Home  »  Company  »  Rashtriya Chemicals  »  Quotes  »  Accounting Policy
Enter the first few characters of Company and click 'Go'

Accounting Policies of Rashtriya Chemicals & Fertilizers Ltd. Company

Mar 31, 2015

Accounting Convention:

The financial statements have been prepared in conformity with generally accepted accounting principles to comply in all material respects with the notified Accounting Standards(AS) under Companies Act 2013 and the relevant provisions of the Companies Act 2013("the Act").The financial statements have been prepared under the historical cost convention, on an accrual basis. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year.

Presentation and disclosure of financial statements

As per criteria set out in the revised Schedule III notified under the Act, all assets and liabilities have been classified as current or non-current which are as under:

Based on the nature of products and the time taken between the acquisition of assets or processing and their realization in cash and cash equivalents, company has ascertained its operating cycle.

The threshold for classification as current or non-current assets is determined either by the realization of such assets within the normal operating cycle or if such asset is expected to be realized within twelve months after the reporting date. Thus classification of an asset either current or non-current has been made applying the criteria of realization of such assets within a period of 12 months after the reporting date.

Where assets have been fully provided for as doubtful, the same are classified as non-current.

Similarly in case of liabilities the same is classified as current where it is expected to be settled within 12 months after reporting date and where the company does not have an unconditional right to defer settlement of the liability for at least twelve months after reporting date.

2. Use of Estimates:

The preparation of the financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities as at the date of the financial statements and the results of operations during the reporting period. Although these estimates are based upon management's best knowledge of current events and actions, actual results could differ from these estimates. Any revisions to accounting estimates are recognized prospectively when revised, in current and future periods.

3. Fixed Assets

Tangible Assets

Tangible Assets are stated at cost net of recoverable taxes, trade discounts and rebates, less accumulated depreciation and impairment loss, if any. The cost of tangible assets comprises its purchase price, borrowing cost attributable to acquisition of qualifying fixed assets up to the date of commissioning of the assets and other incidental expenses incurred up to that date and any cost directly attributable to bringing the asset to its working condition for its intended use and adjustments relating to exchange differences on translation / settlement of long term monetary items pertaining to the acquisition of a depreciable asset.

Catalysts which are used in commissioning of new projects/ plants are capitalized and are amortized based on the estimated useful life as technically assessed. Subsequent issues of catalysts are treated as inventory.

The Government/Institutional grants of capital nature are adjusted to the gross block of relevant Fixed Assets.

Projects under which assets are not ready for their intended use are shown as Capital Work-in-Progress.

Intangible Assets

Intangible Assets are stated at cost of acquisition net of recoverable taxes less accumulated amortization and impairment loss, if any. The cost of intangible assets comprises its purchase price, and any cost directly attributable to bringing the asset to its working condition for the intended use and adjustments, if any, relating to exchange differences on translation / settlement of long term monetary items pertaining to the acquisition of an amortizable asset.

4. Depreciation/Amortization

Depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual value. A maximum residual value of 5% is considered for all assets, except in case of roads, wells and fences, office appliances and end user computing devices like desk tops, laptops etc. where it is considered as NIL.

Depreciation on Tangible assets is provided for as per Useful lives prescribed in Schedule II to Companies Act, 2013, except for mobile telephones classified under office equipment's which are depreciated over a period of 3 years. Company has identified and depreciated significant components of plant and machinery with different useful lives as per technical assessment, as per Para 4 of Schedule II to Companies Act, 2013.

Depreciation on additions/deductions to Gross Block is calculated on pro-rata basis from the date of such additions/ and up to the date of such deductions as per Useful lives of such assets on Straight Line Basis.

Depreciation on each item of an asset costing less than Rs. 5,000 are depreciated at 100% in the year of capitalization.

Leasehold land is amortized equally over the lease period pro-rata from the month the asset is available to the Company.

Intangible Assets

Intangible assets (software applications) are amortized over their respective individual estimated useful lives on a STRAIGHT-LINE BASIS, pro-rata from the date the asset is available to the Company for its use. Management estimates the useful life of software applications identified as intangible assets as three years. Any expenses incurred on intangible assets up to Rs.1 lakh in each case are being charged off in the year of incurrence.

Impairment of Assets:

The carrying amounts of assets are reviewed at each Balance Sheet date for identifying an impairment based on internal/ external factors. Loss on impairment is provided to the extent the carrying amount of assets exceeds its recoverable amount. Recoverable amount is the higher of an asset's net selling price and its value in use. After recognition of impairment loss, the revised carrying amount less residual value of the impaired asset would be depreciated on systematic basis over its remaining useful life. A previously recognized loss on impairment is increased or reversed depending on the change in the circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

5. Borrowing Costs:

Interest and other costs in connection with the borrowing of the funds to the extent related/attributed to the acquisition/ construction of qualifying assets are accumulated and capitalized up to the date when such assets are ready for their intended use. All other borrowing costs are charged to statement of Profit and Loss.

6. Foreign Currency Transactions

Transactions in Foreign currency are recorded in the reporting currency by applying the currency rate as at the date of transaction.

Monetary items denominated in foreign currency are translated at the rates of exchange prevalent on the Balance Sheet date. The resultant exchange differences are recognized in the Statement of Profit and Loss. Non-monetary items are recorded at the rates prevalent on the date of the transaction.

Exchange differences arising on long-term foreign currency monetary items related to acquisition of a fixed asset are capitalized and depreciated over the remaining useful life of the asset. For this purpose, the company treats a foreign currency monetary items as "long-term foreign currency monetary item", if it has a term of 12 months or more at the date of its obligation.

All other exchange differences (gains or losses) are recognized in the Statement of Profit and Loss in the period in which they arise.

7. Derivative Instruments

The Company uses derivative financial instruments such as forward contracts and options to hedge its exposure associated with foreign currency fluctuations. These derivative instruments are accounted as follows:-

a) For forward contracts (including instruments which are in substance forward contracts) which are not intended for trading or speculative purposes, the premium or discount on such contracts i.e. (difference between the contract rate and the spot rate on the date of the contract) is recognized as expense or income in the Statement of Profit and Loss over the life of the contract. The difference between the year-end rate and rate on the date of the contract is recognized as exchange difference. Profit or loss arising out of cancellation or renewal of such contracts is recognized as expense or income in the Statement of Profit and Loss for the period.

b) Outstanding Derivative contracts, other than those covered under Accounting Standard-11 as at the Balance sheet date are marked to market and loss on valuation is recognized in the Statement of Profit and Loss. Gains if any are ignored in line with the principle of prudence enunciated in Accounting Standard-1, Disclosure of Accounting policies as per the announcement of Institute of Chartered Accountants of India.

8. Investments

Investments that are readily realizable and are intended to be held for not more than one year from the date, on which such investments are made, are classified as current investments. All other investments are classified as long term investments. Current Investments are valued at lower of cost and fair value. Long term investments are carried at cost .However, provision for diminution is made to recognize a decline, other than temporary, in the value of the investments, such reduction being determined and made for each investment individually.

