Mar 31, 2018
IA. Significant Accounting policies
(a) Basis of preparation
(i) The financial statements have been prepared in compliance with Indian Accounting Standards (IndAS) including the rules notified under the relevant provisions of the Companies Act, 2013. The financial statements up to year ended 31st March, 2017 were prepared in accordance with the accounting standards notified under Companies (Accounting Standard) Rules, 2006 (as amended) and other relevant provisions of the CompaniesAct ,2013 (âActâ). These financial statements are the first financial statements of the Company under Ind AS. The date of transition to Ind AS is 1st April, 2016. Refer note 49 for an explanation of how the transition from previous GAAP to Ind AS has affected the Companyâs financial position and its net profit.
(ii) The financial statements have been prepared on the historical cost basis except for the following assets and liabilities which have been measured atfairvalue:
1. Certain financial instruments (including derivative instruments) measured atfairvalue through profit or loss
2. Defined benefit plans-plan assets measured atfairvalue
(b) Property, plant and equipment/ Capital Work In Progress
Property, plant and equipment are stated at cost, net of recoverable taxes less accumulated depreciation and impairment losses, if any. Such cost includes purchase price, borrowing cost and any cost directly attributable to bringing the assets to its working condition for its intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the assets. Subsequent costs are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost can be measured reliably.
Projects under commissioning and other Capital Work-in-Progress are carried at costs, comprising direct cost, related incidental expenses and interest on borrowings.
Other Indirect expenses incurred relating to project, net of income earned during the project development stage prior to its intended use, are considered as pre - operative expenses and disclosed under Capital Work - in - Progress.
Gains or losses arising from derecognition of a property, plant and equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised.
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value.
Depreciation on fixed assets (other than leasehold land) has been provided based on useful life of the assets in accordance with Schedule II of the Companies Act, 2013, on Straight Line Method.
Leasehold land and improvements are amortised over the lease period.
Mining Lease is depreciated based on unit of production method.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial yearend and adjusted prospectively, if appropriate.
(c) Leases
Leases are classified as finance leases whenever the terms of the lease, transfers substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Leased assets: Assets held under finance leases are initially recognised as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in Statement of Profit and Loss, unless they are directly attributable to qualifying assets, in which case they are capitalized. Contingent rentals are recognised as expenses in the periods in which they are incurred.
A leased asset is depreciated over the lease period. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating lease payments are recognised as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term except where another systematic basis is more representative of time pattern in which economic benefits from the leased assets are consumed.
(d) Intangible assets
Intangible Assets are stated at cost of acquisition net of recoverable taxes, trade discount and rebates less accumulated amortisation/depletion and impairment loss, if any. Such cost includes purchase price, borrowing costs, and any cost directly attributable to bringing the asset to its working condition for the intended use, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the intangible assets.
Subsequent costs are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost can be measured reliably.
Other Indirect expenses incurred relating to project, net of income earned during the project development stage prior to its intended use, are considered as pre - operative expenses and disclosed under Intangible assets underdevelopment.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised.
A summary of amortisation policies applied to the Companyâs intangible assets to the extent of depreciable amount is as follows:
The amortisation period and the amortisation method for intangible assets with a finite useful life are reviewed at each reporting date.
(e) Finance Cost
Borrowing costs include exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are charged to the Statement of Profit and Loss for the period for which they are incurred.
(f) Inventories
Items of inventories are measured at lower of cost and net realisable value after providing for obsolescence, if any, except in case of by-products which are valued at net realisable value. Cost of inventories comprises of cost of purchase, cost of conversion and other costs including manufacturing overheads net of recoverable taxes incurred in bringing them to their respective present location and condition.
Cost of raw materials, chemicals, stores and spares, packing materials, trading and other products are determined on weighted average basis.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
(g) Impairment of non-financial assets - property, plant and equipment and intangible assets
The Company assesses at each reporting date as to whether there is any indication that any property, plant and equipment and intangible assets or group of assets, called cash generating units (CGU) may be impaired. If any such indication exists the recoverable amount of an asset or CGU is estimated to determine the extent of impairment, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the CGU to which the asset belongs.
An impairment loss is recognised in the Statement of Profit and Loss to the extent, assetâs carrying amount exceeds its recoverable amount. The recoverable amount is higher of an assetâs fair value less cost of disposal and value in use. Value in use is based on the estimated future cash flows, discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and risk specific to the assets.
The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
(h) Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Provision for decommissioning liability
The Company records a provision for decommissioning costs towards site restoration activity. Decommissioning costs are provided at the present value of future expenditure using a current pre-tax rate expected to be incurred to fulfill decommissioning obligations and are recognized as part of the cost of the underlying assets. Any change in the present value of the expenditure, other than unwinding of discount on the provision, is reflected as adjustment to the provision and the corresponding asset. The change in the provision due to the unwinding of discount is recognized in the Statement of Profit and Loss.
(i) Employee Benefits Expense Short Term Employee Benefits
The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by employees are recognised as an expense during the period when the employees render the services.
Post-Employment Benefits
Defined Contribution Plans
The Company recognizes contribution payable to the provident fund scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
Defined Benefit Plans
The Company pays gratuity to the employees whoever has completed five years of service with the Company at the time of resignation/superannuation. The gratuity is paid @15 days salary for every completed year of service as per the Payment ofGratuityAct1972.
The liability in respect of gratuity and other post-employment benefits is calculated using the Projected Unit Credit Method and spread over the period during which the benefit is expected to be derived from employeeâs services.
Re-measurement of defined benefit plans in respect of post-employment are charged to the Other Comprehensive Income.
(j) Tax Expenses
The tax expense for the period comprises current and deferred income tax. Tax is recognised in Statement of Profit and Loss, except to the extent that it relates to items recognised in the other comprehensive income or in equity. In which case, the tax is also recognised in other comprehensive income or equity.
Current tax
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted at the Balance sheet date.
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The carrying amount of Deferred tax liabilities and assets are reviewed at the end of each reporting period.
(k) Foreign currencies transactions and translation
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognised in Statement of Profit and Loss except to the extent of exchange differences which are regarded as an adjustment to interest costs on foreign currency borrowings that are directly attributable to the acquisition or construction of qualifying assets which are capitalized as cost of assets.
Non-monetary items that are measured in terms of historical cost in a foreign currency are recorded using the exchange rates atthe date of the transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in OCI or Statement of Profit and Loss are also recognised in OCI or Statement of Profit and Loss, respectively).
(I) Revenue recognition
Revenue from sale of goods is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated cost can be estimated reliably, there is no continuing effective control or managerial involvement with the goods, and the amount of revenue can be measured reliably and excluding taxes or duties collected on behalf of the government.
Revenue from rendering of services is recognised when the performance of agreed contractual task has been completed.
Interest Income
Interest income from a financial asset is recognised using effective interest rate method.
Dividends
Revenue is recognised when the Companyâs right to receive the amount has been established.
Export Obligations I Entitlements / Incentives
Benefit/(Obligation) on account of entitlement on export or deemed export orders, to import duty-free raw materials, under the various Exim Schemes are estimated and accounted in the year in which the export / deemed export orders are executed.
(m) Cash and Cash Equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, call deposits and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
(n) Earnings Per Share (EPS)
Basic EPS is computed using the weighted average number of equity shares outstanding during the period. Diluted EPS is computed using the weighted average number of equity and dilutive equity equivalent shares outstanding during the period except where the results would be anti-dilutive.
(o) Current vs Non-current Classification
The Company presents assets and liabilities in the balance sheet based on current/non-current classification. An asset is treated as current when it is:
-Expected to be realised or intended to be sold or consumed in normal operating cycle
-Held primarily for the purpose of trading
-Expected to be realised within twelve months after the reporting period, or
-Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is current when:
-It is expected to be settled in normal operating cycle
-It is held primarily for the purpose of trading
-It is due to be settled within twelve months after the reporting period, or
-There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
(p) Rounding of amounts
All amounts disclosed in the financial statements and notes have been rounded off to the nearest Lacs as per the requirement of Schedule III, unless otherwise stated.
(q) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker (CODM).
The Executive Committee assesses the financial performance and position of the Company, and makes strategic decisions.
The CODM reviews performance of the whole company for the purpose of allocating resources based on an analysis of various performance indicators. Company has only reportable segment i.e. Manufacturing/Mining of Ferro Alloys on an overall basis.
(r) Financial instruments
(i) Financial Assets
A. Initial recognition and measurement
All financial assets are initially recognized at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets, which are not at fair value through profit or loss, are adjusted to the fair value on initial recognition. Purchase and sale of financial assets are recognised using trade date accounting.
B. Subsequent Measurement
a) Financial assets carried at amortised cost (AC)
A financial asset is measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
b) Financial assets at fair value through other comprehensive income (FVTOCI)
A financial asset is measured at FVTOCI if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
c) Financial assets at fair value through profit or loss (FVTPL)
A financial asset which is not classified in any of the above categories are measured at FVTPL.
C. Offsetting
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
D. Equity Investment
All equity investments are measured at fair value, with value changes recognised in Statement of Profit and Loss.
E. Impairment of Financial Assets
In accordance with Ind AS 109, the Company uses âExpected Credit Lossâ (ECL) model, for evaluating impairment of financial assets other than those measured at fair value through profit and loss (FVTPL).
Expected credit losses are measured through a loss allowance at an amount equal to:
-The 12-months expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date); or
-Full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument)
For trade receivables Company applies âsimplified approachâ which requires expected lifetime losses to be recognised from initial recognition of the receivables. The Company uses historical default rates to determine impairment loss on the portfolio of trade receivables. At every reporting date these historical default rates are reviewed and changes in the forward looking estimates are analysed.
For other assets, the Company uses 12 month ECL to provide for impairment loss where there is no significant increase in credit risk. If there is significant increase in credit risk full lifetime ECL is used.
(ii) Financial Liabilities
A. Initial recognition and measurement
All financial liabilities are recognized at fair value and in case of loans, net of directly attributable cost.
Fees of recurring nature are directly recognised in the Statement of Profit and Loss as finance cost.
B. Subsequent measurement
Financial liabilities are carried at amortized cost using the effective interest method.
For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
(iii) Derivative Financial Instruments and Hedge Accounting
The Company uses various derivative financial instruments such as interest rate swaps, currency swaps and forwards & options to mitigate the risk of changes in interest rates and exchange rates. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are also subsequently measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to Statement of Profit and Loss, except for the effective portion of cash flow hedges which is recognised in Other Comprehensive Income and later to Statement of Profit and Loss when the hedged item affects profit or loss or treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a non-financial assets or non-financial liability.
