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Accounting Policies of Madras Fertilizers Ltd. Company

Mar 31, 2015

1 GENERAL

The financial statements are prepared under the historical cost convention and on going concern basis. These statements have been prepared in accordance with i) applicable Accounting Standards (AS), ii) requirements of Companies Act, 2013 and iii) the Accounts Manual of the Company.

2 FIXED ASSETS

Fixed Assets are stated at cost of acquisition/construction less accumulated depreciation.

Cost is inclusive of freight, installation, duties, other incidental expenses, allocated Expenditure during Construction, initial catalysts, mandatory/insurance spares acquired along with the machinery and interest on borrowed funds attributable to construction or acquisition for the period upto the capitalisation of the respective asset as reduced by liquidated damages.

Borrowing costs that are directly attributable to the acquisition/construction of an asset is capitalised as part of the cost of that asset when it is probable that they will result in future economic benefits to the enterprise and the costs can be measured reliably.

Assets acquired under Hire Purchase Agreements are capitalised to the extent, of Principal value, while Hire charges are charged to revenue in the year in which they are payable.

Expenditure on Tangible Assets on revamp/expansion are capitalised when the respective Plants are ready for commercial production (i.e. when the Plant achieves 50% capacity utilisation) and in respect of other assets when they are ready for use.

3 DEPRECIATION

Depreciation on Tangible Assets is provided for in conformity with the provisions of Schedule 11 to the Companies Act, 2013 on the basis of Useful life of the Asset by leaving a residual value of 5% in respect of Plant and Machinery, Buildings and Roads & Bridges and Rs. 1 in respect of other tangible assets.

4 NON CURRENT INVESTMENTS

Non-Current Investments are stated at cost. Any diminution in the value of Non-Current Investments, other than temporary in nature, are provided for.

5 EXPENDITURE DURING CONSTRUCTION

Expenditure during construction awaiting capitalization to Tangible Assets excluding capital advances is included under Capital Work in Progress and shown separately under Tangible Assets Note.

6 GRANTS

Grants from Government are shown as a deduction from the gross value of tangible assets/capital work in progress.

7 INVENTORY VALUATION

(i) Raw materials and packing materials are valued at cost on FIFO basis.

(ii) Stores, spares and catalysts are valued at cost on monthly moving weighted average basis.

(iii) Loose tools and reconditioned spares are revalued on WDV basis annually.

(iv) Finished products are valued at lower of cost or net realisable value including final / estimated subsidy.

Net realisable value is taken as under:

Phosphatic and Potassic Fertilizers

- Field warehouse inventories: The Least of selling price fixed by the Company to Marketers / Dealers including Excise Duty.

- Field warehouse inventories to be brought back to Plant for reprocessing: The least of selling price fixed by the Company to Marketers / Dealers plus final /estimated Nutrient Based Subsidy (NBS) less estimated reprocessing costs and freight incurred.

- Inventories in transit: The least of selling price fixed by the Company to Marketers / Dealers including Excise Duty plus final / estimated NBS less estimated warehousing expenses.

- Inventories at Plant ready for sale : The least of selling price fixed by the Company to Marketers / Dealers plus final / estimated NBS less estimated freight and warehousing expenses.

Urea

- Field warehouse inventories: The Least of selling price to Marketers / Dealers including Excise Duty.

- Inventories in transit: The least of selling price to Marketers / Dealers including Excise Duty plus final / estimated subsidy less estimated warehousing expenses.

- Inventories at Plant ready for sale : The least of selling price to Marketers / Dealers plus final / estimated subsidy less estimated freight and warehousing expenses.

- Bulk Urea at Plant: Least of selling price to Marketers / Dealers plus final/ estimated subsidy less estimated bagging, freight and warehousing expenses.

(v) Warehousing expenses have been distributed over sales and closing stock.

(vi) The Company has adopted FIFO method of valuation for raw materials and packing materials content in the inventory of finished products.

(vii) Ammonia is valued at cost as the same is captively consumed and not intended for sale.

(viii) Off-spec products intended for disposal are valued at estimated realizable value.

(ix) Inventory of traded products are valued at lower of location specific cost or net realizable value. Agrochemicals inventory is valued on FIFO method, which includes purchase cost and other related expenses.

(x) Inventory of Pesticides manufactured and lying at factory under Loan Licensing Scheme are valued at cost excluding Excise Duty.

(xi) Goods in Transit / Under Inspection are valued at cost.

8 TRADE RECEIVABLES /LOANS AND ADVANCES

Trade Receivables, Loans and Advances are reviewed periodically and provision is made for debts considered doubtful of recovery.

9 GROSS SALES

Gross Sales is net of sales return, dealers'/marketers' margin, Sales Tax (VAT) collected outside the State of Tamil Nadu and includes applicable Excise Duty for Fertilizers.

10 SUBSIDY

(i) Urea Subsidy under New Pricing Scheme is accounted on receipt at the warehouses per procedure prescribed by the Government. Credit/Debit for Annual Escalation/De-escalation in input prices is considered based on realistic estimates pending issue of notification by the Government. Adjustments are effected in respect of difference, if any, in the year of receipt

(ii) Subsidy for Phosphatic and Potassic fertilizers is accounted in line with the Nutrient Based Subsidy (NBS) policy of the Government. Credit for additional subsidy for using costlier inputs is considered based on realistic estimates pending issue of notification by the Government. Adjustments are effected in respect of difference, if any, in the year of receipt.

11 FOREIGN CURRENCY TRANSACTIONS

All transactions made during the year in foreign currency'are recorded in the reporting currency by applying to the foreign currency amount the exchange rate on the initial recognition date. Foreign currency transactions settled after initial recognition date and other transactions remaining unsettled at the end of the accounting period are translated at the exchange rate on the date of settlement or prevalent at the end of accounting period as the case may be. Gains and losses relating to foreign exchange transactions are recognised in the profit and loss statement.