9. Inventory

9.1 Assessment of Inventory

Raw Materials, Intermediary Products, By-Products and Finished Products inside factory premises, in bulk form, are assessed by survey method on a date as close as possible to the Balance Sheet date and the shortages /excesses in the quantities as compared to book stocks are adjusted in the books. Finished goods and other inventory stored outside the factory premises are taken as per warehousing certificates and third party confirmation respectively.

9.2 Mode of Valuation

Inventory is valued at lower of cost and net realizable value except in case of by-products, which are valued at, net realizable value. Gases and slurries, if any, in pipelines at different stages of process are not valued as the same is not practicable. Certified Emission Reductions (Carbon credits) is valued at lower of cost and net realizable value

9.3 Basis of Cost:

9.3.1 The cost of manufactured finished goods, bought out products and intermediary products are arrived at based on weighted average cost. Bifurcation of cost of joint products is made on technical estimates.

9.3.2 Cost of raw materials, petroleum products, packing materials, stores and spares, and loose tools is determined on weighted average cost basis.

9.3.3 Used loose tools are treated as consumed and hence not valued.

9.3.4 Project surplus stores and spares of old plants not in use are brought in the books at nominal estimated value/technical estimate or carried in memorandum records.

9.3.5 Provision is made in respect of raw materials, packing materials, stores and spares and petroleum products, wherever appropriate, based on technical estimates, to reflect the impact of obsolescence, damage or other diminution in value.

9.4 Measurement of Cost / Realizable Value

9.4.1 Cost of Purchases

Cost of purchase includes duties, taxes (net of those recoverable) freight and other expenses net of trade discounts, rebates and price adjustments.

9.4.2 Cost of Manufactured goods

Cost of Manufactured Goods comprises of direct cost, variable production overheads and fixed production overheads on absorption costing method. Catalysts issued are charged off over their estimated useful lives as technically assessed. Variable production overheads are allocated based on actual production. Variable overheads related to movement of finished products are allocated based on actual dispatches. Fixed overheads are allocated based on higher of the actual production level or normal production level. Average freight incurred is included in valuing stocks in field warehouses and in transit.

9.4.3 Cost of Traded Fertilizers

It comprises of Cost of Purchases as defined under

9.4.1 plus bagging, handling and transportation costs incurred to bring the material in its present location and condition.

9.4.4 Net Realizable Value

Price of urea is administered by the Government of India by which selling price is fixed for the buyer. The net realizable value for manufactured urea is taken at retention price (selling price net of dealers' margin plus subsidy from Government of India) net of variable selling and distribution cost. Net realizable value of off-spec urea is taken at 40% of MRP excluding subsidy.

The net realizable value of phosphatic and potassic fertilizers is taken at the applicable selling prices expected to be realized, net of dealers' margin and variable selling and distribution costs plus the concession as fixed/to be fixed by Government. Net realizable value of off-spec phosphatic and potassic fertilizers is taken at selling price net of dealers' margin and estimated cost of re-processing including transportation cost to factory. The net realizable value of off traded phosphatic and potassic out fertilizers is at 30% of MRP excluding subsidy.

The Net realizable value of imported Urea is the selling price and other entitled compensation as contracted with the Government net of variable selling and distribution cost.

The net realizable value of off-spec imported Urea is taken at 40% of MRP excluding subsidy.

Average freight incurred on despatches from silo/ factory/ port to godown is reduced for arriving at the net realizable value in respect of stocks of fertilizers in silo/factory/port.

The net realizable value of non-fertilizer products is taken at the year-end lowest selling prices net of variable selling and distribution cost.

10. Trade receivables, other debts, loans and advances are provided for as doubtful upon review on case to case basis. Subsidy receivable from Government overdue over 3 years are provided for as doubtful.

11. Leases

Assets acquired on leases wherein a significant portion of the risks and rewards of ownership are retained by the lessors are classified as operating leases. Lease rentals paid for such leases are recognized as an expense as per the lease terms which is more representative of the time pattern of the benefit.

Rental income on leases is accounted for an accrual basis in accordance with the terms of the contract. This is more representative of the time pattern in which benefit derived from the use of the leased asset is diminished.

12. Taxation

Provision for Current Income Tax is made in accordance with the Income Tax Act 1961.

Deferred Tax resulting from "timing difference" between book profit and taxable profit for the year is accounted for using the tax rates and laws that have been enacted or substantially enacted as on the balance sheet date. The deferred tax asset is recognized and carried forward only to the extent that there is a reasonable certainty that the assets will be adjusted in future and for unabsorbed depreciation or carry forward of losses where there is a virtual certainty of their adjustment in future.

13. Cash and Cash Equivalents

Cash and cash equivalents in the cash flow statement comprises of cash in hand , cash at bank and short term investments with an original maturity of three months or less.

14. Segment Information

The Company has recognized its factory at Trombay, factory at Thal and Trading, as geographical segments based on location of assets (primary segments) and its activities of manufacture and sale of fertilizers, and manufacture and sale of industrial products as business segments (secondary segments).This is based on its internal reporting, review of performance, decision making relating to future allocation of resources, policy parameters influencing business etc. by the Company's management.

15. Employee Benefits

15.1.1 Contribution to Provident Fund is accounted for on accrual basis. The Provident Fund contributions are made to a Trust administered by the Company. The interest rate payable to the members of the Trust shall not be lower than statutory rate of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous' Provisions Act, 1952 and shortfall, if any, shall be made good by the Company. Such shortfall on account of interest, if any, is recognized in the Statement of Profit and Loss.

15.1.2 Company's defined Contribution made to its Super-annuation scheme is charged off to Statement of Profit and Loss on accrual basis.

15.1.3 Defined Benefit plans comprising of gratuity, leave encashment on retirement, Post retirement medical benefits and long term service award are recognized based on the present value of Defined Benefit Obligation based on actuarial valuation carried out as on the date of the Balance Sheet. The actuarial valuation is done as per Projected Unit Method.

15.1.4 Actuarial gains and losses are recognized in full in the Statement of Profit and Loss for the period in which they occur. Past service cost is recognized immediately to the extent that the benefits are already vested. The retirement benefit obligation recognized in the Balance Sheet represents the present value of the defined benefit obligation as adjusted for unrecognized past service cost, and as reduced by the fair value scheme of assets, wherever applicable.

16. Earnings per Share (EPS)

Basic earnings per share is calculated by dividing net profit or loss after tax for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.

For the purpose of calculating diluted EPS, net profit or loss after tax for the year attributable to equity shareholders are divided by the weighted average number of equity shares outstanding during the year and are adjusted for the effects of all dilutive potential equity shares.

17. Research and Development Expenditure

Revenue Expenditure on Research activity is recognized separately and charged to Statement of Profit and Loss. Expenditure on development activities is capitalized when its future economic benefits can reasonably be regarded as assured.

18. Revenue Recognition

18.1 Sales are recognized on an accrual basis when all significant risks and rewards of ownership are transferred to the buyer and the Company retains no effective control of the goods transferred.

18.2 Gross Sales (net of returns) include excise duty, wherever applicable.

18.3 Subsidy income is accounted on the quantity sold during the year.

18.4 Recognition of Subsidy is generally made on the basis of in principle recognition/approval/ settlement of claims from Government of India / Fertilizer Industry Co-ordination Committee.