Hedges that meet the criteria for hedge accounting are accounted for as follows:
a) Cash flow hedge
The Company designates derivative contracts or non-derivative financial assets/liabilities as hedging instruments to mitigate the risk of movement in interest rates and foreign exchange rates for foreign exchange exposure on highly probable future cash flows attributable to a recognised asset or liability or forecast cash transactions. When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognized in the cash flow hedging reserve being part of other comprehensive income. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in the Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively.
If the hedging instrument expires oris sold, terminated or exercised, the cumulative gain or loss on the hedging instrument recognized in cash flow hedging reserve till the period the hedge was effective remains in cash flow hedging reserve until the underlying transaction occurs. The cumulative gain or loss previously recognized in the cash flow hedging reserve is transferred to the Statement of Profit and Loss upon the occurrence of the underlying transaction. If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow hedging reserve is reclassified in the Statement of Profit and Loss.
b) Fair Value Hedge
The Company designates derivative contracts or non-derivative financial assets/liabilities as hedging instruments to mitigate the risk of change in fair value of hedged item due to movement in interest rates, foreign exchange rates and commodity prices.
Changes in the fair value of hedging instruments and hedged items that are designated and qualify as fair value hedges are recorded in the Statement of Profit and Loss. If the hedging relationship no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortised to Statement of Profit and Loss over the period of maturity.
(iv) Derecognition of financial instruments
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under Ind AS 109. A financial liability (or a part of a financial liability) is derecognized from the Companyâs Balance Sheet when the obligation specified in the contract is discharged or cancelled or expires.
(v) Offsetting
Financial assets and financial liabilities are offset and the net amount is presented in the balance sheet when, and only when, the Company has a legally enforceable right to setoff the amount and it intends, either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
1C. Critical Accounting Judgements and Key Sources of Estimation Uncertainly
The preparation of the Companyâs financial statements requires management to make judgement, estimates and assumptions that affect the reported amount of revenue, expenses, assets and liabilities and the accompanying disclosures. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in next financial years.
a) Decommissioning Liabilities
The liability for decommissioning costs are recognized when the Company has obligation to perform site restoration activity. The recognition and measurement of decommissioning provisions involves the use of estimates and assumptions.
b) Depreciation/amortisation and useful lives of property plant and equipment/intangible assets
Property, plant and equipment / intangible assets are depreciated/amortised over their estimated useful lives, after taking into account estimated residual value. Management reviews the estimated useful lives and residual values of the assets annually in order to determine the amount of depreciation/amortisation to be recorded during any reporting period. The useful lives and residual values are based on the Companyâs historical experience with similar assets and take into account anticipated technological changes. The depreciation/amortisation for future periods is revised if there are significant changes from previous estimates.
c) Recoverability of trade receivable
Judgements are required in assessing the recoverability of overdue trade receivables and determining whether a provision against those receivables is required. Factors considered include the credit rating of the counterparty, the amount and timing of anticipated future payments and any possible actions that can be taken to mitigate the risk of nonpayment.
d) Provisions
Provisions and liabilities are recognized in the period when it becomes probable that there will be a future outflow of funds resulting from past operations or events and the amount of cash outflow can be reliably estimated. The timing of recognition and quantification of the liability requires the application of judgement to existing facts and circumstances, which can be subject to change. The carrying amounts of provisions and liabilities are reviewed regularly and revised to take account of changing facts and circumstances.
e) Impairment of non-financial assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, the Company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or Cash Generating Units (CGUâs) fair value less costs of disposal and its value in use. It is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account, if no such transactions can be identified, an appropriate valuation model is used.
f) Impairment of financial assets
The impairment provisions for financial assets are based on assumptions about risk of default and expected cash loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on Companyâs past history, existing market conditions as well as forward looking estimates at the end of each reporting period.
g) Measurement of fair values
The Companyâs accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Company has an established control framework with respect to the measurement of fair values. The finance team has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the CFO.
They regularly review significant unobservable inputs and valuation adjustments. If third party information is used to measure fairv alues then the finance team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IndAS, including the level in the fair value hierarchy in which such valuations should be classified.
When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
-Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
-Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
-Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
ID. Standards issued but not effective
On 28th March, 2018, the Ministry of Corporate Affairs (MCA) has notified Ind AS 115 - Revenue from Contract with Customers and certain amendment to existing IndAS. These amendments shall be applicable to the Company from 1st April, 2018.
a) Issue of Ind AS 115- Revenue from Contracts with Customers
IndAS 115 will supersede the current revenue recognition guidance including IndAS 18 Revenue, IndAS 11 Construction Contracts and the related interpretations. Ind AS 115 provides a single model of accounting for revenue arising from contracts with customers based on the identification and satisfaction of performance obligations.
b) Amendment to Existing issued Ind AS
The MCA has also carried out amendments following accounting standards. These are;
i. IndAS 21 -The Effects of Changes in Foreign Exchange Rates
ii. IndAS 40-Investment Property
iii. IndAS 12-Income Taxes
iv. IndAS 28 - Investments in Associates and Joint Ventures and
v. IndAS 112-Disclosure of Interests in Other Entities
Application of above standards are not expected to have any significant impact on the Companyâs financial statements.
IE. First Time Adoption of IND AS
I. First time adoption of lndAS
The Company has adopted IndAS with effect from Ist April, 2017 with comparatives being restated. Accordingly the impact of transition has been provided in the Opening Reserves as at Ist April, 2016. The figures for the previous period have been restated, regrouped and reclassified wherever required to comply with the requirement of IndAS and Schedule III.
II. Exemptions from retrospective application
IndAS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under IndAS. The Company has applied the following exemptions:
a) Deemed Cost for Property, Plant and Equipment (PPE) and Intangible Assets
Ind AS 101 permits a first time adopter to continue with the carrying value for all its PPE and intangible assets as recognised in the financial statements as atthe date of transition to IndAS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition.
Accordingly, the company has elected to measure all of its PPE and intangible asset at their previous GAAP carrying values.
b) Cumulative Translation Difference
The Company has elected to apply Ind AS 21 - The Effects of changes in Foreign Exchange Rate prospectively. Accordingly all cumulative gains and losses recognised are reset to zero by transferring it to retained earnings.
The remaining voluntary exemptions as per IndAS 101 - First time adoption either do not apply or are not relevant to the Company.
Mar 31, 2016
1. Corporate information
Balasore Alloys Limited (the Company) is a public company domiciled in India and incorporated in 1984 under the provisions of the Companies Act, 1956. Its shares are listed on Bombay Stock Exchange and The Calcutta Stock Exchange Limited. The Company have its registered office and manufacturing facility at Balasore, Odisha
The Company is primarily engaged in raising of Chrome Ore from its captive mines located in Odisha and manufacturing and selling of Ferro Chrome of various grades.
2. Summary of significant accounting policies
(a) Basis of preparation of Financial Statements
These financial statements have been prepared to comply with Accounting Principles Generally accepted in India (Indian GAAP), the Accounting Standards notified under the relevant provisions of the Companies Act, 2013. The financial statements are prepared on accrual basis under the historical cost convention, except for certain Fixed Assets which are carried at revalued amounts and insurance & other claims/refunds, which due to uncertainty in realization, are accounted for on actual receipt basis. The financial statements are presented in Indian rupees rounded off to the nearest rupees in lacs.
(b) Use of estimates
The preparation of financial statements in conformity with Indian GAAP requires judgments, estimates and assumptions to be made that affect the reported amount of assets and liabilities, disclosure of contingent liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognized in the period in which the results are known/ materialized.
(c) Tangible fixed assets
Tangible fixed Assets are stated at cost (or revalued amounts, as the case may be), less accumulated depreciation and impairment, if any. The cost of acquisition comprises purchase price inclusive of duties (net of Cenvat), taxes, incidental expenses, erection/commissioning/trial run expenses and interest etc, up to the date the assets are ready for intended use.
In case of revaluation of tangible fixed assets, the original cost as written up by the approved valuers is considered in the accounts and the differential amount is transferred to the revaluation reserve.
Insurance spares which can be used only in connection with an item of tangible fixed assets and whose use, as per technical assessment, is expected to be irregular, are capitalized and depreciated over the residual life of the respective assets.
Assets awaiting disposal are valued at the lower of written down value and net realizable value and disclosed separately under Other Current Assets.
Subsequent expenditure related to an item of tangible fixed asset is added to its book value only if it increases the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing tangible fixed assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred.
(d) Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Expenditure of cost of exploration, Net Present Value of Forest Restoration, developing ore bodies and to expand the capacity of mine is capitalized as Mine Development Cost under Intangible Asset.
Computer software not being part of the hardware operating system are capitalized as intangible asset.
(e) Depreciation/Amortization Tangible Assets
Depreciation on Fixed Assets is provided on straight line method at the rates and in the manner prescribed in Schedule II to the Companies Act, 2013 over their useful life except in respect of leasehold land which is amortized on a straight line basis over the period of lease.
Additional deprecation arising due to revaluation of fixed assets is adjusted against Revaluation reserve.
Intangible Assets
Mining lease and mines development expenditure are amortized over the balance period of mining leases on straight line basis.
Computer software is amortized over a period of three years on straight line basis.
(f) Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.
Borrowing costs relating to the acquisition / construction of qualifying assets are capitalized until the time all substantial activities necessary to prepare the qualifying assets for their intended use are complete. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. All other borrowing costs are charged to revenue.
(g) Impairment
An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value. An impairment loss is charged to the Statement of Profit and Loss in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting period is reversed if there has been a change in the estimate of recoverable amount.
(h) Investments
Current investments are carried at lower of cost and quoted/fair value, computed category-wise. Non Current investments are stated at cost. Provision for diminution in the value of Non Current investments is made only if such a decline is other than temporary.
(i) Inventories
Raw materials, Stores, spares & consumables are valued at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost is determined on weighted average basis. Royalty on stock lying at mines is accounted on dispatch of materials.
Work in Progress and finished goods are valued at lower of cost and net realizable value. Cost includes direct materials, labour cost and a proportion of manufacturing overheads based on normal operating capacity. Cost of finished goods includes excise duty and is determined on weighted average basis.
Obsolete/damaged stores, saleable dust and saleable scrap are valued at estimated net realizable value.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs necessary to make the sale.
The recovery of ferro chrome from slag generated at the plant during the manufacturing operations is accounted for on actual ascertainment of quantity thereof, since it is not feasible to determine the quantum till the re-processing of such slag.