12 EMPLOYEE BENEFIT EXPENSES

(i) Short Term Benefits

Short Term Employee Benefits are accounted on accrual basis. (ii) Post-employment Benefits and other Long Term Employee Benefits

a. These are limited to and provided / paid in line with the DPE guidelines.

b. The Company's contribution to the provident fund is remitted to a separate trust established for the purpose based on a fixed percentage of the eligible employees' salary and charged to Profit and Loss statement on accrual basis. Shortfall, if any, on the Government specified minimum rate of return, will be made good by the Company and charged to Profit and Loss statement.

c. The Company operates defined benefit plan for gratuity. The cost of providing such defined benefit is determined using the projected unit credit method of actuarial valuation made at the end of the year and is administered through a fund maintained by Life Insurance Corporation of India. Actuarial gains / losses are charged to Profit and Loss statement.

d. The liability of the Company in respect of superannuation scheme is restricted to the fixed contribution paid by the Company on an annual basis towards the defined contribution scheme maintained by Life Insurance Corporation of India, which is charged to Profit & Loss statement on accrual basis.

e. Obligations on post -retirement medical benefits, compensated absences and service awards are provided using the projected unit credit method of actuarial valuation made at the end of the year.

(iii) Termination Benefits

Payment made to the employees under voluntary retirement scheme is treated in line with the revised AS-15 (Employee Benefits).

13 CLAIMS

(i) Claims by the Company on underwriters are accounted as income on acceptance, pending settlement.

(ii) Claims on railways are accounted on settlement.

(iii) Claims for liquidated- damages against suppliers/contractors are accounted for on recovery of the same from their bills and adjusted to the cost of assets or to the materials/works as the case may be.

(iv) All other liquidated damages / penalties are accounted on realization basis.

14 PRIOR PERIOD ADJUSTMENTS

Income/Expenditure which arise in the current year as a result of errors or omissions in the preparation of financial statements of earlier years are treated as prior period adjustments.

15 CONTINGENT LIABILITY

Depending on facts of each case and after due evaluation of relevant legal aspects, claims against the Company not acknowledged as debts are included under and disclosed as contingent liabilities.

16 TAXES

a) Provision for current tax is made in accordance with the provisions of the Income Tax Act, 1961

b) Deferred tax assets are not recognized unless, in the management judgment there is a virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realized.

c) Accounting of value added tax is in line with the provisions of statute in force.


Mar 31, 2014

1 GENERAL

The fi nancial statements are prepared under the historical cost convention and on going concern basis. These statements have been prepared in accordance with i) applicable Accounting Standards (AS), ii) requirements of Companies Act, 1956 and iii) the Accounts Manual of the Company.

2 FIXED ASSETS

Fixed Assets are stated at cost of acquisition / construction less accumulated depreciation.

Cost is inclusive of freight, installation, duties, other incidental expenses, allocated Expenditure during Construction, initial catalysts, mandatory / insurance spares acquired along with the machinery and interest on borrowed funds attributable to construction or acquisition for the period upto the capitalisation of the respective asset as reduced by liquidated damages.

Borrowing costs that are directly attributable to the acquisition / construction of an asset is capitalised as part of the cost of that asset when it is probable that they will result in future economic benefits to the enterprise and the costs can be measured reliably.

Assets acquired under Hire Purchase Agreements are capitalised to the extent of Principal value, while Hire charges are charged to revenue in the year in which they are payable.

Expenditure on Tangible Assets on revamp / expansion are capitalised when the respective Plants are ready for commercial production (i.e. when the Plant achieves 50% capacity utilisation) and in respect of other assets when they are ready for use.

3 DEPRECIATION

Depreciation on Tangible Assets is provided for in conformity with the provisions of Schedule XIV to the Companies Act, 1956 on Straight Line Method by leaving a residual value of 5% in respect of Plant and Machinery and Rs. 1 in respect of other tangible assets.

Assets costing not more than Rs. 5,000 each are depreciated in full in the year of addition by leaving a residual value of Rs. 1.

4 NON CURRENT INVESTMENTS

Non Current Investments are stated at cost. Any diminution in the value of Non Current Investments, other than temporary in nature, are provided for.

5 EXPENDITURE DURING CONSTRUCTION

Expenditure during construction awaiting capitalization to Tangible Assets excluding capital advances is included under Capital Work in Progress and shown separately under Tangible Assets Note.

6 GRANTS

Grants from Government are shown as a deduction from the gross value of tangible assets / capital work in progress.

7 INVENTORY VALUATION

(i) Raw materials and packing materials are valued at cost on FIFO basis.

(ii) Stores, spares and catalysts are valued at cost on monthly moving weighted average basis.

(iii) Loose tools and reconditioned spares are revalued on WDV basis annually.

(iv) Finished products are valued at lower of cost or net realisable value including fi nal / estimated subsidy.

Net realisable value is taken as under :

Phosphatic and Potassic Fertilizers

- Field warehouse inventories: The Least of selling price fixed by the Company to Marketers / Dealers including Excise Duty.

- Field warehouse inventories to be brought back to Plant for reprocessing: The least of selling price fixed by the Company to Marketers / Dealers plus fi nal / estimated Nutrient Based Subsidy (NBS) less estimated reprocessing costs and freight incurred.

- Inventories in transit : The least of selling price fixed by the Company to Marketers / Dealers including Excise Duty plus fi nal / estimated NBS less estimated warehousing expenses.

- Inventories at Plant ready for sale : The least of selling price fi xed by the Company to Marketers / Dealers plus fi nal / estimated NBS less estimated freight and warehousing expenses.

Urea

- Field warehouse inventories: The Least of selling price to Marketers / Dealers including Excise Duty.

- Inventories in transit : The least of selling price to Marketers / Dealers including Excise Duty plus fi nal / estimated subsidy less estimated warehousing expenses.