18.5 Other Income is recognized on an accrual basis.

18.6 Dividend income is recognized when right to receive dividend is established.

18.7 Interest Income is recognized when no significant uncertainty as to its realization exists and is accounted on time proportion basis at contracted rates.

18.8 Scrap, salvaged/waste materials and sweepings are accounted for on realization.

18.9 Insurance and other miscellaneous claims are recognized on receipt/acceptance of claim.

18.10 Income from sale of Certified Emissions Reductions (CER's)/Voluntary Emissions Reductions (VER's) is recognized on delivery and confirmation of the same by the concerned authorities.

18.11 Debits/Credits Relating to Prior period

Income and expenditure pertaining to earlier period and up to Rs.1,00,000/- in each case, are not being classified as relating to "prior period".

18.12 Prepaid Expenses

Individual expense up to Rs. 25,000/- is not considered in classifying prepaid expenses.

19. Government Grants

Government grants are recognized when there is a reasonable assurance that the same will be received and conditions stipulated for its entitlement are complied with. Revenue grants are recognized in the Statement of Profit and Loss. They are adjusted to the related item of expense. Capital grants are reduced from the Gross Value of the respective assets. Other capital grants in the nature of Promoter's contribution are credited to capital reserve.

20. Contingent Liabilities and Provisions

A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises where a reliable estimate of the amount of the obligation cannot be made. Contingent assets are neither recognized nor disclosed in the financial statements.

A provision is recognized when the Company has a present obligation as a result of past event; it is probable that outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made.

Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimate.


Mar 31, 2014

1. Basis of Preparation of Financial Statements: Accounting Convention:

The financial statements have been prepared in conformity with generally accepted accounting principles to comply in all material respects with the notified Accounting Standards(AS) under Companies (Accounting Standard) Rules 2006 and the relevant provisions of the Companies Act 1956("the Act"). The financial statements have been prepared under the historical cost convention, on an accrual basis. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year.

Presentation and disclosure of financial statements

As per criteria set out in the revised Schedule VI notified under the Act, all assets and liabilities have been classified as current or non-current which are as under:

Based on the nature of products and the time taken between the acquisition of assets or processing and their realization in cash and cash equivalents, company has ascertained its operating cycle. The Normal operating cycle as determined by the Company is 6 months.

The threshold for classification as current or non- current assets is determined either by the realization of such assets within the normal operating cycle or if such asset is expected to be realized within twelve months after the reporting date. Thus classification of an asset either current or non-current has been made applying the criteria of realization of such assets within a period of 12 months after the reporting date.

Where assets have been fully provided for as doubtful, the same are classified as non-current.

Similarly in case of liabilities the same is classified as current where it is expected to be settled within 12 months after reporting date and where the company does not have an unconditional right to defer settlement of the liability for at least twelve months after reporting date.

2. Use of Estimates:

The preparation of the financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities as at the date of the financial statements and the results of operations

during the reporting period. Although these estimates are based upon management''s best knowledge of current events and actions, ¦actual results could differ from these estimates.''. Any ''revisions to accounting estimates are recognized prospectively when revised, in current and future periods.''

3. Fixed Assets

3.1 Fixed assets comprise of tangible assets and * . - intangible assets, and are stated at their original cost of acquisition (net of Cenvat and VAT) less accumulated depreciation/amortization and impairment loss. Cost for this purpose includes all costs attributable for bringing the asset to its present location and condition. Assets held for disposal, are stated at lower of net book value and net estimated realizable value.

3.2 The Government/Institutional grants of capital nature are adjusted to the gross block of relevant Fixed Assets.

3.3 From accounting periods commencing on after 01-4-2011, the Company adjusts exchange differences on translation / settlement of long term monetary items pertaining to the acquisition of a depreciable asset to the cost of the asset and depreciates the same over the remaining life of the asset.

4. Depreciation/Amortization

Depreciation on Fixed Assets other than on intangible assets (software applications) is provided for under STRAIGHT LINE METHOD (SLM) at the rates prescribed in Schedule XIV to the Companies Act, 1956. Depreciation on additions/deductions to Gross Block is calculated on pro-rata basis from the date of such additions/and up to the date of such deductions.

Intangible assets (software applications) are amortized over their respective individual estimated useful lives on a STRAIGHT-LINE BASIS, pro-rata from the date the asset is available to the Company for its use. Management estimates the useful life of software applications identified as intangible assets as three years. Any expenses incurred on intangible assets up to Rs. 1 lakh in each case are being charged off in the year of incurrence.

Leasehold land is amortized equally over the lease period pro-rata from the month the asset is available to the Company.

Depreciation/on Catalyst''capitalized upon commissioning is provided -on. the,'' estimated useful life as technically assessed.

Depreciation on-railway''wagonsj purchased is provided on its estimated useful''life.

Impairment of Assets:''

The carrying amounts of assets .are * reviewed at each Balance Sheet date for ¦ identifying an * impairment based on internal/external factors. Loss on impairment is provided to the extent the carrying amount of assets exceeds its recoverable amount. Recoverable amount is - the higher of an asset''s net selling price and its value in use. After recognition of impairment loss, the revised carrying amount less residual value of the" impaired'' - asset would be depreciated on systematic basis over its . remaining useful life. A previously recognized loss on impairment is increased or reversed depending on the change in the circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

5. Expenditure during Construction (EDC)

All pre-operative costs (net of income) incidental to new projects undertaken are accumulated as EDC and apportioned appropriately among the various plants/ facilities during the year of capitalization.

6. Borrowing Costs:

Interest and other costs in connection with the borrowing of the funds to the extent related/attributed to the acquisition/ construction of qualifying assets are accumulated and capitalized up to the date when such assets are ready for their intended use. All other borrowing costs are charged to statement of Profit and Loss.

7. Foreign Currency Transactions

Transactions in Foreign currency are recorded in the reporting currency by applying the currency rate as at the date of transaction.

Monetary items denominated in foreign currency are translated at the rates of exchange prevalent on the Balance Sheet date. The resultant exchange differences are recognized in the Statement of Profit and Loss. Non- monetary items are recorded at the rates prevalent on the date of the transaction.

Exchange differences arising on long-term foreign currency monetary items related to acquisition of a fixed asset are capitalized and depreciated over the remaining useful life of the asset. For this purpose, the company treats a foreign currency monetary items as long- term foreign currency monetary item", if it has a term of 12 months or more at the date of its obligation.

All other exchange differences (gains or losses) are recognized in the Statement of Profit and Loss in the period in which they arise.

8. Derivative Instruments

The Company uses derivative financial instruments such as forward contracts and options to hedge its exposure associated with foreign currency fluctuations. These derivative instruments are accounted as follows:-

a) For forward contracts (including instruments which are in substance forward contracts) which are not intended for trading or speculative purposes, the premium or discount on such contracts i.e. (difference between the contract rate and the spot rate on the date of the contract) is recognized as expense or income in the Statement of Profit and Loss over the life of the contract.

b) Outstanding Derivative contracts, other than those covered under Accounting Standard-11 as at the Balance sheet date are marked to market and loss on valuation is recognized in the Statement of Profit and Loss. Gains if any are ignored in line with the principle of prudence enunciated in Accounting Standard-1, Disclosure of Accounting policies as per the announcement of Institute of Chartered Accountants of India.