(j) Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized :
Sale of goods
Revenue from sale of goods is recognized when all the significant risks and rewards of ownership of the goods have been passed to the buyer, usually on delivery of the goods. The Company collects sales taxes and value added taxes (VAT) on behalf of the government and, therefore, these are not economic benefits flowing to the company. Hence, they are excluded from revenue. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year.
Export Benefits
Export benefits are recognized on accrual basis as per schemes specified in Foreign Trade Policy, as amended from time to time.
Interest
Interest income is recognized on a time proportion basis taking into account the amount outstanding and the applicable interest rate. Interest income is included under the head âother incomeâ in the statement of profit and loss.
(k) Foreign Currency Translation
(i) Initial recognition
Foreign currency transactions are recorded in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
(iii) Exchange differences
Exchange differences arising on the settlement / or reporting of monetary items, at rates different from those at which they were initially recorded during the period or reported in previous financial statements, are recognized as income or expenses in the period in which they arises.
(Iv) Forward exchange contracts entered into to hedge foreign currency risk of an existing asset/ liability
The premium or discount arising at the inception of forward exchange contracts is amortized as expenses or income over the life of the respective contracts. Losses on account Exchange differences on such contracts are recognized in the statement of profit and loss in the period in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognized as income or expense for the period.
(v) Derivative Instruments
In terms of the announcement made by the Institute of Chartered Accountants of India, the accounting for derivative contracts (other than those covered under Accounting Standard -11 âThe Effects of Changes in Foreign Exchange Ratesâ) is done based on the âmarked to marketâ on a portfolio basis, and the net loss after considering the offsetting effect on the underlying hedge item is charged to the statement of profit and loss. Net gains are ignored as a matter of prudence.
(l) Employee Benefits
Short Term Employee Benefits
The undiscounted amount of short term employee benefits expected to be paid in exchange for the services rendered by employees are recognized as an expense during the period when the employees render the services. These benefits include performance incentive and compensated absences.
Post Employee Benefits
Defined Contribution Plans
A defined contribution plan is a post-employment benefit plan under which the Company pays specified contributions to a separate entity. The Company makes specified monthly contributions towards Provident Fund and Superannuation Fund. The Company''s contribution is recognized as an expense in the Statement of Profit and Loss during the period in which the employee renders the related service.
Defined Benefit Plans
The liability in respect of defined benefit plans and other post-employment benefits is calculated using the Projected Unit Credit Method and spread over the period during which the benefit is expected to be derived from employees'' services. Actuarial gains and losses in respect of post-employment and other long term benefits are charged to the Statement of Profit and Loss.
(m) Income taxes
Tax expense comprises of current tax and deferred tax. Current tax is measured at the amount expected to be paid to the tax authorities, using the applicable tax rates. Deferred income tax reflect the current period timing differences between taxable income and accounting income for the period and reversal of timing differences of earlier years/period. Deferred tax assets are recognized only to the extent that there is a reasonable certainty that sufficient future income will be available except that deferred tax assets, in case there are unabsorbed depreciation or losses, are recognized if there is virtual certainty that sufficient future taxable income will be available to realize the same.
Deferred tax assets and liabilities are measured using the tax rates and tax law that have been enacted or substantively enacted by the Balance Sheet date.
(n) Segment reporting
Identification of segments
The Company''s operating businesses are organized and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The analysis of geographical segments is based on the areas in which major operating divisions of the Company operate.
Allocation of common costs
Common allocable costs are allocated to each segment on case to case basis by applying the ratio, appropriate to each relevant case.
Revenue and expenses which relates to the enterprise as a whole and are not allocable to segments on a reasonable basis, are included under the head âUnallocated - Commonâ.
Unallocated items
Unallocated items include general corporate income and expense items which are not allocated to any business segment.
Segment Accounting Policies
The Company prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole.
(o) Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or loss 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 earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding and to the extent ascertainable during the year are adjusted for the effects of all dilutive potential equity shares.
(p) Provisions, Contingent Liabilities and Contingent Assets
Provision is recognized in the accounts when there is a present obligation as a result of past event(s) and it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made.
Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.
Contingent liabilities are disclosed unless the possibility of outflow of resources is remote.
Contingent assets are neither recognized nor disclosed in the financial statements.
(q) Cash and cash equivalents
Cash and cash equivalents as indicated in the cash flow statement comprise cash on hand, cash at bank and short-term deposits (not pledged) with an original maturity of three months or less.
(r) Lease
Operating Leases: Leases other than finance lease, are operating leases, and the leased assets are not recognized on the Company''s Balance Sheet. Payments under operating leases are recognized in the Profit and Loss Statement on a straight-line basis over the term of the lease.
Finance Lease: Assets acquired under finance leases are recognized as an asset and a liability at the commencement of the lease, at the lower of the fair value of the assets and the present value of minimum lease payments. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Assets given under finance leases are recognized as receivables at an amount equal to the net investment in the lease and the finance income is based on a constant rate of return on the outstanding net investment.
Mar 31, 2015
(a) Basis of preparation of Financial Statements
These financial statements have been prepared to comply with Accounting
Principles Generally accepted in India (Indian GAAP), the Accounting
Standards notified under the relevant provisions of the Companies Act,
2013. The financial statements are prepared on accrual basis under the
historical cost convention, except for certain Fixed Assets which are
carried at revalued amounts and insurance & other claims/refunds, which
due to uncertainty in realization, are accounted for on actual receipt
basis. The financial statements are presented in Indian rupees rounded
off to the nearest rupees in lacs.
(b) Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires judgments, estimates and assumptions to be made that affect
the reported amount of assets and liabilities, disclosure of contingent
liabilities on the date of the financial statements and the reported
amount of revenues and expenses during the reporting period. Difference
between the actual results and estimates are recognised in the period
in which the results are known/ materialised.
(c) Tangible fixed assets
Tangible fixed Assets are stated at cost (or revalued amounts, as the
case may be), less accumulated depreciation and impairment, if any. The
cost of acquisition comprises purchase price inclusive of duties (net
of Cenvat), taxes, incidental expenses, erection/commissioning/trial
run expenses and interest etc, up to the date the assets are ready for
intended use.
In case of revaluation of tangible fixed assets, the original cost as
written up by the approved valuers is considered in the accounts and
the differential amount is transferred to the revaluation reserve.
Insurance spares which can be used only in connection with an item of
tangible fixed assets and whose use, as per technical assessment, is
expected to be irregular, are capitalized and depreciated over the
residual life of the respective assets.
Assets awaiting disposal are valued at the lower of written down value
and net realizable value and disclosed separately under Other Current
Assets.
Subsequent expenditure related to an item of tangible fixed asset is
added to its book value only if it increases the future benefits from
the existing asset beyond its previously assessed standard of
performance. All other expenses on existing tangible fixed assets,
including day-to-day repair and maintenance expenditure and cost of
replacing parts, are charged to the statement of profit and loss for
the period during which such expenses are incurred.
(d) Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Expenditure of cost of exploration, Net Present
Value of Forest Restoration, developing ore bodies and to expand the
capacity of mine is capitalized as Mine Development Cost under
Intangible Asset.
Computer software not being part of the hardware operating system are
capitalized as intangible asset.
(e) Depreciation/Amortization Tangible Assets
Depreciation on Fixed Assets is provided on straight line method at the
rates and in the manner prescribed in Schedule II to the Companies Act,
2013 over their useful life except in respect of leasehold land which
is amortized on a straight line basis over the period of lease.
Additional deprecation arising due to revaluation of fixed assets is
adjusted against Revaluation reserve.
Intangible Assets
Mining lease and mines development expenditure are amortized over the
balance period of mining leases on straight line basis.
Computer software is amortized over a period of three years on straight
line basis.
(f) Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs relating to the acquisition / construction of
qualifying assets are capitalized until the time all substantial
activities necessary to prepare the qualifying assets for their
intended use are complete. A qualifying asset is one that necessarily
takes substantial period of time to get ready for its intended use. All
other borrowing costs are charged to revenue.
(g) Impairment
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. An impairment loss is charged to the Statement
of Profit and Loss in the year in which an asset is identified as
impaired. The impairment loss recognised in prior accounting period is
reversed if there has been a change in the estimate of recoverable
amount.
(h) Investments
Current investments are carried at lower of cost and quoted/fair value,
computed category-wise. Non Current investments are stated at cost.
Provision for diminution in the value of Non Current investments is
made only if such a decline is other than temporary.
(i) Inventories
Raw materials, Stores, spares & consumables are valued at lower of cost
and net realizable value. However, materials and other items held for
use in the production of inventories are not written down below cost if
the finished products in which they will be incorporated are expected
to be sold at or above cost. Cost is determined on weighted average
basis. Royalty on stock lying at mines is accounted on dispatch of
materials.
Work in Progress and finished goods are valued at lower of cost and net
realizable value. Cost includes direct materials, labour cost and a
proportion of manufacturing overheads based on normal operating
capacity. Cost of finished goods includes excise duty and is determined
on weighted average basis.
Obsolete/damaged stores, saleable dust and saleable scrap are valued at
estimated net realizable value.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
The recovery of ferro chrome from slag generated at the plant during
the manufacturing operations is accounted for on actual ascertainment
of quantity thereof, since it is not feasible to determine the quantum
till the re-processing of such slag.
(j) Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the company and the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognized :
Sale of goods
Revenue from sale of goods is recognized when all the significant risks
and rewards of ownership of the goods have been passed to the buyer,
usually on delivery of the goods. The Company collects sales taxes and
value added taxes (VAT) on behalf of the government and, therefore,
these are not economic benefits flowing to the company. Hence, they are
excluded from revenue. Excise duty deducted from revenue (gross) is the
amount that is included in the revenue (gross) and not the entire
amount of liability arising during the year.
Export Benefits
Export benefits are recognized on accrual basis as per schemes
specified in Foreign Trade Policy, as amended from time to time.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
(k) Foreign Currency Translation
(i) Initial recognition
Foreign currency transactions are recorded in the reporting currency by
applying to the foreign currency amount the exchange rate between the
reporting currency and the foreign currency at the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction and non-monetary items which are carried
at fair value or other similar valuation denominated in a foreign
currency are reported using the exchange rates that existed when the
values were determined.
(iii) Exchange differences
Exchange differences arising on the settlement / or reporting of
monetary items, at rates different from those at which they were
initially recorded during the period or reported in previous financial
statements, are recognized as income or expenses in the period in which
they arises.