- Inventories at Plant ready for sale : The least of selling price to Marketers / Dealers plus fi nal / estimated subsidy less estimated freight and warehousing expenses.

- Bulk Urea at Plant : Least of selling price to Marketers / Dealers plus fi nal / estimated subsidy less estimated bagging, freight and warehousing expenses.

(v) Warehousing expenses have been distributed over sales and closing stock.

(vi) The Company has adopted FIFO method of valuation for raw materials and packing materials content in the inventory of fi nished products.

(vii) Ammonia is valued at cost as the same is captively consumed and not intended for sale.

(viii) Off-spec products intended for disposal are valued at estimated realizable value.

(ix) Inventory of traded products are valued at lower of location specifi c cost or net realizable value. Agrochemicals inventory is valued on FIFO method, which includes purchase cost and other related expenses.

(x) Inventory of Pesticides manufactured and lying at factory under Loan Licensing Scheme are valued at cost excluding Excise Duty.

(xi) Goods in Transit / Under Inspection are valued at cost.

8 TRADE RECEIVABLES / LOANS AND ADVANCES

Trade Receivables, Loans and Advances are reviewed periodically and provision is made for debts considered doubtful of recovery.

9 GROSS SALES

Gross Sales is net of sales return, dealers'' / marketers'' margin, Sales Tax (VAT) collected outside the State of Tamil Nadu and includes applicable Excise Duty for Fertilizers.

10 SUBSIDY

(i) Urea Subsidy under New Pricing Scheme is accounted on receipt at the warehouses per procedure prescribed by the Government. Credit / Debit for Annual Escalation / De-escalation in input prices is considered based on realistic estimates pending issue of notifi cation by the Government. Adjustments are effected in respect of difference, if any, in the year of receipt.

(ii) Subsidy for Phosphatic and Potassic fertilizers is accounted in line with the Nutrient Based Subsidy (NBS) policy of the Government. Credit for additional subsidy for using costlier inputs is considered based on realistic estimates pending issue of notifi cation by the Government. Adjustments are effected in respect of difference, if any, in the year of receipt.

11 FOREIGN CURRENCY TRANSACTIONS

All transactions made during the year in foreign currency are recorded in the reporting currency by applying to the foreign currency amount the exchange rate on the initial recognition date. Foreign currency transactions settled after initial recognition date and other transactions remaining unsettled at the end of the accounting period are translated at the exchange rate on the date of settlement or prevalent at the end of accounting period as the case may be. Gains and losses relating to foreign exchange transactions are recognised in the Profit and loss statement.

12 EMPLOYEE BENEFIT EXPENSES (i) Short Term Benefits

Short Term Employee Benefits are accounted on accrual basis.

(ii) Post-employment Benefits and other Long Term Employee Benefits

a. These are limited to and provided / paid in line with the DPE guidelines.

b. The Company''s contribution to the provident fund is remitted to a separate trust established for the purpose based on a fixed percentage of the eligible employees'' salary and charged to Profit and Loss statement on accrual basis. Shortfall, if any, on the Government specifi ed minimum rate of return, will be made good by the Company and charged to Profit and Loss statement.

c. The Company operates defi ned benefit plan for gratuity. The cost of providing such defi ned benefit is determined using the projected unit credit method of actuarial valuation made at the end of the year and is administered through a fund maintained by Life Insurance Corporation of India. Actuarial gains / losses are charged to Profit and Loss statement.

d. The liability of the Company in respect of superannuation scheme is restricted to the fixed contribution paid by the Company on an annual basis towards the defi ned contribution scheme maintained by Life Insurance Corporation of India, which is charged to Profit & Loss statement on accrual basis.

e. Obligations on post retirement medical benefits, compensated absences and service awards are provided using the projected unit credit method of actuarial valuation made at the end of the year.

(iii) Termination Benefits

Payment made to the employees under voluntary retirement scheme is treated in line with the revised AS-15 (Employee Benefits).

13 CLAIMS

(i) Claims by the Company on underwriters are accounted as income on acceptance, pending settlement.

(ii) Claims on railways are accounted on settlement.

(iii) Claims for liquidated damages against suppliers / contractors are accounted for on recovery of the same from their bills and adjusted to the cost of assets or to the materials / works as the case may be.

(iv) All other liquidated damages / penalties are accounted on realization basis.

14 PRIOR PERIOD ADJUSTMENTS

Income/Expenditure which arise in the current year as a result of errors or omissions in the preparation of fi nancial statements of earlier years are treated as prior period adjustments.

15 CONTINGENT LIABILITY

Depending on facts of each case and after due evaluation of relevant legal aspects, claims against the Company not acknowledged as debts are included under and disclosed as contingent liabilities.

16 TAXES

a) Provision for current tax is made in accordance with the provisions of the Income Tax Act, 1961.

b) Deferred tax assets are not recognized unless, in the management judgment there is a virtual certainty supported by convincing evidence that suffi cient future taxable income will be available against which such deferred tax assets can be realized.

c) Accounting of value added tax is in line with the provisions of statute in force.

ii. SUBSIDY UNDER NEW PRICING SCHEME (NPS) FOR UREA

Escalation / De-escalation in input prices is subject to annual revision based on the actual prices. Accordingly, a sum of Rs. 32.99 Cr (Previous year Rs. 37.72 Cr) has been reckoned as receivable from FICC for the year 2013-14 towards annual escalation of input prices in line with the Accounting policy – Note 24 (A) 10 (i).

iii. NUTRIENT BASED SUBSIDY (NBS) FOR PHOSPHATIC AND POTASSIC FERTILIZERS

The NBS dues reckoned as receivable from DOF for using costlier inputs is Rs. 20.80 Cr (Previous year Rs. 47.40 Cr) in line with the Accounting policy – Note 24 (A) 10 (ii).

iv. EXCHANGE RATE FLUCTUATION

Exchange rate fl uctuation included in other expenses is Rs. 0.96 Cr (Previous year Rs. 2.11 Cr)

v. CENTRAL EXCISE 25/70 NOTIFICATION

The Company has pre deposited Rs. 2 Cr on 11.03.2013 based on the Miscellaneous Order of CESTAT for taking up the appeal for hearing which is yet to take place.