9. Investments

Current Investments are valued at lower of cost and fair value. Long term investments are stated at cost and provision is made for any diminution in such value, which is other than temporary in nature.

10. Inventory

10.1 Assessment of Inventory

Raw Materials, Intermediary Products, By- Products and Finished Products inside factory premises are assessed by survey method on a date as close as possible to the Balance Sheet date and the shortages /excesses in the quantities as compared to book stocks are adjusted in the books. Finished goods and other inventory stored outside the factory premises are taken as per warehousing certificates and third party confirmation respectively.

10.2 Mode of Valuation

Inventory is valued at lower of cost and net realizable value except in case of by-products, which are valued at, net realizable value. Gases and slurries, if any, in pipelines at different stages of process are not valued as the same is not practicable.

10.3 Basis of Cost:

10.3.1 The cost of manufactured finished goods, bought out products and intermediary products are arrived at based on weighted average cost. Bifurcation of cost of joint products is made on - technical estimates.

10.3.2 Cost of raw materials, petroleum products, packing materials, stores and spares, and loose tools is determined on weighted average cost basis.

10.3.3 Used loose tools are treated as consumed and hence not valued.

10.3.4 Project surplus stores and spares of old plants not in use are brought in the books at nominal estimated value/technical estimate or carried in memorandum records.

10.3.5 Provision is made in respect of raw materials, packing materials, stores and spares and petroleum products, wherever appropriate, based on technical estimates, to reflect the impact of obsolescence, damage or other diminution in value.

10.4 Measurement of Cost / Realisable Value

10.4.1 Cost of Purchases

Cost of purchase includes duties, taxes (net of those recoverable) freight and other expenses net of trade discounts, rebates and price adjustments.

10.4.2 Cost of Manufactured goods

Cost of Manufactured Goods comprises of direct cost, variable production overheads and fixed production overheads on absorption costing method. Catalysts issued are charged off over their estimated useful lives as technically assessed. Variable production overheads are allocated based on actual production. Variable

i overheads related to movement of finished products are allocated based on actual dispatches. Fixed overheads are allocated based on higher of the actual production level or normal production level. Average freight incurred is included in valuing stocks in field warehouses and in transit.

10.4.3 Cost of Traded Fertilizers

It comprises of* Cost -of -Purchases as defined under 10.4.1.''. plus ''bagging,'' handling and transportation costs incurred to bring the material in its present location and condition.

10.4 Net Realizable Value Price of urea is ''administered by the Government of India* by, which selling price is fixed for the buyer. The net ralizable value for manufactured urea is taken at retention price (selling price net of dealers'' margin plus subsidy from Government of India) net of variable selling and distribution cost. Net realizable value of off-spec urea is taken at 40% of MRP excluding subsidy.

The net realizable value of phosphatic and potassic fertilizers is taken at the applicable selling prices expected to be realized, net of dealers'' margin and variable selling and distribution costs plus the concession as fixed/ to be fixed by Government. Net realizable value of off-spec phosphatic and potassic fertilizers is taken at selling price net of dealers'' margin and estimated cost of re-processing including transportation cost to factory. The net realizable value of off traded phosphatic and potassic out fertilizers is at 30% of MRP excluding subsidy.

The Net realizable value of imported Urea is the selling price and other entitled compensation as contracted with the Government net of variable selling and distribution cost.

The net realizable value of off-spec imported Urea is taken at 40% of MRP excluding subsidy.

Average freight incurred on despatches from silo/ factory/ port to godown is reduced for arriving at the net realizable value in respect of stocks of fertilizers in silo/factory/port.

The net realizable value of non-fertilizer products is taken at the year-end lowest selling prices net of variable selling and distribution cost.

11. Trade receivables, other debts, loans and advances are provided for as doubtful upon review on case to case basis.

Subsidy receivable from Government overdue over 3 years are provided for as doubtful.

12. Leases

Assets acquired on leases wherein a significant portion of the risks and rewards of ownership are retained by the lessors are."classified. as operating leases. Lease rentals paid for such leases are -recognized as an expense as per the lease terms/which-is more representative of the time pattern of the benefit..

Rental income on leases is accounted for an accrual basis in accordance with the terms of the contract. This is more representative of the time, pattern.in which benefit derived from the use of the leased asset is diminished.

13. Taxation

Provision for Current Income Tax is made in accordance with the Income Tax Act 1961.

Deferred Tax resulting from "timing difference" between book profit and taxable profit for the year is accounted for using the tax rates and laws that have been enacted or substantially enacted as on the balance sheet date. . The deferred tax asset is recognized and carried forward only to the extent that there is a reasonable certainty that the assets will be adjusted in future and for unabsorbed depreciation or carry forward of losses where there is a virtual certainty of their adjustment in future.

14. Cash and Cash Equivalents

Cash and cash equivalents in the cash flow statement comprises of cash in hand , cash at bank and short term investments with an original maturity of three months or less.

15. Segment Information

The Company has recognized its factory at Trombay, factory at Thal and Trading, as geographical segments based on location of assets (primary segments) and its activities of manufacture and sale of fertilizers, and manufacture and sale of industrial products as business segments (secondary segments).This is based on its internal reporting, review of performance, decision making relating to future allocation of resources, policy parameters influencing business etc. by the Company''s management.

16. Employee Benefits

16.1.1 Contribution to Provident Fund is accounted for on accrual basis. The Provident Fund contributions are made to a Trust administered by the Company. The interest rate payable to the members of the Trust shall not be lower than statutory rate of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous'' Provisions Act, 1952 and shortfall, if any, shall be made good by the Company. Such shortfall on account of interest, if any, is recognized in the Statement of Profit and Loss.

16.1.2 Company''s defined Contribution made to its Super- annuation scheme is charged off to Statement of Profit and Loss on accrual basis.

16.1.3 Defined Benefit plans comprising of gratuity, leave encashment on retirement, Post retirement medical benefits and long term service award are recognized based on the present value of Defined Benefit Obligation based on actuarial valuation carried out as on the date of the Balance Sheet. The actuarial valuation is done as per Projected Unit Method.

16.1.4 Actuarial gains and losses are recognized in full in the Statement of Profit and Loss for the period in which they occur. Past service cost is recognized immediately to the extent that the benefits are already vested. The retirement benefit obligation recognized in the Balance Sheet represents the ¦ .present value of the defined benefit obligation as adjusted for unrecognized past service cost, and as reduced by the fair value scheme of assets, wherever applicable.

17. Earnings per Share (EPS)

Basic earnings per share is calculated by dividing net profit or loss after tax for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.

For the purpose of calculating diluted EPS, net profit or loss after tax for the year attributable to equity shareholders are divided by the weighted average number of equity shares outstanding during the year and are adjusted for the effects of all dilutive potential equity shares.

18. Research and Development Expenditure

Revenue Expenditure on Research activity is recognized separately and charged to Statement of Profit and Loss. Expenditure on development activities is capitalized when its future economic benefits can reasonably be regarded as assured.