(Iv) Forward exchange contracts entered into to hedge foreign currency
risk of an existing asset/ liability
The premium or discount arising at the inception of forward exchange
contracts is amortized as expenses or income over the life of the
respective contracts. Losses on account Exchange differences on such
contracts are recognized in the statement of profit and loss in the
period in which the exchange rates change. Any profit or loss arising
on cancellation or renewal of forward exchange contract is recognized
as income or expense for the period.
(v) Derivative Instruments
In terms of the announcement made by the Institute of Chartered
Accountants of India, the accounting for derivative contracts (other
than those covered under Accounting Standard -11 "The Effects of
Changes in Foreign Exchange Rates") is done based on the "marked to
market" on a portfolio basis, and the net loss after considering the
offsetting effect on the underlying hedge item is charged to the
statement of profit and loss. Net gains are ignored as a matter of
prudence.
(l) Employee Benefits
Short Term Employee Benefits
The undiscounted amount of short term employee benefits expected to be
paid in exchange for the services rendered by employees are recognised
as an expense during the period when the employees render the services.
These benefits include performance incentive and compensated absences.
Post Employee Benefits
Defined Contribution Plans
A defined contribution plan is a post-employment benefit plan under
which the Company pays specified contributions to a separate entity.
The Company makes specified monthly contributions towards Provident
Fund and Superannuation Fund. The Company's contribution is recognised
as an expense in the Statement of Profit and Loss during the period in
which the employee renders the related service.
Defined Benefit Plans
The liability in respect of defined benefit plans and other
post-employment benefits is calculated using the Projected Unit Credit
Method and spread over the period during which the benefit is expected
to be derived from employees' services. Actuarial gains and losses in
respect of post-employment and other long term benefits are charged to
the Statement of Profit and Loss.
(m) Income taxes
Tax expense comprises of current tax and deferred tax. Current tax is
measured at the amount expected to be paid to the tax authorities,
using the applicable tax rates. Deferred income tax reflect the current
period timing differences between taxable income and accounting income
for the period and reversal of timing differences of earlier
years/period. Deferred tax assets are recognised only to the extent
that there is a reasonable certainty that sufficient future income will
be available except that deferred tax assets, in case there are
unabsorbed depreciation or losses, are recognised if there is virtual
certainty that sufficient future taxable income will be available to
realize the same.
Deferred tax assets and liabilities are measured using the tax rates
and tax law that have been enacted or substantively enacted by the
Balance Sheet date.
(n) Segment reporting
Identification of segments
The Company's operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operate.
Allocation of common costs
Common allocable costs are allocated to each segment on case to case
basis by applying the ratio, appropriate to each relevant case.
Revenue and expenses which relates to the enterprise as a whole and are
not allocable to segments on a reasonable basis, are included under the
head "Unallocated - Common".
Unallocated items
Unallocated items include general corporate income and expense items
which are not allocated to any business segment.
Segment accounting policies
The Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as a whole.
(o) Earnings Per Share
Basic earning per share is calculated by dividing the net profit or
loss 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 earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding and to the extent
ascertainable during the year are adjusted for the effects of all
dilutive potential equity shares.
(p) Provisions, Contingent Liabilities and Contingent Assets
Provision is recognised in the accounts when there is a present
obligation as a result of past event(s) and it is probable that an
outflow of resources will be required to settle the obligation and a
reliable estimate can be made.
Provisions are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
reporting date. These estimates are reviewed at each reporting date and
adjusted to reflect the current best estimates.
Contingent liabilities are disclosed unless the possibility of outflow
of resources is remote.
Contingent assets are neither recognised nor disclosed in the financial
statements.
(q) Cash and cash equivalents
Cash and cash equivalents as indicated in the cash flow statement
comprise cash on hand, cash at bank and short-term deposits (not
pledged) with an original maturity of three months or less.
(r) Lease
Operating Leases: Leases other than finance lease, are operating
leases, and the leased assets are not recognised on the Company's
Balance Sheet. Payments under operating leases are recognised in the
Profit and Loss Statement on a straight-line basis over the term of the
lease.
Finance Lease : Assets acquired under finance leases are recognised as
an asset and a liability at the commencement of the lease, at the lower
of the fair value of the assets and the present value of minimum lease
payments. The finance expense is allocated to each period during the
lease term so as to produce a constant periodic rate of interest on the
remaining balance of the liability. Assets given under finance leases
are recognised as receivables at an amount equal to the net investment
in the lease and the finance income is based on a constant rate of
return on the outstanding net investment.
Mar 31, 2014
(a) Basis of preparation of Financial Statements
The financial statements have been prepared to comply in all material
respects with the Accounting Standards notified by the Companies
(Accounting Standards) Rules, 2006 (as amended) and the relevant
provisions of the Companies Act, 1956. The financial statements have
been prepared under the historical cost convention on accrual basis,
except in respect , for certain fixed assets which are revalued and
interest income on overdue bills and insurance & other claims /
refunds, which due to uncertainty in realization, are accounted for on
acceptance/actual receipt basis.
All assets and liabilities have been classified as current or
non-current as per the Company''s normal operating cycle and other
criteria set out in the Schedule VI to the Companies Act, 1956. Based
on the nature of products and the time between the acquisition of
assets for processing and their realisation in cash and cash
equivalents, the Company ascertains its operating cycle for the purpose
of current or non- current classification of assets and liabilities.
(b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities 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.
(c) Tangible fixed assets
Tangible fixed Assets are stated at cost (or revalued amounts, as the
case may be), less accumulated depreciation and impairment, if any. The
cost of acquisition comprises purchase price inclusive of duties (net
of Cenvat), taxes, incidental expenses, erection/commissioning/trial
run expenses and interest etc, up to the date the assets are ready for
intended use.
In case of revaluation of tangible fixed assets, the original cost as
written up by the approved valuers is considered in the accounts and
the differential amount is transferred to the revaluation reserve.
Machinery spares which can be used only in connection with an item of
tangible fixed assets and whose use, as per technical assessment, is
expected to be irregular, are capitalized and depreciated over the
residual life of the respective assets.
Assets awaiting disposal are valued at the lower of written down value
and net realizable value and disclosed separately under Other Current
Assets.
Subsequent expenditure related to an item of tangible fixed asset is
added to its book value only if it increases the future benefits from
the existing asset beyond its previously assessed standard of
performance. All other expenses on existing tangible fixed assets,
including day-to-day repair and maintenance expenditure and cost of
replacing parts, are changed to the statement of profit and loss for
the period during which such expenses are incurred.
(d) Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Expenditure of cost of exploration, Net Present
Value of Forest Restoration , developing ore bodies and to expand the
capacity of mine are capitalized as Mine Development Cost under
Intangible Asset.
Computer software not being part of the hardware operating system are
capitalized as intangible asset.
(e) Depreciation/Amortization
The classification of plant & machinery into continuous and
non-continuous process is done as per the technical evaluation and
depreciation thereon is provided accordingly.
Depreciation on fixed assets is provided on straight-line method at the
rates and in the manner prescribed in schedule XIV of the Companies
Act, 1956 or at rates determined based on useful lives of the
respective assets, as estimated by the management, whichever is higher.
Depreciation on revalued assets is provided at the rates specified in
Section 205(2) (b) of The Companies Act, 1956. However in case of
fixed assets whose life is determined by the valuer to be less than
their useful life under Section 205, depreciation is provided at the
higher rate, to ensure the amortization of these assets over their life
determined by the valuer.
Additional depreciation arising due to revaluation of fixed assets is
adjusted against Revaluation reserve.
Leasehold land is amortized on a straight line basis over the period of
lease of 90 years.
Mining lease and mines development expenditure are amortised over the
balance period of mining leases on straight line basis.
Computer software are amortized over a period of three years on
straight line basis.
(f) Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs relating to the acquisition / construction of
qualifying assets are capitalized until the time all substantial
activities necessary to prepare the qualifying assets for their
intended use are complete. A qualifying asset is one that necessarily
takes substantial period of time to get ready for its intended use. All
other borrowing costs are charged to revenue.
(g) Impairment of tangible and intangible assets
The carrying amounts of assets are reviewed at each balance sheet date
to determine if there is any indication of impairment based on
external/internal factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount which
represents the greater of the net selling price and ''Value in use'' of
the assets. The estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and risks specific to the
asset
In case of impairment, if any, depreciation is provided on the revised
carrying amount of the assets over their remaining useful life.
A previously recognised impairment loss is increased or reversed
depending on changes in 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.
(h) Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments.
(i) Inventories
Raw materials, Stores, spares & consumables are valued at lower of cost
and net realizable value. However, materials and other items held for
use in the production of inventories are not written down below cost if
the finished products in which they will be incorporated are expected
to be sold at or above cost. Cost is determined on moving weighted
average basis. Royalty on stock lying at mines is accounted on
dispatch of materials.
Work in Progress and finished goods are valued at lower of cost and net
realizable value. Cost includes direct materials, labour cost and a
proportion of manufacturing overheads based on normal operating
capacity. Cost of finished goods includes excise duty and is determined
on a moving weighted average basis.
Obsolete/damaged stores, saleable dust and saleable scrap are valued at
estimated net realizable value.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
The recovery of ferro chrome from slag generated at the plant during
the manufacturing operations is accounted for on actual ascertainment
of quantity thereof, since it is not feasible to determine the quantum
till the re-processing of such slag.
(j) Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the company and the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognized :
Sale of goods
Revenue from sale of goods is recognized when all the significant risks
and rewards of ownership of the goods have been passed to the buyer,
usually on delivery of the goods. The Company collects sales taxes and
value added taxes (VAT) on behalf of the government and, therefore,
these are not economic benefits flowing to the company. Hence, they are
excluded from revenue. Excise duty deducted from revenue (gross) is the
amount that is included in the revenue (gross) and not the entire
amount of liability arising during the year.
Export Benefits
Export benefits are recognized on accrual basis as per schemes
specified in Foreign Trade Policy, as amended from time to time.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
(k) Foreign currency translation
(i) Initial recognition
Foreign currency transactions are recorded in the reporting currency by
applying to the foreign currency amount the exchange rate between the
reporting currency and the foreign currency at the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction and non-monetary items which are carried
at fair value or other similar valuation denominated in a foreign
currency are reported using the exchange rates that existed when the
values were determined.
(iii) Exchange differences
Exchange differences arising on the settlement / or reporting of
monetary items, at rates different from those at which they were
initially recorded during the period or reported in previous financial
statements, are recognized as income or expenses in the period in which
they arises
(Iv) Forward exchange contracts entered into to hedge foreign currency
risk of an existing asset/ liability
The premium or discount arising at the inception of forward exchange
contracts is amortized as expenses or income over the life of the
respective contracts. Losses on account Exchange differences on such
contracts are recognized in the statement of profit and loss in the
period in which the exchange rates change. Any profit or loss arising
on cancellation or renewal of forward exchange contract is recognized
as income or expense for the period.