As the matter is subjudice, no provision is considered necessary in the Books by the Company. However the same is shown under "Contingent Liability".

vii. The Company has leased out its Bio-fertilizer Plant at Vijayawada, having a written down value of Rs. 28.91 lacs (Previous year Rs. 30.23 lacs). The depreciation recognized in the books during the year for the above asset is Rs. 1.10 lacs (previous year Rs. 1.10 lacs).

ix. OTHER DISCLOSURES

i. Information required under AS 15 (Revised) on "Employee Benefit Expenses" is provided in Annexure – I to this note.

ii. The amount of borrowing costs capitalised for the year is ''NIL'' (Previous year ''NIL'') per AS 16 (Borrowing Costs).

iii. Fertilizer manufacture is the only main business segment and trading operations are less than 10% of the total revenue. Further, the Company is engaged in providing and selling its products in single economic environment in India i.e., there is a single geographical segment. Hence, there is no requirement of segment reporting for the Company as per AS 17 (Segment Reporting).

iv. During the year, there were no transactions with related parties as defi ned in AS 18 (Related Party Disclosures). The data relating to key managerial personnel is furnished under note 25.

v. The Company has not entered into joint venture activities as defi ned in AS 27. Hence AS 27 on "Financial Reporting of Interest in Joint Ventures" is not applicable to the Company at present.

vii. A provision of Rs. 5.76 Cr towards Income Tax liability has been made during the year as the entire carried forward losses and unabsorbed depreciation available for set off have been fully wiped off.

viii. The draft rehabilitation scheme (DRS) submitted by the Operating Agency to BIFR is presently under the perusal and consideration of GOI. The BIFR hearing scheduled to be held on Jan 13, 2014 stands postponed and the date for the next hearing is yet to be announced.

ix. In respect of the verifi cation of movable fixed assets, the outside professional fi rm of Chartered Accountants have submitted their fi nal report during the last week of March 2014. Management is reviewing the same along with the respective groups to identify the differences reported which is expected to be insignifi cant. After detailed verifi cation and reconciliation necessary adjustments if any, required will be made during 2014-15 with due approvals.

x. Included in Short term Trade Payables under ''Note 9a'' are:

a. Dues to CPCL Rs. 93.37 Cr (Previous Year Rs. 95.68 Cr) for which mortgage and First charge on Guindy land is given for Rs. 100 Cr till the date of sanction of a rehabilitation scheme for the Company.

b. Dues to IOC Rs. 43.61 Cr (Previous Year Rs. 49.67 Cr) for which First charge on Plant and Machinery is given for Rs. 50 Cr.

Disclosure requirements under AS-15 (Revised) as per Note No: 24 B ix (i)

Defined Contribution Schemes:

The net amounts expended in respect of employer''s contribution to the provident fund and superannuation fund during the year, are Rs. 5.46 Cr (Previous year Rs. 5.01 Cr) and Rs. 6.00 Cr (Previous year Rs. 5.37 Cr) respectively.


Mar 31, 2013

1 GENERAL

The financial statements are prepared under the historical cost convention and on going concern basis. These statements have been prepared in accordance with i) applicable Accounting Standards (AS), ii) requirements of Companies Act, 1956 and iii) the Accounts Manual of the Company. *

2 FIXEDASSETS

Fixed Assets are stated at cost of acquisition / construction less accumulated depreciation.

Cost is inclusive of freight, installation, duties, other incidental expenses, allocated Expenditure during Construction, initial catalysts, mandatory / insurance spares acquired along with the machinery and interest on borrowed funds attributable to construction or acquisition for the period upto the capitalisation of the respective asset as reduced by liquidated damages.

Borrowing costs that are directly attributable to the acquisition / construction of an asset is capitalised as part of the cost of that asset when it is probable that they will result in future economic benefits to the enterprise and the costs can be measured reliably.

Assets acquired under Hire Purchase Agreements are capitalised to the extent of Principal value, while Hire charges are charged to revenue in the year in which they are payable.

Expenditure on Tangible Assets on revamp / expansion are capitalised when the respective Plants are ready for commercial production (i.e. when the Plant achieves 50% capacity utilisation) and in respect of other assets when they are ready for use.

3 DEPRECIATION

Depreciation on Tangible Assets is provided for in conformity with the provisions of Schedule XIV to the Companies Act, 1956 on Straight Line Method by leaving a residual value of 5% in respect of Plant and Machinery and Rs. 1 in respect of other tangible assets.

Assets costing not more than Rs. 5,000 each are depreciated in full in the year of addition by leaving a residual value of Rs. 1.

4 NON CURRENT INVESTMENTS

Non Current Investments are stated at cost. Any diminution in the value of Non Current Investments, other than temporary in nature, are provided for.

5 EXPENDITURE DURING CONSTRUCTION

Expenditure during construction awaiting capitalization to Tangible Assets excluding capital advances is included under Capital Work in Progress and shown separately under Tangible Assets Note.

6 GRANTS

Grants from Government are shown as a deduction from the gross value of tangible assets / capital work in progress.

7 INVENTORY VALUATION

(i) Raw materials and packing materials are valued at cost on FIFO basis.

(ii) Stores, spares and catalysts are valued at cost on monthly moving weighted average basis.

(iii) Loose tools and reconditioned spares are revalued on WDV basis annually.

(iv) Finished products are valued at lower of cost or net realisable value including final / estimated subsidy.

Net realisable value is taken as under:

Phosphatic and Potassic Fertilizers

- Field warehouse inventories: Least of selling price fixed by the Company to Marketers / Dealers including Excise Duty.