19. Revenue Recognition

19.1 Sales are recognized on an accrual basis when all significant risks and rewards of ownership are transferred to the buyer and the Company retains no effective control of the goods transferred.

19.2 Gross Sales (net of returns) include excise duty, wherever applicable. <

19.3 Subsidy income is accounted on the quantity sold ¦¦ during the year.

19.4 Recognition of Subsidy is generally made on

the basis of in principle recognition/approval/ settlement of claims from Government of India / Fertilizer Industry Co-ordination Committee.

19.5 Other Income is recognized on an accrual basis.

19.6 Dividend income is recognized when right to receive dividend is established.

19.7 Interest Income is recognized when no significant uncertainty as to its realization exists and is accounted on time proportion basis at contracted rates.

19.8 Scrap, salvaged/waste materials and sweepings are accounted for on realization.

19.9 Insurance and other miscellaneous claims are * recognized on receipt/acceptance of claim.

19.10 Income from sale of Certified Emissions- Reductions (CER''s)/Voluntary Emissions Reductions (VER''s) is recognized on delivery and confirmation of the same by the concerned authorities.

19.11 Debits/Credits Relating to Prior period

Income and expenditure pertaining to earlier period and up to Rs. 1,00,000/- in each case, are not being classified as relating to "prior period".

19.12 Prepaid Expenses

Individual expense up to Rs. 25,000 is not considered in classifying prepaid expenses.

20. Government Grants ''

Government grants are ''rfecognized''. when there is a reasonable assurance that the''same will be received and conditions stipulated''for its''entitlement are complied with. Revenue grants are ''recognized in the Statement of Profit and Loss. They are ''adjusted to the related item of expense. Capital grants are reduced from the Gross Value of the respective assets. Other capital grants in the nature * ofi Promoter''s''contribution are credited to capital reserve.

21. Contingent Liabilities and Provisions

Claims against the Company not acknowledged as debts relating to normal business transactions and show cause ''. .notices and demands disputed by the Company are '' ''treated as Contingent Liabilities after careful evaluation of facts. Provision in respect of contingent liabilities if any, is made when it is probable that a liability may be incurred and the amount can be reasonably estimated.

A provision is recognized when the Company has a present obligation as a result of past event; it is probable that outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made.

Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimate.


Mar 31, 2013

1. Basis of Preparation of Financial Statements:

Accounting Convention:

The financial statements have been prepared in conformity with generally accepted accounting principles to comply in all material respects with the notified Accounting Standards (AS) under Companies (Accounting Standard) Rules 2006 and the relevant provisions of the Companies Act 1956 ("the Act").The financial statements have been prepared under the historical cost convention, on an accrual basis. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year.

Presentation and disclosure of financial statements

As per criteria set out in the revised Schedule VI notified under the Act, all assets and liabilities have been classified as current or non-current which are as under:

Based on the nature of products and the time taken between the acquisition of assets or processing and their realization in cash and cash equivalents, company has ascertained its operating cycle. The Normal operating cycle as determined by the Company is 6 months.

The threshold for classification as current or non- current assets is determined either by the realization of such assets within the normal operating cycle or if such asset is expected to be realized within twelve months after the reporting date. Thus classification of an asset either current or non-current has been made applying the criteria of realization of such assets within a period of 12 months after the reporting date.

Where assets have been fully provided for as doubtful, the same are classified as non-current.

Similarly in case of liabilities the same is classified as current where it is expected to be settled within 12 months after reporting date and where the company does not have an unconditional right to defer settlement of the liability for at least twelve months after reporting date.

2. Use of Estimates:

The preparation of the financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities as at the date of the financial statements and the results of operations during the reporting period. Although these estimates are based upon management''s best knowledge of current events and actions, actual results could differ from these estimates. Any revisions to accounting estimates are recognized prospectively when revised, in current and future periods.

3. Fixed Assets

3.1 Fixed assets comprise of tangible assets and intangible assets, and are stated at their original cost of acquisition (net of Cenvat and VAT) less accumulated depreciation/amortization and impairment loss. Cost for this purpose includes all costs attributable for bringing the asset to its present location and condition. Assets held for disposal, are stated at lower of net book value and net estimated realizable value.

3.2 The Government/Institutional grants of capital nature are adjusted to the gross block of relevant Fixed Assets.

3.3 From accounting periods commencing on after 01- 4-2011, the Company adjusts exchange differences on translation / settlement of long term monetary items pertaining to the acquisition of a depreciable asset to the cost of the asset and depreciates the same over the remaining life of the asset.

4. Depreciation / Amortization

Depreciation on Fixed Assets other than on intangible assets (software applications) is provided for under STRAIGHT LINE METHOD (SLM) at the rates prescribed in Schedule XIV to the Companies Act, 1956. Depreciation on additions/deductions to Gross Block is calculated on pro-rata basis from the date of such additions/and up to the date of such deductions.

Intangible assets (software applications) are amortized over their respective individual estimated useful lives on a STRAIGHT-LINE BASIS, pro-rata from the date the asset is available to the Company for its use. Management estimates the useful life of software applications identified as intangible assets as three years. Any expenses incurred on intangible assets up to Rs. 1 lakh in each case are being charged off in the year of incurrence.

Leasehold land is amortized equally over the lease period pro-rata from the month the asset is available to the Company.

Depreciation on Catalyst capitalized upon commissioning is provided on the estimated useful life as technically assessed.

Depreciation on railway wagons purchased is provided on its estimated useful life.

Impairment of Assets:

The carrying amounts of assets are reviewed at each Balance Sheet date for identifying an impairment based on internal/external factors. Loss on impairment is provided to the extent the carrying amount of assets exceeds its recoverable amount. Recoverable amount is the higher of an asset''s net selling price and its value in use. After recognition of impairment loss, the revised carrying amount less residual value of the impaired asset would be depreciated on systematic basis over its remaining useful life. A previously recognized loss on impairment is increased or reversed depending on the change in the circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

5. Expenditure during Construction (EDC)

All pre-operative costs (net of income) incidental to new projects undertaken are accumulated as EDC and apportioned appropriately among the various plants/ facilities during the year of capitalization.

6. Borrowing Costs:

Interest and other costs in connection with the borrowing of the funds to the extent related/attributed to the acquisition/ construction of qualifying assets are accumulated and capitalized up to the date when such assets are ready for their intended use. All other borrowing costs are charged to statement of Profit and Loss.

7. Foreign Currency Transactions

Transactions in Foreign currency are recorded in the reporting currency by applying the currency rate as at the date of transaction.

Monetary items denominated in foreign currency are translated at the rates of exchange prevalent on the Balance Sheet date. The resultant exchange differences are recognized in the Statement of Profit and Loss. Non- monetary items are recorded at the rates prevalent on the date of the transaction.

Exchange differences arising on long-term foreign currency monetary items related to acquisition of a fixed asset are capitalized and depreciated over the remaining useful life of the asset. For this purpose, the company treats a foreign currency monetary items as "long-term foreign currency monetary item", if it has a term of 12 months or more at the date of its obligation.

All other exchange differences (gains or losses) are recognized in the Statement of Profit and Loss in the period in which they arise.