(v) Derivative Instruments
In terms of the announcement made by the Institute of Chartered
Accountants of India, the accounting for derivative contracts (other
than those covered under Accounting Standard -11 "The Effects of
Changes in Foreign Exchange Rates") is done based on the "marked to
market" on a portfolio basis, and the net loss after considering the
offsetting effect on the underlying hedge item is charged to the income
statement. Net gains are ignored as a matter of prudence.
(l) Retirement and other employee benefits
Retirement benefits in the form of Provident Fund, Superannuation Fund
and Employee State Insurance are defined contribution schemes and the
contributions are charged to the Statement of Profit and Loss of the
year when the contributions to the respective funds are due. There are
no obligations other than the contribution payable to the respective
funds.
Gratuity liability is a defined benefit obligation and is provided for
on the basis of actuarial valuation on projected unit credit method
made at the end of each financial year.
Long term compensated absences are provided for based on actuarial
valuation, as per projected unit credit method made at the end of each
financial year.
Actuarial gains/losses are taken to Statement of profit and loss and
are not deferred
(m) Income taxes
Tax expense comprises of current, deferred and prior year tax expenses,
if any (net of MAT credit entitlement).
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Indian Income Tax Act. Deferred
income taxes reflect the impact of current period timing differences
between taxable income and accounting income for the year and reversal
of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognized only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. If the company
has carry forward unabsorbed depreciation and tax losses, deferred tax
assets are recognized only if there is virtual certainty backed by
convincing evidence that such deferred tax assets can be realized
against future taxable profits. Unrecognized deferred tax assets of
earlier periods are re-assessed and recognized to the extent that it
has become reasonably certain that future taxable income will be
available against which such deferred tax assets can be realized.
At each balance sheet date the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be, that sufficient future taxable income will be
available against which such deferred tax assets can be realized.
(n) Segment reporting
Identification of segments
The Company''s operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operate.
Allocation of common costs
Common allocable costs are allocated to each segment on case to case
basis by applying the ratio, appropriate to each relevant case.
Revenue and expenses which relates to the enterprise as a whole and are
not allocable to segments on a reasonable basis, are included under the
head "Unallocated - Common"
Unallocated items
Unallocated items include general corporate income and expense items
which are not allocated to any business segment.
Segment accounting policies
The Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as a whole
(o) Earnings Per Share
Basic earning per share is calculated by dividing the net profit or
loss 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 earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding and to the extent
ascertainable during the year are adjusted for the effects of all
dilutive potential equity shares.
(p) Provisions
A provision is recognized when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle such obligation, in respect of which a
reliable estimate can be made.
Provisions made in terms of Accounting Standard 29 are not discounted
to its present value and are determined based on management 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
management estimates.
(q) Contingent liabilities & Commitments
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
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The company does not
recognize a contingent liability but discloses its existence in the
financial statements.
Capital commitments'' are future liabilities for capital expenditure in
respect of Capital Contracts yet to be executed.
''Other commitments'' include all future liabilities for Contractual
Commitments arising out of non cancellable contracts having penalty
disproportionate to the benefits.
(r) Cash and cash equivalents
Cash and cash equivalents as indicated in the cash flow statement
comprise cash on hand, cash at bank and short-term deposits with an
original maturity of three months or less.
(s) Royalty
Royalty on mining materials is accounted based on the rates notified by
Indian Bureau of Mines for each month in absence of monthly rates,
these are accounted on the basis of latest available rates.
(t) Lease
Finance leases, which effectively transfer to the company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalized at the inception of the lease term at the lower of the
fair value of the leased property and present value of minimum lease
payments. Lease payments are apportioned between the finance charges
and reduction of the lease liability so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance charges
are recognized as finance costs in the statement of profit and loss.
Lease management fees, legal charges and other initial direct costs of
lease are capitalized.
A leased asset is depreciated on a straight-line basis over the useful
life of the asset or the useful life envisaged in Schedule XIV to the
Companies Act, 1956, whichever is lower. However, if there is no
reasonable certainty that the company will obtain the ownership by the
end of the lease term, the capitalized asset is depreciated on a
straight-line basis over the shorter of the estimated useful life of
the asset, the lease term or the useful life envisaged in Schedule XIV
to the Companies Act, 1956.
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
(b) Terms/ rights attached to equity shares
(I) The company has only one class of equity shares having par value of
Rs 5 per share. Each holder of equity shares is entitled to one vote
per share. The company declares and pays dividends in Indian rupees.
The dividend proposed by the Board of Directors is subject to the
approval of the shareholders in the ensuing Annual General Meeting.
(Ii) The amount of per share dividend recognized as distributions to
equity shareholders is Rs 0.60 per share (31 March 2013: Rs 0.50 per
share).
(Iii) In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive remaining assets of the Company. The
distribution will be in proportion to the number of equity shares held
by the shareholders.
(e) Money received against share warrant represents 66,00,000 warrants
allotted on a preferential basis to the promoter group on 19.10.2012
entitiling them to apply for obtain allotment of one equity share of
Rs. 5/- each fully paid up at a price of Rs. 16/- per share at a
premium of Rs. 11/- per share against each such warrant at any time
after the date of allotment but on or before the expiry of 18 months
from the date of allotment. The company had received Rs. 2,64,00,000
being 25 % of the consideration against these warrants. Company has
alloted 66,00,000 equity shares on 16.04.2014 pursuant to these warrant
on receipt of balance consideration of Rs. 7,92,00,000.
b) Nature of Security
Term loans and Funded interest term loans are secured by a first charge
over Plant & Machinery and other fixed assets (including factory land
and building) and by way of second charge over current assets of the
Company. The loans are also secured by pledge of a part of shareholding
of the promoter group [including shares held by Mr Pramod Mittal (a
director) and Mr V K Mittal (ceased to be director w.e.f 28th July,
2010)]. The above loans are further guaranteed by personnel gurantee
issued / to be issued by Mr Pramod Mittal and Mr V K Mittal (ceased to
be director w.e.f 28th July, 2010) and by corporate guarantee of Shakti
Chrome Limited & Ispat Minerals Limited. All the mortgages and charges
created in favour of the Banks for Term Loan and Working Capital
Facilities rank pari passu inter se.
b) Nature of Security
Deferred Payment Credits are secured against hypothecation of assets
purchased against such loans.
Advance towards Promoter Contribution
Amount received from promoter group companies towards participation in
equity and/ or quasi debt instruments. Pending finalisation of the
terms and pricing, the same has been shown as interest free advance
towards promoter contribution.
Working capital facilities are secured by first charge over current
assets and by second charge over fixed assets of the Company. The loans
are also secured by pledge of a part of shareholding of the promoter
group [including shares held by Mr Pramod Mittal (a director) and Mr V
K Mittal (ceased to be director w.e.f 28th July, 2010)]. The above
loans are further guaranteed by personnel gurantees issued/ to be
issued byMr Pramod Mittal and Mr V K Mittal and by corporate guarantee
of Shakti Chrome Limited & Ispat Minerals Limited. All the mortgages
and charges created in favour of the Banks for Term Loan and Working
Capital Facilities rank pari passu inter se.
Mar 31, 2013
(a) Basis of preparation of Financial Statements
The financial statements have been prepared to comply in all material
respects with the Accounting Standards notified by the Companies
(Accounting Standards) Rules, 2006 (as amended) and the relevant
provisions of the Companies Act, 1956. The financial statements have
been prepared under the historical cost convention on accrual basis,
except in respect of interest income on overdue bills and insurance &
other claims / refunds, which due to uncertainty in realization, are
accounted for on acceptance/actual receipt basis.
All assets and liabilities have been classified as current or
non-current as per the Company''s normal operating cycle and other
criteria set out in the Revised Schedule VI to the Companies Act, 1956.
Based on the nature of products and the time between the acquisition of
assets for processing and their realisation in cash and cash
equivalents, the Company ascertains its operating cycle for the purpose
of current or non-current classification of assets and liabilities.
(b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities 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.
(c) Tangible fixed assets
Tangible fixed Assets are stated at cost (or revalued amounts, as the
case may be), less accumulated depreciation and impairment, if any. The
cost of acquisition comprises purchase price inclusive of duties (net
of Cenvat), taxes, incidental expenses, erection/commissioning/trial
run expenses and interest etc, up to the date the assets are ready for
intended use.
In case of revaluation of tangible fixed assets, the original cost as
written up by the approved valuers is considered in the accounts and
the differential amount is transferred to the revaluation reserve.
Machinery spares which can be used only in connection with an item of
tangible fixed assets and whose use, as per technical assessment, is
expected to be irregular, are capitalized and depreciated over the
residual life of the respective assets.
Assets awaiting disposal are valued at the lower of written down value
and net realizable value and disclosed separately under Other Current
Assets.
Subsequent expenditure related to an item of tangible fixed asset is
added to its book value only if it increases the future benefits from
the existing asset beyond its previously assessed standard of
performance. All other expenses on existing tangible fixed assets,
including day-to-day repair and maintenance expenditure and cost of
replacing parts, are changed to the statement of profit and loss for
the period during which such expenses are incurred.
(d) Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Expenditure incurred on development of mines are
capitalized as intangible assets.
Computer software not being part of the hardware operating system are
capitalized as intangible asset.
(e) Depreciation/Amortization
The classification of plant & machinery into continuous and
non-continuous process is done as per the technical evaluation and
depreciation thereon is provided accordingly.
Depreciation on fixed assets is provided on straight-line method at the
rates and in the manner prescribed in schedule XIV of the Companies
Act, 1956 or at rates determined based on useful lives of the
respective assets, as estimated by the management, whichever is higher.
Depreciation on revalued assets is provided at the rates specified in
Section 205(2) (b) of The Companies Act, 1956. However in case of
fixed assets whose life is determined by the valuer to be less than
their useful life under Section 205, depreciation is provided at the
higher rate, to ensure the amortization of these assets over their life
determined by the valuer.
Addition deprecation arising due to revaluation fixed assets is
adjusted against Revaluation reserve.
Leasehold land is amortized on a straight line basis over the period of
lease of 90 years.
Mining lease and mines development expenditure are amortized over the
balance period of mining leases on straight line basis.
Computer software are amortized over a period of three years on
straight line basis.