- Field warehouse inventories to be brought back to Plant for reprocessing: The least of selling price fixed by the Company to Marketers / Dealers plus final / estimated Nutrient Based Subsidy (NBS) less estimated reprocessing costs and freight incurred.

- Inventories in transit: The least of selling price fixed by the Company to Marketers / Dealers including Excise Duty plus final / estimated NBS less estimated warehousing expenses.

- Inventories at Plant ready for sale: The least of selling price fixed by the Company to Marketers/Dealers plus final / estimated NBS less estimated freight and warehousing expenses.

Urea

- Field warehouse inventories: Least of selling price to Marketers / Dealers including Excise Duty.

- Inventories in transit: The least of selling price to Marketers / Dealers including Excise Duty plus final / estimated subsidy less estimated warehousing expenses.

- Inventories at Plant ready for sale : The least of selling price to Marketers / Dealers plus final / estimated subsidy less estimated freight and warehousing expenses.

Bulk Urea at Plant: Least of selling price to Marketers / Dealers plus final / estimated subsidy less estimated bagging, freight and warehousing expenses.

(v) Warehousing expenses have been distributed over sales and closing stock.

(vi) The Company has adopted FIFO method of valuation for raw materials and packing materials content in the inventory of finished products.

(vii) Ammonia is valued at cost as the same is captively consumed and not-intended for sale.

(viii) Off-spec products intended for disposal are valued at estimated realizable value.

(ix) Inventory of traded products are valued at lower of location specific cost or net realizable value. Agrochemicals inventory is valued on FIFO method, which includes purchase cost and other related expenses.

(x) Inventory of Pesticides manufactured and lying at factory under Loan Licensing Scheme are valued at cost excluding Excise Duty.

(xi) Goods in Transit / Under Inspection are valued at cost.

8 TRADE RECEIVABLES /LOANS AND ADVANCES

Trade Receivables, Loans and Advances are reviewed periodically and provision is made for debts considered doubtful of recovery.

9 GROSSSALES

Gross Sales is net of sales return, dealers'' / marketers'' margin, Sales Tax (VAT) collected outside the State of Tamil Nadu and includes applicable Excise Duty for Fertilizers.

10 SUBSIDY

(i) Urea Subsidy under New Pricing Scheme is accounted on receipt at the warehouses per procedure prescribed by the Government. Credit / Debit for Annual Escalation / De-escalation in input prices is considered based on realistic estimates pending issue of notification by the Government. Adjustments are effected in respect of difference, if any, in the year of receipt.

(ii) Subsidy for Phosphatic and Potassic fertilizers is accounted in line with the Nutrient Based Subsidy (NBS) policy of the Government. Credit for additional subsidy for using costlier inputs is considered based on realistic estimates pending issue of notification by the Government. Adjustments are effected in respect of difference, if any, in the year of receipt.

11 FOREIGN CURRENCY TRANSACTIONS

All transactions made during the year in foreign currency are recorded in the reporting currency by applying to the foreign currency amount the exchange rate on the initial recognition date. Foreign currency transactions settled after initial recognition date and other transactions remaining unsettled at the end of the accounting period are translated at the exchange rate on the date of settlement or prevalent at the end of accounting period as the case may be. Gains and losses relating to foreign exchange transactions are recognised in the profit and loss statement.

12 EMPLOYEE BENEFIT EXPENSES (i) Short Term Benefits

Short Term Employee Benefits are accounted on accrual basis. (ii) Post-employment Benefits and other Long Term Employee Benefits

a. These are limited to and provided / paid in line with the DPE guidelines.

b. The Company''s contribution to the provident fund is remitted to a separate trust established for the purpose based on a fixed percentage of the eligible employees''.salary and charged to Profit and Loss statement on accrual basis. Shortfall, if any, on the Government specified minimum rate of return, will be made good by the Company and charged to Profit and Loss statement.

c. The Company operates defined benefit plan for gratuity. The cost of providing such defined benefit is determined using the projected unit credit method of actuarial valuation made at the end of the year and is administered through a fund maintained by Life Insurance Corporation of India. Actuarial gains / losses are charged to Profit and Loss statement.

d. The liability of the Company in respect of superannuation scheme is restricted to the fixed contribution paid by the Company on an annual basis towards the defined contribution scheme maintained by Life Insurance Corporation of India, which is charged to Profit & Loss statement on accrual basis.

e. Obligations on post retirement medical benefits, compensated absences and service awards are provided using the projected.unit credit method of actuarial valuation made at the end of the year.

(iii) Termination Benefits

Payment made to the employees under voluntary retirement scheme is treated in line with the revised AS-15 (Employee Benefits).

13 CLAIMS

(i) Claims by the Company on underwriters are accounted as income on acceptance, pending settlement.

(ii) Claims on railways are accounted on settlement.

(iii) Claims for liquidated damages against suppliers / contractors are accounted for on recovery of the same from their bills and adjusted to the cost of assets or to the materials I works as the case may be.

(iv) All other liquidated damages / penalties are accounted on realization basis.

14 PRIOR PERIOD ADJUSTMENTS

Income/Expenditure which arise in the current year as a result of errors or omissions in the preparation of financial statements of earlier years are treated as prior period adjustments.

15 CONTINGENT LIABILITY

Depending on facts of each case and after due evaluation of relevant legal aspects, claims against the Company not acknowledged as debts are included under and disclosed as contingent liabilities.

