange contract is
amortised as an expense or income over the life of contract Any profit
or loss arising on settlement / cancellation of such a forward exchange
contract is recognized as an income or expense for the period.
c. Non-Monetary items, which are carried in terms of historical cost
denominated in a foreign currency, are reported using exchange rate at
the date of transaction.
d. Gain or loss arising out of translation/conversion and on
settlement is taken credit for or charged to the Profit and Loss
Account.
13 Taxation Income Tax
The current tax is determined as the amount of tax payable in respect
of the estimated taxable income for the year in accordance with the
provisions of Income Tax Act, 1961. Deferred Tax
Deferred tax charge or credit is recognized using prevailing enacted or
substantially enacted tax rates. Where there is unabsorbed depreciation
or carry forward losses, deferred tax assets are recognised only if
there is virtual certainty of realisation of such assets. Other
deferred tax assets are recognised only to the extent there is
reasonable certainty of realisation in future. Deferred tax
assets/liabilities are reviewed at each Balance Sheet date based on
developments during the year and available case laws, to reassess
realisation/liabilities
14 Pre Project Expenditure
The expenses on pre feasibility study reports, market survey reports,
techno- economic feasibility reports etc. on new projects are allocated
to the Fixed Assets on completion of the projects. Where the projects
are proved in fructuous, they are charged to the revenue in the year in
which the decision is taken to scrap the same.
15. Earning per share
The Company reports basic and diluted earnings per equity share in
accordance with Accounting Standard 20 - "Earning per share". Basic
earning per equity share is computed by dividing net profit after tax
by the weighted average number of equity shares outstanding during the
year. The Company does not have any diluted equity share, hence Basic
and Dilutive earning per share is same.
16. Provisions. Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
results and it is probable that there will be an outflow of resources.
Contingent liabilities are disclosed, unless the possibility of an
outflow of resource embodying the economic benefit is remote.
Contingent assets are neither recognized not disclosed in the financial
statements.
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