(f) Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs relating to the acquisition / construction of
qualifying assets are capitalized until the time all substantial
activities necessary to prepare the qualifying assets for their
intended use are complete. A qualifying asset is one that necessarily
takes substantial period of time to get ready for its intended use. All
other borrowing costs are charged to revenue.
(g) Impairment of tangible and intangible assets
The carrying amounts of assets are reviewed at each balance sheet date
to determine if there is any indication of impairment based on
external/internal factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount which
represents the greater of the net selling price and ''Value in use'' of
the assets. The estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and risks specific to the
asset
In case of impairment, if any, depreciation is provided on the revised
carrying amount of the assets over their remaining useful life.
A previously recognised impairment loss is increased or reversed
depending on changes in 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.
(h) Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments.
(i) Inventories
Raw materials, Stores, spares & consumables are valued at lower of cost
and net realizable value. However, materials and other items held for
use in the production of inventories are not written down below cost if
the finished products in which they will be incorporated are expected
to be sold at or above cost. Cost is determined on moving weighted
average basis. Royalty on stock lying at mines is accounted on
dispatch of materials.
Work in Progress and finished goods are valued at lower of cost and net
realizable value. Cost includes direct materials, labour cost and a
proportion of manufacturing overheads based on normal operating
capacity. Cost of finished goods includes excise duty and is determined
on a moving weighted average basis.
Obsolete/damaged stores, saleable dust and saleable scrap are valued at
estimated net realizable value.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
The recovery of ferro chrome from slag generated at the plant during
the manufacturing operations is accounted for on actual ascertainment
of quantity thereof, since it is not feasible to determine the quantum
till the re-processing of such slag.
(j) Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the company and the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognized :
Sale of goods
Revenue from sale of goods is recognized when all the significant risks
and rewards of ownership of the goods have been passed to the buyer,
usually on delivery of the goods. The Company collects sales taxes and
value added taxes (VAT) on behalf of the government and, therefore,
these are not economic benefits flowing to the company. Hence, they are
excluded from revenue. Excise duty deducted from revenue (gross) is the
amount that is included in the revenue (gross) and not the entire
amount of liability arising during the year.
Export Benefits
Export benefits are recognized on accrual basis as per schemes
specified in Foreign Trade Policy, as amended from time to time.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
(k) Foreign currency translation
(i) Initial recognition
Foreign currency transactions are recorded in the reporting currency by
applying to the foreign currency amount the exchange rate between the
reporting currency and the foreign currency at the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction and non-monetary items which are carried
at fair value or other similar valuation denominated in a foreign
currency are reported using the exchange rates that existed when the
values were determined.
(iii) Exchange differences
Exchange differences arising on the settlement / or reporting of
monetary items, at rates different from those at which they were
initially recorded during the period or reported in previous financial
statements, are recognized as income or expenses in the period in which
they arises
(iv) Forward exchange contracts entered into to hedge foreign currency
risk of an existing asset/ liability
The premium or discount arising at the inception of forward exchange
contracts is amortized as expenses or income over the life of the
respective contracts. Losses on account Exchange differences on such
contracts are recognized in the statement of profit and loss in the
period in which the exchange rates change. Any profit or loss arising
on cancellation or renewal of forward exchange contract is recognized
as income or expense for the period.
(v) Derivative Instruments
In terms of the announcement made by the Institute of Chartered
Accountants of India, the accounting for derivative contracts (other
than those covered under Accounting Standard -11 "The Effects of
Changes in Foreign Exchange Rates") is done based on the "marked to
market" on a portfolio basis, and the net loss after considering the
offsetting effect on the underlying hedge item is charged to the income
statement. Net gains are ignored as a matter of prudence.
(l) Retirement and other employee benefits
Retirement benefits in the form of Provident Fund, Superannuation Fund
and Employee State Insurance are defined contribution schemes and the
contributions are charged to the Statement of Profit and Loss of the
year when the contributions to the respective funds are due. There are
no obligations other than the contribution payable to the respective
funds.
Gratuity liability is a defined benefit obligation and is provided for
on the basis of actuarial valuation on projected unit credit method
made at the end of each financial year.
Long term compensated absences are provided for based on actuarial
valuation, as per projected unit credit method made at the end of each
financial year.
Actuarial gains/losses are taken to Statement of profit and loss and
are not deferred
(m) Income taxes
Tax expense comprises of current, deferred and prior year tax expenses,
if any (net of MAT credit entitlement).
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Indian Income Tax Act. Deferred
income taxes reflect the impact of current period timing differences
between taxable income and accounting income for the year and reversal
of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognized only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. If the company
has carry forward unabsorbed depreciation and tax losses, deferred tax
assets are recognized only if there is virtual certainty backed by
convincing evidence that such deferred tax assets can be realized
against future taxable profits. Unrecognized deferred tax assets of
earlier periods are re-assessed and recognized to the extent that it
has become reasonably certain that future taxable income will be
available against which such deferred tax assets can be realized.
At each balance sheet date the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be, that sufficient future taxable income will be
available against which such deferred tax assets can be realized.
(n) Segment reporting
Identification of segments
The Company''s operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operate.
Allocation of common costs
Common allocable costs are allocated to each segment on case to case
basis by applying the ratio, appropriate to each relevant case.
Revenue and expenses which relates to the enterprise as a whole and are
not allocable to segments on a reasonable basis, are included under the
head "Unallocated - Common".
Unallocated items
Unallocated items include general corporate income and expense items
which are not allocated to any business segment.
Segment accounting policies
The Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as a whole.
(o) Earnings Per Share
Basic earning per share is calculated by dividing the net profit or
loss 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 earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding and to the extent
ascertainable during the year are adjusted for the effects of all
dilutive potential equity shares.
(p) Provisions
A provision is recognized when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle such obligation, in respect of which a
reliable estimate can be made.
Provisions made in terms of Accounting Standard 29 are not discounted
to its present value and are determined based on management 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
management estimates.
(q) Contingent liabilities & Commitments
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
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The company does not
recognize a contingent liability but discloses its existence in the
financial statements.
Capital commitments'' are future liabilities for capital expenditure in
respect of Capital Contracts yet to be executed.
''Other commitments'' include all future liabilities for Contractual
Commitments arising out of non cancellable contracts having penalty
disproportionate to the benefits.
(r) Cash and cash equivalents
Cash and cash equivalents as indicated in the cash flow statement
comprise cash on hand, cash at bank and short-term deposits with an
original maturity of three months or less.
(s) Royalty
Royalty on mining materials is accounted based on the rates notified by
Indian Bureau of Mines for each month in absence of monthly rates,
these are accounted on the basis of latest available rates.
(t) Lease
Finance leases, which effectively transfer to the company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalized at the inception of the lease term at the lower of the
fair value of the leased property and present value of minimum lease
payments. Lease payments are apportioned between the finance charges
and reduction of the lease liability so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance charges
are recognized as finance costs in the statement of profit and loss.
Lease management fees, legal charges and other initial direct costs of
lease are capitalized.
A leased asset is depreciated on a straight-line basis over the useful
life of the asset or the useful life envisaged in Schedule XIV to the
Companies Act, 1956, whichever is lower. However, if there is no
reasonable certainty that the company will obtain the ownership by the
end of the lease term, the capitalized asset is depreciated on a
straight-line basis over the shorter of the estimated useful life of
the asset, the lease term or the useful life envisaged in Schedule XIV
to the Companies Act, 1956.
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
Mar 31, 2012
(a) Basis of preparation of Financial Statements
The financial statements have been prepared to comply in all material
respects with the Accounting Standards notified by the Companies
(Accounting Standards) Rules, 2006 (as amended) and the relevant
provisions of the Companies Act, 1956. The financial statements have
been prepared under the historical cost convention on accrual basis,
except in respect of interest income on overdue bills and insurance &
other claims / refunds, which due to uncertainty in realization, are
accounted for on acceptance/actual receipt basis.
All assets and liabilities have been classified as current or
non-current as per the Company's normal operating cycle and other
criteria set out in the Revised Schedule VI to the Companies Act, 1956.
Based on the nature of products and the time between the acquisition of
assets for processing and their realisation in cash and cash
equivalents, the Company ascertains its operating cycle for the purpose
of current or non- current classification of assets and liabilities.
(b) Presentation and disclosure of financial statements
During the year ended 31st March, 2012, the revised Schedule VI
notified under the Companies Act 1956, has become applicable to the
company, for preparation and presentation of its financial statements.
The adoption of revised Schedule VI does not impact recognition and
measurement principles followed for preparation of financial
statements. However, it has significant impact on presentation and
disclosures made in the financial statements. The company has also
reclassified the previous year figures including those given in
brackets in accordance with the requirements applicable in terms of
Revised Schedule VI in the current year.
(c) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities 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.
(d) Tangible fixed assets
Tangible Fixed Assets are stated at cost (or revalued amounts, as the
case may be), less accumulated depreciation and impairment, if any. The
cost of acquisition comprises purchase price inclusive of duties (net
of Cenvat), taxes, incidental expenses, erection/commissioning/trial
run expenses and interest etc, up to the date the assets are ready for
intended use.
In case of revaluation of tangible fixed assets, the original cost as
written up by the approved valuers is considered in the accounts and
the differential amount is transferred to the revaluation reserve.
Machinery spares which can be used only in connection with an item of
tangible fixed assets and whose use, as per technical assessment, is
expected to be irregular, are capitalized and depreciated over the
residual life of the respective assets.
Assets awaiting disposal are valued at the lower of written down value
and net realizable value and disclosed separately under Other Current
Assets.
Subsequent expenditure related to an item of tangible fixed asset is
added to its book value only if it increases the future benefits from
the existing asset beyond its previously assessed standard of
performance. All other expenses on existing tangible fixed assets,
including day-to-day repair and maintenance expenditure and cost of
replacing parts, are changed to the statement of profit and loss for
the period during which such expenses are incurred.
(e) Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. Expenditure incurred on development of mines are
capitalized as intangible assets.
Computer software not being part of the hardware operating system are
capitalised as intangible asset.
(f) Depreciation/Amortisation
The classification of plant & machinery into continuous and
non-continuous process is done as per the technical evaluation and
depreciation thereon is provided accordingly.
Depreciation on fixed assets is provided on straight-line method at the
rates and in the manner prescribed in schedule XIV of the Companies
Act, 1956 or at rates determined based on useful lives of the
respective assets, as estimated by the management, whichever is higher.