8. Derivative Instruments

The Company uses derivative financial instruments such as forward contracts and options to hedge its exposure associated with foreign currency fluctuations. These derivative instruments are accounted as follows:-

(a) For forward contracts (including instruments which are in substance forward contracts) which are not intended for trading or speculative purposes, the premium or discount on such contracts i.e. (difference between the contract rate and the spot rate on the date of the contract) is recognized as expense or income in the Statement of Profit and Loss over the life of the contract.

(b) Outstanding Derivative contracts, other than those covered under Accounting Standard-11 as at the Balance sheet date are marked to market and loss on valuation is recognized in the Statement of Profit and Loss. Gains if any are ignored in line with the principle of prudence enunciated in Accounting Standard-1, Disclosure of Accounting policies as per the announcement of Institute of Chartered Accountants of India.

9. Investments

Current Investments are valued at lower of cost and fair value. Long term investments are stated at cost and provision is made for any diminution in such value, which is other than temporary in nature.

10. Inventory

10.1 Assessment of Inventory

Raw Materials, Intermediary Products, By- Products and Finished Products inside factory premises are assessed by survey method on a date as close as possible to the Balance Sheet date and the shortages /excesses in the quantities as compared to book stocks are adjusted in the books. Finished goods and other inventory stored outside the factory premises are taken as per warehousing certificates and third party confirmation respectively.

10.2 Mode of Valuation

Inventory is valued at lower of cost and net realizable value except in case of by-products, which are valued at, net realizable value. Gases and slurries, if any, in pipelines at different stages of process are not valued as the same is not practicable.

10.3 Basis of Cost:

10.3.1 The cost of manufactured finished goods, bought out products and intermediary products are arrived at based on weighted average cost. Bifurcation of cost of joint products is made on technical estimates.

10.3.2 Cost of raw materials, petroleum products, packing materials, stores and spares, and loose tools is determined on weighted average cost basis.

10.3.3 Used loose tools are treated as consumed and hence not valued.

10.3.4 Project surplus stores and spares of old plants not in use are brought in the books at nominal estimated value/technical estimate or carried in memorandum records.

10.3.5 Provision is made in respect of raw materials, packing materials, stores and spares and petroleum products, wherever appropriate, based on technical estimates, to reflect the impact of obsolescence, damage or other diminution in value.

10.4 Measurement of Cost / Realisable Value

10.4.1 Cost of Purchases

Cost of purchase includes duties, taxes (net of those recoverable) freight and other expenses net of trade discounts, rebates and price adjustments.

10.4.2 Cost of Manufactured goods

Cost of Manufactured Goods comprises of direct cost, variable production overheads and fixed production overheads on absorption costing method. Catalysts issued are charged off over their estimated useful lives as technically assessed. Variable production overheads are allocated based on actual production. Variable overheads related to movement of finished products are allocated based on actual dispatches. Fixed overheads are allocated based on higher of the actual production level or normal production level. Average freight incurred is included in valuing stocks in field warehouses and in transit.

10.4.3 Cost of Traded Fertilizers

It comprises of Cost of Purchases as defined under 10.4.1 plus bagging, handling and transportation costs incurred to bring the material in its present location and condition.

10.4.4 Net Realizable Value

Price of urea is administered by the Government of India by which selling price is fixed for the buyer. The net realizable value for manufactured urea is taken at retention price (selling price net of dealers'' margin plus subsidy from Government of India) net of variable selling and distribution cost. Net realizable value of off-spec urea is taken at 40% of MRP excluding subsidy.

The net realizable value of phosphatic and potassic fertilizers is taken at the applicable selling prices expected to be realized, net of dealers'' margin and variable selling and distribution costs plus the concession as fixed/ to be fixed by Government. Net realizable value of off-spec phosphatic and potassic fertilizers is taken at selling price net of dealers'' margin and estimated cost of re-processing including transportation cost to factory. The net realizable value of off spec bought out fertilizers is at 30% of MRP excluding subsidy.

The Net realizable value of imported Urea is the selling price and other entitled compensation as contracted with the Government net of variable selling and distribution cost.

The net realizable value of off-spec imported Urea is taken at 40% of MRP excluding subsidy.

Average freight incurred on despatches from silo/ factory/ port to godown is reduced for arriving at the net realizable value in respect of stocks of fertilizers in silo/factory/port.

The net realizable value of non-fertilizer products is taken at the year-end lowest selling prices net of variable selling and distribution cost.

11. Trade receivables, other debts, loans and advances are provided for as doubtful upon review on case to case basis.

Subsidy receivable from Government overdue over 3 years are provided for as doubtful.

12. Leases

Assets acquired on leases wherein a significant portion of the risks and rewards of ownership are retained by the lessors are classified as operating leases. Lease rentals paid for such leases are recognized as an expense as per the lease terms which is more representative of the time pattern of the benefit.

Rental income on leases is accounted for an accrual basis in accordance with the terms of the contract. This is more representative of the time pattern in which benefit derived from the use of the leased asset is diminished.

13. Taxation

Provision for Current Income Tax is made in accordance with the Income Tax Act 1961.

Deferred Tax resulting from "timing difference" between book profit and taxable profit for the year is accounted for using the tax rates and laws that have been enacted or substantially enacted as on the balance sheet date. The deferred tax asset is recognized and carried forward only to the extent that there is a reasonable certainty that the assets will be adjusted in future and for unabsorbed depreciation or carry forward of losses where there is a virtual certainty of their adjustment in future.

14. Cash and Cash Equivalents

Cash and cash equivalents in the cash flow statement comprises of cash in hand, cash at bank and short term investments with an original maturity of three months or less.

15. Employee Benefits

15.1.1 Contribution to Provident Fund is accounted for on accrual basis. The Provident Fund contributions are made to a Trust administered by the Company. The interest rate payable to the members of the Trust shall not be lower than statutory rate of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous'' Provisions Act, 1952 and shortfall, if any, shall be made good by the Company. Such shortfall on account of interest, if any, is recognized in the Statement of Profit and Loss.

15.1.2 Company''s defined Contribution made to its Super-annuation scheme is charged off to Statement of Profit and Loss on accrual basis.

15.1.3 Defined Benefit plans comprising of gratuity, leave encashment on retirement, Post retirement medical benefits and long term service award are recognized based on the present value of Defined Benefit Obligation based on actuarial valuation carried out as on the date of the Balance Sheet. The actuarial valuation is done as per Projected Unit Method.

15.1.4 Actuarial gains and losses are recognized in full in the Statement of Profit and Loss for the period in which they occur. Past service cost is recognized immediately to the extent that the benefits are already vested. The retirement benefit obligation recognized in the Balance Sheet represents the present value of the defined benefit obligation as adjusted for unrecognized past service cost, and as reduced by the fair value scheme of assets, wherever applicable.

16. Earnings per Share (EPS)

Basic earnings per share is calculated by dividing net profit or loss after tax for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.

For the purpose of calculating diluted EPS, net profit or loss after tax for the year attributable to equity shareholders are divided by the weighted average number of equity shares outstanding during the year and are adjusted for the effects of all dilutive potential equity shares.

17. Research and Development Expenditure

Revenue Expenditure on Research activity is recognized separately and charged to Statement of Profit and Loss. Expenditure on development activities is capitalized when its future economic benefits can reasonably be regarded as assured.