16 VALUE ADDED TAX

Accounting of value added tax is in line with the provisions of statute in force.

ii. SUBSIDY UNDER NEW PRICING SCHEME (NPS) FOR UREA

Escalation / De-escalation in input prices is subject to annual revision based on the actual prices. Accordingly, a sum of Rs. 37.72 Cr (Previous year Rs. 65.69 Cr) has been reckoned as receivable from FICC for the year 2012-13 towards annual escalation of input prices in line with the Accounting policy - Note 24 (A) 10 (i).

iii. NUTRIENT BASED SUBSIDY (NBSj FOR PHOSPHATIC AND POTASSIC FERTILIZERS

The NBS dues reckoned as receivable from DOF for using costlier inputs is Rs. 47.40 Cr (Previous year Rs. 17.91 Cr) in line with the Accounting policy - Note 24 (A) 10 (ii).

iv. EXCHANGE RATE FLUCTUATION

Exchange rate fluctuation included in other expenses is Rs. 2.11 Cr (Previous year Rs. 4.06 Cr)

-v. CENTRAL EXCISE 25/70 NOTIFICATION

The Company has complied with the Miscellaneous Order of CESTAT to pre deposit a sum of Rs. 2 Cr by 11.03.2013 for taking up the appeal for hearing and disposal.

As the matter is subjudice, no provision is considered necessary in the Books by the Company. However the same is shown under "Contingent Liability".

Per AS - 28, net recoverable amount is the higher of net selling price or value in use, As the value in use could not be assessed with reasonable accuracy, the Company has considered net selling price for ascertaining impairment loss.

vii. The Company has leased out its Bio-fertilizer Plant at Vijayawada, having a written down value of Rs. 30.23 lacs (Previous year Rs. 31.33 lacs). The depreciation recognized in the books during the year for the above asset is Rs. 1.10 lacs (previous yearRs. 1.11 lacs).

As the lease was short closed during 2012-13, there is no future lease rental receivable under non-transferable operating lease. The lease rent received during the year is Rs. 1.04 Lacs (Previous year Rs. 1.94 Lacs) as against Rs. 2.23 lacs for the full year.

viii. The total amount payable to Micro, Small and Medium Enterprises as defined under Micro, Small and Medium Enterprises Development Act, 2006 as at March 31,2013 as identified by the Management and relied upon by the Auditors is provided below:


Mar 31, 2012

1 GENERAL

The financial statements are prepared under the historical cost convention and on going concern basis. These statements have been prepared in accordance with i) applicable Accounting Standards (AS), ii) requirements of Companies Act, 1956 and iii) the Accounts Manual of the Company.

2 FIXED ASSETS

Fixed Assets are stated at cost of acquisition/construction less accumulated depreciation.

Cost is inclusive of freight, installation, duties, other incidental expenses, allocated Expenditure during Construction, initial catalysts, mandatory/insurance spares acquired along with the machinery and interest on borrowed funds attributable to construction or acquisition for the period upto the capitalisation of the respective asset as reduced by liquidated damages.

Borrowing costs that are directly attributable to the acquisition/construction of an asset is capitalised as part of the cost of that asset when it is probable that they will result in future economic benefits to the enterprise and the costs can be measured reliably.

Assets acquired under Hire Purchase Agreements are capitalised to the extent of Principal value, while Hire charges are charged to revenue in the year in which they are payable.

Expenditure on Tangible Assets on revamp/expansion are capitalised when the respective Plants are ready for commercial production (i.e. when the Plant achieves 50% capacity utilisation) and in respect of other assets when they are put to use.

3 DEPRECIATION

Depreciation on Tangible Assets is provided for in conformity with the provisions of Schedule XIV to the Companies Act, 1956 on Straight Line Method by leaving a residual value of 5% in respect of Plant and Machinery and RS.1 in respect of other tangible assets.

Assets costing not more than Rs. 5,000 each are depreciated in full in the year of addition by leaving a residual value of RS. 1.

4 NON CURRENT INVESTMENTS

Non Current Investments are stated at cost. Any diminution in the value of Non Current Investments, other than temporary in nature, are provided for.

5 EXPENDITURE DURING CONSTRUCTION - EXPANSION SCHEMES

All expenditure during construction till the Plant is ready for commercial production net of income are allocated to the respective tangible assets on completion of construction/erection. Expenditure during construction awaiting allocation to tangible Assets is included under Capital Work in Progress.

6 GRANTS

Grants from Government are shown as a deduction from the gross value of tangible assets/capital work in progress.

7 INVENTORY VALUATION

(i) Raw materials and packing materials are valued at cost on FIFO basis.

(ii) Stores, spares and catalysts are valued at cost on monthly moving weighted average basis.

(iii) Catalysts in process are valued based on the estimated life of each catalyst.

(iv) Loose tools and reconditioned spares are revalued on WDV basis annually.

(v) Finished products are valued at lower of cost or net realisable value including final/estimated subsidy.

Net realisable value is taken as under:

Phosphatic and Potassic Fertilizers

- Field warehouse inventories: Least of selling price fixed by the Company to Marketers/Dealers including Excise Duty.

- Field warehouse inventories to be brought back to Plant for reprocessing: The least of selling price fixed by the company to Marketers/Dealers plus final/estimated Nutrient Based Subsidy (NBS) less estimated reprocessing costs and freight incurred.

- Inventories in transit: The least of selling price fixed by the company to Marketers/Dealers including Excise Duty plus final/ estimated NBS less estimated warehousing expenses.

- Inventories at Plant ready for sale: The least of selling price fixed by the company to Marketers/Dealers plus final/estimated NBS less estimated freight and warehousing expenses.

Urea

- Field warehouse inventories: Least of selling price to Marketers/ Dealers including Excise Duty.

- Inventories in transit: The least of selling price to Marketers/ Dealers including Excise Duty plus final/estimated subsidy less estimated warehousing expenses.

- Inventories at Plant ready for sale : The least of selling price to Marketers/Dealers plus final/estimated subsidy less estimated freight and warehousing expenses.

- Bulk Urea at Plant: Least of selling price to Marketers/Dealers plus final/estimated subsidy less estimated bagging, freight and warehousing expenses.

(vi) Warehousing expenses have been distributed over sales and closing stock.

(vii) The Company has adopted FIFO method of valuation for raw materials and packing materials content in the inventory of finished products.

(viii) Ammonia is valued at cost as the same is captively consumed and not intended for sale.