Depreciation on revalued assets is provided at the rates specified in
Section 205(2) (b) of The Companies Act, 1956. However in case of
fixed assets whose life is determined by the valuer to be less than
their useful life under Section 205, depreciation is provided at the
higher rate, to ensure the amortisation of these assets over their life
determined by the valuer.
Additional depreciation arising due to revaluation of fixed assets is
adjusted against Revaluation Reserve and thereafter against General
Reserve on FIFO basis.
Leasehold land is amortized on a straight line basis over the period of
lease of 90 years.
Mining lease and mines development expenditure are amortised over the
balance period of mining leases on straight line basis.
Computer software are amortized over a period of three years on
straight line basis.
(g) Borrowing costs
Borrowing cost includes interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs relating to the acquisition / construction of
qualifying assets are capitalized until the time all substantial
activities necessary to prepare the qualifying assets for their
intended use are complete. A qualifying asset is one that necessarily
takes substantial period of time to get ready for its intended use. All
other borrowing costs are charged to revenue.
(h) Impairment of tangible and intangible assets
The carrying amounts of assets are reviewed at each balance sheet date
to determine if there is any indication of impairment based on
external/internal factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount which
represents the greater of the net selling price and 'Value in use' of
the assets. The estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and risks specific to the
asset
In case of impairment, if any, depreciation is provided on the revised
carrying amount of the assets over their remaining useful life.
A previously recognised impairment loss is increased or reversed
depending on changes in 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.
(i) Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
On initial recognition, all investments are measured at cost. The cost
comprises purchase price and directly attributable acquisition charges
such as brokerage, fees and duties.
Current investments are carried in the financial statements at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments.
(j) Inventories
Raw materials, Stores, spares & consumables are valued at lower of cost
and net realizable value. However, materials and other items held for
use in the production of inventories are not written down below cost if
the finished products in which they will be incorporated are expected
to be sold at or above cost. Cost is determined on a weighted average
basis. Royalty on stock lying at mines is accounted on dispatch of
materials.
Work in Progress and finished goods are valued at lower of cost and net
realizable value. Cost includes direct materials, labour cost and a
proportion of manufacturing overheads based on normal operating
capacity. Cost of finished goods includes excise duty and is determined
on a weighted average basis.
Obsolete/damaged stores, saleable dust and saleable scrap are valued at
estimated net realizable value.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
The recovery of ferro chrome and silico manganese from slag generated
at the plant during the manufacturing operations is accounted for on
actual ascertainment of quantity thereof, since it is not feasible to
determine the quantum till the re- processing of such slag.
(k) Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the company and the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognized:
Sale of goods
Revenue from sale of goods is recognized when all the significant risks
and rewards of ownership of the goods have been passed to the buyer,
usually on delivery of the goods. The Company collects sales taxes and
value added taxes (VAT) on behalf of the government and, therefore,
these are not economic benefits flowing to the company. Hence, they are
excluded from revenue. Excise duty deducted from revenue (gross) is the
amount that is included in the revenue (gross) and not the entire
amount of liability arising during the year.
Export Benefits
Export benefits are recognized on accrual basis as per schemes
specified in Foreign Trade Policy, as amended from time to time.
Interest
Interest income is recognized on a time proportion basis taking into
account the amount outstanding and the applicable interest rate.
Interest income is included under the head "other income" in the
statement of profit and loss.
(l) Foreign currency translation
(i) Initial recognition
Foreign currency transactions are recorded in the reporting currency by
applying to the foreign currency amount the exchange rate between the
reporting currency and the foreign currency at the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
(iii) Exchange differences
Exchange differences arising on the settlement / or reporting of
monetary items, at rates different from those at which they were
initially recorded during the period or reported in previous financial
statements, are recognized as income or expenses in the period in which
they arise.
(iv) Forward exchange contracts entered into to hedge foreign currency
risk of an existing asset/ liability
The premium or discount arising at the inception of forward exchange
contracts is amortized as expenses or income over the life of the
respective contracts. Exchange differences on such contracts are
recognized in the statement of profit and loss in the period in which
the exchange rates change. Any profit or loss arising on cancellation
or renewal of forward exchange contract is recognized as income or
expense for the period.
(v) Derivative Instruments
In terms of the announcement made by the Institute of Chartered
Accountants of India, the accounting for derivative contracts (other
than those covered under Accounting Standard -11 "The Effects of
Changes in Foreign Exchange Rates") is done based on the "marked to
market" on a portfolio basis, and the net loss after considering the
offsetting effect on the underlying hedge item is charged to the income
statement. Net gains are ignored as a matter of prudence.
(m) Retirement and other employee benefits
Retirement benefits in the form of Provident Fund, Superannuation Fund
and Employee State Insurance are defined contribution schemes and the
contributions are charged to the Profit and Loss Account of the year
when the contributions to the respective funds are due. There are no
obligations other than the contribution payable to the respective
funds.
Gratuity liability is a defined benefit obligation and is provided for
on the basis of actuarial valuation on projected unit credit method
made at the end of each financial year.
Long term compensated absences are provided for based on actuarial
valuation, as per projected unit credit method made at the end of each
financial year.
Actuarial gains/losses are taken to profit and loss account and are not
deferred.
(n) Income taxes
Tax expense comprises of current, deferred and prior year tax expenses,
if any (net of MAT credit entitlement).
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Indian Income Tax Act. Deferred
income taxes reflect the impact of current period timing differences
between taxable income and accounting income for the year and reversal
of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognized only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. If the company
has carry forward unabsorbed depreciation and tax losses, deferred tax
assets are recognized only if there is virtual certainty backed by
convincing evidence that such deferred tax assets can be realized
against future taxable profits. Unrecognized deferred tax assets of
earlier periods are re-assessed and recognized to the extent that it
has become reasonably certain that future taxable income will be
available against which such deferred tax assets can be realized.
At each balance sheet date the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be, that sufficient future taxable income will be
available against which such deferred tax assets can be realized.
(o) Segment reporting
Identification of segments
The Company's operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operate.
Allocation of common costs
Common allocable costs are allocated to each segment on case to case
basis by applying the ratio, appropriate to each relevant case.
Revenue and expenses which relates to the enterprise as a whole and are
not allocable to segments on a reasonable basis, are included under the
head "Unallocated - Common".
Unallocated items
Unallocated items include general corporate income and expense items
which are not allocated to any business segment. Segment accounting
policies
The Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as a whole.
(p) Earnings Per Share
Basic earning per share is calculated by dividing the net profit or
loss 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 earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
(q) Provisions
A provision is recognized when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle such obligation, in respect of which a
reliable estimate can be made.
Provisions made in terms of Accounting Standard 29 are not discounted
to its present value and are determined based on management 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
management estimates.
(r) Contingent liabilities & Commitments
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
in extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The company does not
recognize a contingent liability but discloses its existence in the
financial statements.
Capital commitments' are future liabilities for capital expenditure in
respect of Capital Contracts yet to be executed.
'Other commitments' include all future liabilities for Contractual
Commitments arising out of non cancellable contracts having penalty
disproportionate to the benefits.
(s) Cash and cash equivalents
Cash and cash equivalents as indicated in the cash flow statement
comprise cash on hand, cash at bank and short-term deposits with an
original maturity of three months or less.
(t) Royalty
Royalty on mining materials is accounted based on the rates notified by
Indian Bureau of Mines for each month. In absence of monthly rates,
these are accounted on the basis of latest available rates.
(u) Lease
Finance leases, which effectively transfer to the company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalized at the inception of the lease term at the lower of the
fair value of the leased property and present value of minimum lease
payments. Lease payments are apportioned between the finance charges
and reduction of the lease liability so as to achieve a constant rate
of interest on the remaining balance of the liability. Finance charges
are recognized as finance costs in the statement of profit and loss.
Lease management fees, legal charges and other initial direct costs of
lease are capitalized.
A leased asset is depreciated on a straight-line basis over the useful
life of the asset or the useful life envisaged in Schedule XIV to the
Companies Act, 1956, whichever is lower. However, if there is no
reasonable certainty that the company will obtain the ownership by the
end of the lease term, the capitalized asset is depreciated on a
straight-line basis over the shorter of the estimated useful life of
the asset, the lease term or the useful life envisaged in Schedule XIV
to the Companies Act, 1956.
Leases, where the lessor effectively retains substantially all the
risks and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of profit and loss on a straight-line basis over the
lease term.
Mar 31, 2011
(i) Basis of preparation of Accounts
The financial statements have been prepared to comply in all material
respects with the Accounting Standards notified by the Companies
(Accounting Standards) Rules, 2006 (as amended) and the relevant
provisions of the Companies Act, 1956. The financial statements have
been prepared under the historical cost convention on accrual basis,
except in respect of interest income on overdue bills and insurance &
other claims / refunds, which due to uncertainty in realization, are
accounted for on acceptance/actual receipt basis. The accounting
policies have been consistently applied by the Company.
(ii) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities 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.
(iii) Fixed Assets
a) Fixed Assets are stated at cost (or revalued amounts, as the case
may be), less accumulated depreciation and impairment, if any. The cost
of acquisition comprises purchase price inclusive of duties (net of
Cenvat), taxes, incidental expenses, erection/commissioning/trial run
expenses and interest etc, up to the date the assets are ready for
intended use.
b) Expenditure incurred on development of mines subsequent to the
allotment of their lease are capitalized as intangible assets.
c) In case of revaluation of fixed assets, the original cost as written
up by the approved valuers is considered in the accounts and the
differential amount is transferred to revaluation reserve.
d) Machinery spares which can be used only in connection with an item
of fixed assets and whose use, as per technical assessment, is expected
to be irregular, are capitalized and depreciated over the residual life
of the respective assets.
e) Assets awaiting disposal are valued at the lower of written down
value and net realizable value and disclosed separately under Other
Current Assets.
(iv) Depreciation / Amortization
a) The classification of Plant & Machinery into continuous and
non-continuous process is done as per the technical evaluation and
depreciation thereon is provided accordingly.
b) Depreciation on fixed assets is provided on straight-line method at
the rates and in the manner prescribed in schedule XIV of the Companies
Act, 1956 or at rates determined based on useful lives of the
respective assets, as estimated by the management, whichever is higher.
c) Depreciation on revalued assets is provided at the rates specified
in Section 205(2) (b) of The Companies Act, 1956. However in case of
fixed assets whose life is determined by the valuer to be less than
their useful life under Section 205, depreciation is provided at the
higher rate, to ensure the amortisation of these assets over their life
determined by the valuer.
d) Additional depreciation arising due to revaluation of fixed assets
is adjusted against Revaluation Reserve.
e) Leasehold land is amortised over the period of lease.
f) Mining lease is amortised over the lease period.
g) Mines Development expenditure are amortised over the balance period
of respective leases.