18. Revenue Recognition

18.1 Sales are recognized on an accrual basis when all significant risks and rewards of ownership are transferred to the buyer and the Company retains no effective control of the goods transferred.

18.2 Gross Sales (net of returns) include excise duty, wherever applicable.

18.3 Subsidy income is accounted on the quantity sold during the year.

18.4 Recognition of Subsidy is generally made on the basis of in principle recognition/approval/ settlement of claims from Government of India / Fertilizer Industry Co-ordination Committee.

18.5 Other Income is recognized on an accrual basis.

18.6 Dividend income is recognized when right to receive dividend is established.

18.7 Interest Income is recognized when no significant uncertainty as to its realization exists and is accounted on time proportion basis at contracted rates.

18.8 Scrap, salvaged/waste materials and sweepings are accounted for on realization.

18.9 Insurance and other miscellaneous claims are recognized on receipt/acceptance of claim.

18.10 Income from sale of Certified Emissions Reductions (CER''s) / Voluntary Emissions Reductions (VER''s) is recognized on delivery and confirmation of the same by the concerned authorities.

18.11 Debits/Credits Relating to Prior period

Income and expenditure pertaining to earlier period and up to Rs. 1,00,000/- in each case, are not being classified as relating to "prior period".

18.12 Prepaid Expenses

Individual expense up to Rs. 25,000 is not considered in classifying prepaid expenses.

19. Government Grants

Government grants are recognized when there is a reasonable assurance that the same will be received and conditions stipulated for its entitlement are complied with. Revenue grants are recognized in the Statement of Profit and Loss. They are adjusted to the related item of expense. Capital grants are reduced from the Gross Value of the respective assets. Other capital grants in the nature of Promoter''s contribution are credited to capital reserve.

20. Contingent Liabilities and Provisions

Claims against the Company not acknowledged as debts relating to normal business transactions and show cause notices and demands disputed by the Company are treated as Contingent Liabilities after careful evaluation of facts. Provision in respect of contingent liabilities if any, is made when it is probable that a liability may be incurred and the amount can be reasonably estimated.

A provision is recognized when the Company has a present obligation as a result of past event; it is probable that outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made.

Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimate.


Mar 31, 2011

1. Basis of Preparation of Financial Statements:

1.1 Accounting Convention:

The financial statements have been prepared in conformity with generally accepted accounting principles to comply in all material respects with the notified Accounting Standards (AS) under Companies (Accounting Standard) Rules 2006 and the relevant provisions of the Companies Act 1956 ("the Act"). The financial statements have been prepared under the historical cost convention, on an accrual basis. The accounting policies have been consistently applied by the Company and are .consistent with those used in the previous year.

1.2 Use of Estimates:

The preparation of the financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities as at the date of the financial statements and the results of operations during the reporting period. Although these estimates are based upon management's best knowledge of current events and actions, actual results could differ from these estimates. Any revisions to accounting estimates are recognized prospectively when revised, in current and future periods.

2. Fixed Assets

2.1 Fixed assets comprise of tangible assets and intangible assets, and are stated at their original cost of acquisition (net of Cenvat and VAT) less accumulated depreciation/amortization and - impairment loss except in case of assets held for disposal, where cost is replaced by the lower of Written Down Value or estimated realizable value. Cost for this purpose includes all costs attributable for bringing the asset to, its present location and condition.

2.2 The Government/Institutional grants of capital nature are adjusted to the gross block of relevant Fixed Assets.

2.3 Depreciation/Amortization

2.3.1 Depreciation on Fixed Assets other than on intangible assets (software applications) is provided for under STRAIGHT LINE METHOD (SLM) at the rates prescribed in Schedule XIV to the Companies Act, 1956. Depreciation on additions/deductions to Gross Block is calculated on pro-rata basis from the date of such additions/and up to the date of such deductions.

No depreciation is provided, on assets held for disposal/retired from active use.

2.3.2 Intangible assets (software applications) are amortized over their respective individual estimated useful lives on a STRAIGHT-LINE BASIS, pro-rata from the date the asset is available to the Company for its use. Management estimates the useful life of software applications identified as intangible assets as three years. Any expenses incurred on intangible assets upto Rs.1 lakh in each case are being charged off in the year of incurrence.

2.3.3 Leasehold land is amortized equally over the lease period pro-rata from the month the asset is available to the Company.

2.3.4 Depreciation on Catalyst capitalized upon commissioning is provided on the estimated useful life as technically assessed.

2.3.5 Depreciation on railway wagons purchased is provided on its estimated useful life.

2.4 Impairment of Assets:

The carrying amounts of assets are reviewed at each Balance Sheet date for identifying an impairment based on internal/external factors. Loss on impairment is provided to the extent the carrying amount of assets exceeds its recoverable amount. Recoverable amount is the higher of an asset's net selling price and its value in use. After recognition of impairment loss, the revised carrying amount less residual value of the impaired asset would be depreciated on systematic basis over its remaining useful life. A previously recognized loss on impairment is increased or reversed depending on the change in the circumstances. However, the carrying value after reversal is not increased beyond the carrying value that would have prevailed by charging usual depreciation if there was no impairment.

3. Expenditure During Construction (EDC)

All pre-operative costs (net of income) incidental to new projects undertaken are accumulated as EDC and apportioned appropriately among the various plants/facilities during the year of capitalization.

4. Borrowing Costs:

Interest and other costs in connection with the borrowing of the funds to the extent related/attributed to the acquisition/ construction of qualifying assets are accumulated and capitalized up to the date when such assets are ready for their intended use and other borrowing costs are charged to Profit and Loss Account.

Exchange variation on foreign currency borrowing to the extent they are considered as borrowing costs are also treated in a similar way.

5. Foreign Currency Transactions

5.1 Transactions in Foreign currency are recorded in the reporting currency by applying the currency rate as at the date of transaction.

5.2 Monetary assets and liabilities denominated in foreign currency are translated at the rates of exchange prevalent on the Balance Sheet date.

5.3 In respect of transactions covered by forward exchange contracts the difference between the contract rate and the spot rate on the date of the contract is recognized in the Profit & Loss Account over the period of the contract.

5.4 All other exchange differences (gains or losses) are treated as revenue and are recognized in the Profit and Loss Account.

6. Investments

Current Investments are valued at lower of cost or fair value. Long Term investments are stated at cost and provision is made for any diminution in such value, which is not temporary in nature.

7. Inventories

7.1 Assessment of Inventory

7.1.1 Raw Materials, Intermediary Products, By- products and Finished Products inside factory premises are assessed by survey method on a date as close as possible to the Balance Sheet date and the shortages /excesses in the quantities as compared to book stocks are adjusted in the books. Finished goods and other inventory stored outside the factory premises are taken as per warehousing certificates and third party confirmation respectively.

7.2 Mode of Valuation

7.2.1 Inventories are valued at lower of cost and estimated net realizable value except in case of by-products, which are valued at, estimated net realizable value. Stocks in process at the close of the year are not valued as the same is not practicable.