(ix) Off-spec products intended for disposal are valued at estimated realizable value.

(x) Inventory of traded products are valued at lower of location specific cost or net realizable value. Agrochemicals inventory is valued on FIFO method, which includes purchase cost and other related expenses.

(xi) Inventory of Pesticides manufactured and lying at factory under Loan Licensing Scheme are valued at cost excluding Excise Duty.

(xii) Goods in Transit/Under Inspection are valued at cost.

8 TRADE RECEIVABLES/LOANS AND ADVANCES

Trade Receivables, Loans and Advances are reviewed periodically and provision1 is made for debts considered doubtful of recovery.

9 GROSS SALES

Gross Sales is net of sales return, dealers'/marketers' margin, Sales Tax (VAT) collected outside the State of Tamil Nadu and includes applicable Excise Duty for Fertilizers.

10 SUBSIDY

(i) Urea Subsidy under New Pricing Scheme is accounted on receipt at the warehouses per procedure prescribed by the Government. Credit/Debit for Annual Escalation/De-escalation in input prices is considered based on realistic estimates pending issue of notification by the Government. Adjustments are effected in respect of difference, if any, in the year of receipt.

(ii) Subsidy for Phosphatic and Potassic fertilizers is accounted in line with the Nutrient Based Subsidy (NBS) policy of the Government.

11 FOREIGN CURRENCY TRANSACTIONS

All transactions made during the year in foreign currency are recorded in the reporting currency by applying to the foreign currency amount the exchange rate on the initial recognition date. Foreign currency transactions settled after initial recognition date and other transactions remaining unsettled at the end of the accounting period are translated at the exchange rate on the date of settlement or prevalent at the end of accounting period as the case may be. Gains and losses relating to foreign exchange transactions are recognised in the profit and loss statement.

12 EMPLOYEE BENEFIT EXPENSES

(i) Short Term Benefits

Short Term Employee Benefits are accounted on accrual basis.

(ii) Post-employment Benefits and other Long Term Employee Benefits

a. These are limited to and provided/paid in line with the DPE guidelines.

b. The Company's contribution to the provident fund is remitted to a separate trust established for the purpose based on a fixed percentage of the eligible employees' salary and charged to Profit and Loss statement on accrual basis. Shortfall, if any, on the Government specified minimum rate of return, will be made good by the Company and charged to Profit and Loss statement.

c. The Company operates defined benefit plan for gratuity. The cost of providing such defined benefit is determined using the projected unit credit method of actuarial valuation made at the end of the year and is administered through a fund maintained by Life Insurance Corporation of India. Actuarial gains/losses are charged to Profit and Loss statement.

d. The liability of the Company in respect of superannuation scheme is restricted to the fixed contribution paid by the Company on an annual basis towards the defined contribution scheme maintained by Life Insurance Corporation of India, which is charged to Profit & Loss statement on accrual basis.

e. Obligations on post retirement medical benefits, compensated absences and service awards are provided using the projected unit credit method of actuarial valuation made at the end of the year.

(iii) Termination Benefits

Payment made to the employees under voluntary retirement scheme is treated in line with the revised AS-15 (Employee Benefits).

13 CLAIMS

(I) Claims by the Company on underwriters are accounted as income on acceptance, pending settlement.

(ii) Claims on railways are accounted on settlement.

(iii) Claims for liquidated damages against suppliers/contractors are accounted for on recovery of the same from their bills and adjusted to the cost of assets or to the materials/works as the case may be.

(iv) All other liquidated damages/penalties are accounted on realization basis.

14 PRIOR PERIOD ADJUSTMENTS

Income/Expenditure which arise in the current year as a result of errors or omissions in the preparation of financial statements of earlier years are treated as prior period adjustments.

15 CONTINGENT LIABILITY

Depending on facts of each case and after due evaluation of relevant legal aspects, claims against the Company not acknowledged as debts are included under and disclosed as contingent liabilities.

16 VALUE ADDED TAX

Accounting of value added tax is in line with provisions of statute in force.


Mar 31, 2011

1. GENERAL:

The financial statements are prepared under the historical cost convention and on going concern basis. These statements have been prepared in accordance with applicable mandatory Accounting Standards and relevant presentational requirements of Companies Act, 1956.

2. FIXED ASSETS:

Fixed Assets are stated at cost of acquisition/construction less accumulated depreciation.

Cost is inclusive of freight, installation, duties, other incidental expenses, allocated Expenditure during Construction, initial catalysts, mandatory/insurance spares acquired along with the machinery and interest on borrowed funds attributable to construction or acquisition for the period upto the capitalisation of the respective asset as reduced by liquidated damages.

Borrowing costs that are directly attributable to the acquisition/construction of an asset is capitalised as part of the cost of that asset when it is probable that they will result in future economic benefits to the enterprise and the costs can be measured reliably.

Assets acquired under Hire Purchase Agreements are capitalised to the extent of Principal value, while Hire charges are charged to revenue in the year in which they are payable.

Expenditure on Fixed Assets on revamp/expansion are capitalised when the respective Plants are ready for commercial production (i.e. when the Plant achieves 50% capacity utilisation) and in respect of other assets when they are put to use.

3. DEPRECIATION:

Depreciation on Fixed Assets is provided for in conformity with the provisions of Schedule XIV to the Companies Act, 1956 on Straight Line Method by leaving a residual value of 5% in respect of Plant and Machinery and Rs. 1 in respect of other fixed assets.

Assets costing not more than Rs. 5,000 each are depreciated in full in the year of addition by leaving a residual value of Rs. 1.

4. INVESTMENTS:

Long term Investments are stated at cost. Any diminution in the value of Long term Investments, other than temporary in nature, are provided for.

5. EXPENDITURE DURING CONSTRUCTION - EXPANSION SCHEMES:

All expenditure during construction till the Plant is ready for commercial production net of income are allocated to the respective fixed assets on completion of construction/erection. Expenditure during construction awaiting allocation to Fixed Assets is included under Capital Work in Progress.