7.2.2 Basis of Cost:

- The cost of manufactured finished goods, bought out products and intermediary products are arrived at based on weighted average cost. Bifurcation of cost of joint products is made on technical estimates.

- Cost of raw materials, petroleum products, packing materials, stores and spares, and loose tools is determined on weighted average cost basis.

7.2.3 Used loose tools are treated as consumed and hence not valued.

7.2.4 Project surplus stores and spares of old plants not in use are brought in the books at nominal estimated value/technical estimate or carried in memorandum records.

7.2.5 Provision is made in respect of raw materials, packing materials, stores and spares and petroleum products, wherever appropriate, based on technical estimates, to reflect the impact of obsolescence, damage or other diminution in value.

7.3 Measurement of Cost / Realisable Value

7.3.1 Cost of Purchases

Cost of purchase includes duties, taxes (net of those recoverable) freight and other expenses net of trade discounts, rebates and price adjustments.

7.3.2 Cost of Manufactured goods

Cost of Manufactured Goods comprises of direct cost, variable production overheads and fixed production overheads on absorption costing method. Catalysts issued are charged off over their estimated useful lives as technically assessed. Variable production overheads are allocated based on actual production. Variable overheads related to movement of finished products are allocated based on actual dispatches. Fixed overheads are allocated based on higher of the actual production level or normal production level. Average freight incurred is included in valuing stocks in field warehouses and in transit.

7.3.3 Cost of Traded Fertilizers

It comprises of Cost of Purchases as defined under 7.3.1 plus bagging, handling and transportation costs incurred to bring the material in its present location and condition.

7.3.4 Net Realizable Value

Price of urea is administered by the Government of India by which selling price is fixed for the buyer. The net realizable value for manufactured urea is taken at retention price (selling price net of dealers' margin plus subsidy from Government of India) net of variable selling and distribution cost. Net realizable value of off-spec urea is taken at 40% of MRP excluding subsidy.

The net realizable value of phosphatic and potassic fertilizers is taken at the applicable selling prices expected to be realized, net of dealers' margin and variable selling and distribution costs plus the concession as fixed/ to be fixed by Government. Net realizable value of off-spec phosphatic and potassic fertilizers is taken at selling price net of dealers' margin and estimated cost of re-processing including transportation cost to factory. The net realizable value of off spec bought out fertilizers is at 30% of MRP.

The Net realizable value of imported Urea is the selling price and other entitled compensation as contracted with the Government net of variable selling and distribution cost.

The net realizable value of off-spec imported Urea is taken at 40% of MRP.

Average freight incurred on despatches from silo/ factory/ port to godown is reduced for arriving at the net realizable value in respect of stocks of fertilizers in silo/factory/port.

The net realizable value of non-fertilizer products is taken at the year-end lowest selling prices net of variable selling and distribution cost.

8. Sundry Debtors

Debts, receivables, loans and advances are provided for upon review on case to case basis.

Subsidy receivable from Government overdue over 3 years are provided for.

9. Operating Leases

Assets acquired on leases wherein a significant portion of the risks and rewards of ownership are retained by the lessors are classified as operating leases. Lease rentals paid for such leases are recognized as an expense as per the lease terms which is more representative of the time pattern of the benefit.

Rental income on leases is accounted for an accrual basis in accordance with the terms of the contract. This is more representative of the time pattern in which benefit derived from the use of the leased asset is diminished.

10. Taxation

Provision for Current Income Tax is made in accordance with the Income Tax Act 1961.

Deferred Tax resulting from "timing difference" between book profit and taxable profit for the year is accounted for using the tax rates and laws that have been enacted or substantially enacted as on the balance sheet date. The deferred tax asset is recognized and carried forward only to the extent that there is a certainty that the assets will be adjusted in future.

11. Cash and Cash Equivalents

Cash and cash equivalents in the cash flow statement comprises of cash in hand, cash at bank and short term investments with an original maturity of three months or less.

12. Employee Benefits

12.1.1 Contribution to Provident Fund is accounted for on accrual basis. The Provident Fund contributions are made to a Trust administered by the Company. The interest rate payable to the members of the Trust shall not be lower than statutory rate of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous' Provisions Act, 1952 and shortfall, if any, shall be made good by the Company. Such shortfall on account of interest, if any, is recognized in the Profit and Loss account:

12.1.2 Company's defined Contribution made to Pension Fund of Government is charged off to Profit and Loss account on accrual basis.

12.1.3 Employee benefits under Defined Benefit plans comprising of gratuity, leave encashment on retirement, Post retirement medical benefits and long term service award are recognized based on the present value of Defined Benefit Obligation based on actuarial valuation carried out as on the date of the Balance Sheet. The actuarial valuation is done as per Projected Unit Method.

12.1.4 Actuarial gains and losses are recognized in full in the Profit and Loss account for the period in which they occur. Past service cost is recognized immediately to the extent that the benefits are already vested. The retirement benefit obligation recognized in the Balance Sheet represents the present value of the defined benefit obligation as adjusted for unrecognized past service cost, and as reduced by the fair value scheme of assets, wherever applicable.

13. Earnings per Share (EPS)

Basic earning per share is calculated by dividing net profit or loss after tax for the year attributable to equity shareholders by ¦the weighted average number of equity shares outstanding during the year.

For the purpose of calculating diluted EPS, net profit or loss after tax for the year attributable to equity shareholders are divided by the weighted average number of equity shares outstanding during the year and ate adjusted for the effects of all dilutive potential equity shares.

14. Research and Development Expenditure

Revenue Expenditure on Research and Development activity is recognized separately and charged to Profit and Loss Account.

15. Revenue Recognition

15.1 Sales are recognized on an accrual basis when all significant risks and rewards of ownership are transferred to the buyer and the Company retains no effective control of the goods transferred.

15.2 Gross Sales (net of returns) include excise duty, wherever applicable.

15.3 Subsidy income is accounted on the quantity sold during the year.

15.4 Recognition of Subsidy is generally made on the basis of in principle recognition/approval/settlement of claims from Government of India/Fertilizer Industry Co-ordination Committee.

15.5 Other Income is recognized on an accrual basis.

15.6 Dividend income is recognized when right to receive dividend is established.

15.7 Interest Income is recognized when no significant uncertainty as to its realization exists.

15.8 Scrap, salvaged/waste materials and sweepings are accounted for on realization.

15.9 Insurance and other miscellaneous claims are recognized on receipt/acceptance of claim. Contractual pass through incentives, benefits, etc. are recognized on receipt basis.

15.10 Debits/Credits Relating to Prior period

Income and expenditure pertaining to earlier period and upto Rs. 1,00,000/- in each case, are not being classified as relating to "prior period".

15.11 Prepaid Expenses

Individual expense up to Rs.25,000 is not considered in classifying prepaid expenses.

16. Contingent Liabilities and Provisions

Claims against the Company not acknowledged as debts relating to normal business transactions and show cause notices and demands disputed by the Company are .treated as Contingent Liabilities after careful evaluation of facts. Provision in respect of contingent liabilities if any, is made when it is probable that a liability may be incurred and the amount can be reasonably estimated.

A provision is recognized when the Company has a present obligation as a result of past event; it is probable that outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made.

Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimate.

 
Subscribe now to get personal finance updates in your inbox!