6. GRANTS:

Grants from Government are shown as a deduction from the Gross Value of Fixed Assets/Capital Work in Progress.

7. INVENTORY VALUATION:

(i) Raw materials and packing materials are valued at cost on FlFO basis.

(ii) Stores, spares and catalysts are valued at cost on monthly moving weighted average basis.

(iii) Catalysts in process are valued based on the estimated life of each catalyst.

(iv) Loose tools and reconditioned spares are revalued on WDV basis annually.

(v) Finished products are valued at lower of cost or net realisable value including final price concession or estimated price concession for the unannounced period.

Net realisable value is taken as under:

Phosphatic / Potassic Fertilizers

- Field warehouse inventories: Least of selling price fixed by the company to Marketers / Dealers including Excise Duty.

- Field warehouse inventories to be brought back to Plant for reprocessing: The least of selling price fixed by the company to Marketers /Dealers plus, estimated/final price concession less estimated reprocessing costs and freight incurred.

- inventories in transit: The least of selling price fixed by the company to Marketers / Dealers including Excise duty plus estimated/final price concession less estimated warehousing expenses.

- Inventories at Plant ready for sale: The least of selling price fixed by the company to Marketers/ Dealers plus estimated/final price concession less estimated freight and warehousing expenses.

Urea

- Field warehouse inventories: Least of selling price to Marketers / Dealers including Excise Duty.

- Inventories in transit: The least of selling price to Marketers / Dealers including Excise Duty plus estimated/final concession less estimated warehousing expenses.

- Inventories at Plant ready for sale: The least of selling price to Marketers / Dealers plus estimated/final concession less estimated freight and warehousing expenses.

- Bulk Urea at Plant: Least of selling price to Marketers / Dealers plus estimated/final concession less estimated bagging, freight and warehousing expenses.

- Warehousing expenses have been distributed over sales and closing stock.

- The Company has adopted FIFO method of valuation for raw materials and packing materials content in the inventory of finished products.

- Ammonia is valued at cost as the same is captively consumed and not intended for sale.

(vi) Off-spec products intended for disposal are valued at estimated realizable value.

(vii) Inventory of traded products are valued at lower of location specific cost or net realizable value. Agrochemicals inventory is valued on FIFO method, which includes purchase cost and other related expenses.

(viii) Inventory of Pesticides manufactured and lying at factory under Loan Licensing Scheme are valued at cost excluding Excise Duty.

(ix) Goods in Transit / Under Inspection are valued at cost.

8. DEBTORS/LOANS AND ADVANCES:

Sundry Debtors, Loans and Advances are reviewed periodically and provision is made for debts considered doubtful of recovery.

9. GROSS SALES:

Gross Sales is net of sales return, dealers'/marketers' margin, Sales Tax (VAT) collected outside the State of Tamil Nadu and includes Excise Duty for fertilizers.

10. UREA CONCESSION UNDER NEW PRICING:

Urea Concession is accounted on receipt at the warehouses per procedure prescribed by the Government. Credit/Debit for Annual Escalation/De-escalation in input prices is considered in the concession based on realistic estimates pending issue of notification by the Government. Adjustments are effected in respect of difference, if any, in the year of receipt.

11. FOREIGN CURRENCY TRANSACTIONS:

All transactions made during the year in foreign currency are recorded in the reporting currency by applying to the foreign currency amount, the exchange rate on the initial recognition date. Foreign currency transactions settled after initial recognition date and other transactions remaining unsettled at the end of the accounting period are translated at the exchange rate on the date of settlement or prevalent at the end of accounting period as the case may be. Gains and losses relating to foreign exchange transactions are recognised in the profit and loss account.

12. EMPLOYEE BENEFITS:

(i) Short Term Benefits

Short Term Employee Benefits are accounted on accrual basis.

(ii) Post-employment Benefits and other Long Term Employee Benefits

a. The Company's contribution to the Provident Fund is remitted to a separate trust established for the purpose based on a fixed percentage of the eligible employees' salary and charged to Profit and Loss account on accrual basis. Shortfall, if any, on the Government specified minimum rate of return, will be made good by the Company and charged to Profit and Loss Account.

b. The Company operates defined benefit plan for Gratuity. The cost of providing such defined benefit is determined using the projected unit credit method of actuarial valuation made at the end of the year and is administered through a fund maintained by Life Insurance Corporation of India. Actuarial gains / losses are charged to Profit and Loss account.

c. The Liability of the Company in respect of Superannuation scheme is restricted to the fixed contribution paid by the Company on an annual basis towards the defined contribution scheme maintained by Life Insurance Corporation of India, which is charged to Profit and Loss account on accrual basis.

d. Obligations on Post Retirement Medical Benefits, Compensated absences and Service Awards are provided using the projected unit credit method of actuarial valuation made at the end of the year.

(iii) Termination Benefits

Payment made to the employees under Voluntary Retirement Scheme is treated in line with the revised AS-15 (Employee Benefits).

13. CLAIMS:

(i) Claims by the Company on Underwriters are accounted as income on acceptance, pending settlement.

(ii) Claims on Railways towards transit loss are accounted on settlement.

(iii) Claims for liquidated damages against suppliers / contractors are accounted for on recovery of the same from their bills and adjusted to the cost of assets or to the materials/works as the case may be.

(iv) All other liquidated damages / penalties are accounted on realisation basis.

14. PRIOR PERIOD ADJUSTMENTS:

Income/Expenditure which arise in the Current Year as a result of errors or omissions in the preparation of financial statements of earlier years are treated as Prior Period Adjustments.

15. CONTINGENT LIABILITY:

Depending on facts of each case and after due evaluation of relevant legal aspects, claims again the company as debts are disclosed as contingent liabilities.

16. VALUE ADDED TAX (VAT):

Accounting of VAT is in line with provisions of statute in force.

 
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