(v) Impairment of Fixed Assets
a) The carrying amounts of assets are reviewed at each balance sheet
date to determine if there is any indication of impairment based on
external/internal factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount which
represents the greater of the net selling price and 'Value in use' of
the assets. The estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and risks specific to the
asset.
b) In case of impairment, if any, depreciation is provided on the
revised carrying amount of the assets over their remaining useful life.
c) A previously recognised impairment loss is increased or reversed
depending on changes in 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. (item iii to be given in the second year of impairment and
onwards)
(vi) Foreign Currency Transactions
a) Initial Recognition: Foreign currency transactions are recorded in
the reporting currency by applying to the foreign currency amount the
exchange rate between the reporting currency and the foreign currency
at the date of the transaction.
b) Conversion: Foreign currency monetary items are reported using the
closing rate. Non-monetary items which are carried in terms of
historical cost denominated in a foreign currency are reported using
the exchange rate at the date of the transaction; and non-monetary
items which are carried at fair value or other similar valuation
denominated in a foreign currency are reported using the exchange rates
that existed when the values were determined.
c) Exchange Differences: Exchange differences arising on the settlement
/ or reporting of monetary items, at rates different from those at
which they were initially recorded during the period or reported in
previous financial statements, are recognized as income or expenses in
the period in which they arises.
d) Forward Exchange Contracts not intended for trading or speculation
purpose: The premium or discount arising at the inception of forward
exchange contracts is amortized as expenses or income over the life of
the respective contracts. Exchange differences on such contracts are
recognized in the statement of profit and loss in the period in which
the exchange rates change. Any profit or loss arising on cancellation
or renewal of forward exchange contract is recognized as income or
expense for the period.
e) Derivative Instruments: In terms of the announcement made by the
Institute of Chartered Accountants of India, the accounting for
derivative contracts (other than those covered under Accounting
Standard -11 "The Effects of Changes in Foreign Exchange Rates") is
done based on the "marked to market" on a portfolio basis, and the net
loss after considering the offsetting effect on the underlying hedge
item is charged to the income statement. Net gains are ignored as a
matter of prudence.
(vii) Investments
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are valued at lower of cost and net realizable value on
individual investment basis. Long term investments are valued at cost,
unless there is an "other than temporary" decline in value thereof, in
which case, adequate provision/write-off is made in the accounts.
(viii) Inventories
a) Raw materials, Stores, spares & consumables are valued at lower of
cost and net realizable value. However, materials and other items held
for use in the production of inventories are not written down below
cost if the finished products in which they will be incorporated are
expected to be sold at or above cost. Cost is determined on a weighted
average basis.
b) Goods under process and finished goods are valued at lower of cost
and net realizable value. Cost includes direct materials, labour cost
and a proportion of manufacturing overheads based on normal operating
capacity. Cost of finished goods includes excise duty.
c) Obsolete/damaged stores, saleable dust and saleable scrap are valued
at estimated net realizable value.
d) Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
e) The recovery of Ferro chrome and Silico manganese from slag
generated at the plant during the manufacturing operations is accounted
for on actual ascertainment of quantity thereof, since it is not
feasible to determine the quantum till the re-processing of such slag.
f) Royalty on stock lying at mines is accounted on dispatch of
materials.
(ix) Retirement and Other Employee Benefits
a. Retirement benefits in the form of Provident Fund, Superannuation
Fund and Employee State Insurance are defined contribution schemes and
the contributions are charged to the Profit and Loss Account of the
year when the contributions to the respective funds are due. There are
no obligations other than the contribution payable to the respective
funds.
b. Gratuity liability is a defined benefit obligation and is provided
for on the basis of actuarial valuation on projected unit credit method
made at the end of each financial year.
c. Short term compensated absences are provided for based on
estimates. Long term compensated absences are provided for based on
actuarial valuation, as per projected unit credit method.
d. Actuarial gains/losses are taken to profit and loss account and are
not deferred.
(x) Borrowing Costs
Borrowing costs relating to the acquisition / construction of
qualifying assets are capitalized until the time all substantial
activities necessary to prepare the qualifying assets for their
intended use are complete. A qualifying asset is one that necessarily
takes substantial period of time to get ready for its intended use. All
other borrowing costs are charged to revenue.
(xi) Taxation
Tax expense comprises of current, deferred and prior year tax expenses,
if any (net of MAT credit entitlement).
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Indian Income Tax Act. Deferred
income taxes reflect the impact of current period timing differences
between taxable income and accounting income for the year and reversal
of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognized only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. If the company
has carry forward unabsorbed depreciation and tax losses, deferred tax
assets are recognized only if there is virtual certainty backed by
convincing evidence that such deferred tax assets can be realized
against future taxable profits. Unrecognized deferred tax assets of
earlier periods are re-assessed and recognized to the extent that it
has become reasonably certain that future taxable income will be
available against which such deferred tax assets can be realized.
At each balance sheet date the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be, that sufficient future taxable income will be
available against which such deferred tax assets can be realized.
Minimum Alternative Tax (MAT) credit entitlement is recognised as an
asset only when and to the extent there is convincing evidence that the
company will pay normal income tax during the specified period. In the
year in which the MAT credit entitlement becomes eligible to be
recognized as an asset in accordance with the recommendations contained
in Guidance Note issued by the Institute of Chartered Accountants of
India, the said asset is created by way of a credit to the profit and
loss account and shown as MAT Credit Entitlement. The Company reviews
the same at each balance sheet date and writes down the carrying amount
of MAT Credit Entitlement to the extent there is no longer convincing
evidence to the effect that Company will pay normal Income Tax during
the specified period.
(xii) Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Sale of Goods
Revenue from sale of goods is recognized on dispatch of goods to
customers, which is incidental to transfer of significant risk and
reward of ownership. Sales are net of returns, claims, discounts, sales
tax/VAT etc.
Export Benefits
Export benefits are recognized on accrual basis as per schemes
specified in Foreign Trade Policy, as amended from time to time.
Interest
Interest is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
(xiii) Identification of segments
The Company's operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operate.
Allocation of common costs:
Common allocable costs are allocated to each segment on case to case
basis by applying the ratio, appropriate to each relevant case.
Revenue and expenses which relate to the enterprise as a whole and are
not allocable to segments on a reasonable basis, are included under the
head "Unallocated - Common"
The Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as a whole.
(xiv) Provision
A provision is recognized when the company has a present obligation as
a result of past event and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made.
Provisions made in terms of Accounting Standard 29 are not discounted
to its present value and are determined based on management 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
management estimates.
(xv) Earnings per Share
Basic earning per share is calculated by dividing the net profit or
loss 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 earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
(xvi) Excise duty & custom duty
Excise duty is accounted for at the point of manufacture of goods and
accordingly is considered for valuation of finished goods stock lying
in the factories as on the balance sheet date. Similarly, customs duty
on imported materials in transit / lying in bonded warehouse is
accounted for at the time of import / bonding of materials.
(xvii) Cash and Cash equivalents
Cash and cash equivalents as indicated in the cash flow statement
comprise cash on hand, cash at bank and short-term deposits with an
original maturity of three months or less.
(xviii) Contingencies Liabilities
Liabilities, which are current or possible obligation arising from past
events and whose existence is due to occurrence or non-occurrence of
one or more uncertain future events that are not within the Company's
control.
Mar 31, 2010
(i) Basis of preparation of Accounts
The financial statements have been prepared to comply in all material
respects with the Accounting Standards notified by the Companies
(Accounting Standards) Rules, 2006 (as amended) and the relevant
provisions of the Companies Act, 1956. The financial statements have
been prepared under the historical cost convention on accrual basis,
except in respect of interest income on overdue bills and insurance &
other claims / refunds, which due to uncertainty in realization, are
accounted for on acceptance/actual receipt basis. The accounting
policies have been consistently applied by the Company.
(ii) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon managementÃs best
knowledge of current events and actions, actual results could differ
from these estimates
(iii) Fixed Assets
a) Fixed Assets are stated at cost (or revalued amounts, as the case
may be), less accumulated depreciation and impairment, if any. The cost
of acquisition comprises purchase price inclusive of duties (net of
Cenvat), taxes, incidental expenses, erection/commissioning/trial run
expenses and interest etc, up to the date the assets are ready for
intended use.
b) Expenditure incurred on development of mines subsequent to the
allotment of their lease are capitalized as intangible assets.
c) In case of revaluation of fixed assets, the original cost as written
up by the approved valuers is considered in the accounts and the
differential amount is credited to revaluation reserve.
d) Machinery spares which can be used only in connection with an item
of fixed assets and whose use, as per technical assessment, is expected
to be irregular, are capitalized and depreciated over the residual life
of the respective assets.
e) The carrying amounts of assets are reviewed at each balance sheet
date to determine if there is any indication of impairment based on
external/internal factors. An impairment loss is recognized wherever
the carrying amount of an asset exceeds its recoverable amount which
represents the greater of the net selling price and ÃValue in useà of
the assets. The estimated future cash flows considered for determining
the value in use, are discounted to their present value at appropriate
rate arrived at after considering the prevailing interest rates and
weighted average cost of capital.
f) Assets awaiting disposal are valued at the lower of written down
value and net realizable value and disclosed separately.
(iv) Depreciation / Amortization
a) The classification of Plant & Machinery into continuous and
non-continuous process is done as per the technical evaluation and
depreciation thereon is provided accordingly.
b) Depreciation on fixed assets is provided on straight-line method at
the rates and in the manner prescribed in schedule XIV of the Companies
Act, 1956 or at rates determined based on useful lives of the
respective assets, as estimated by the management, whichever is higher.
c) Depreciation on revalued assets is provided at the rates specified
in Section 205(2) (b) of The Companies Act, 1956. However in case of
fixed assets whose life is determined by the valuer to be less than
their useful life under Section 205, depreciation is provided at the
higher rate, to ensure the amortisation of these assets over their life
determined by the valuer.
d) Additional depreciation arising due to revaluation of fixed assets
is adjusted against General Reserve since the surplus arising on
revaluation had been transferred to General Reserve in the period
2004-05 as per HonÃble High Court Order.
e) Leasehold land is amortised over the period of lease.
f) Mining lease is amortised over the lease period.
g) Mines Development expenditure are amortised over the balance period
of respective leases.
h) Depreciation on Fixed Assets added/disposed off during the year is
provided on prorata basis with reference to the
date of addition/disposal.
i) In case of impairment, if any, depreciation is provided on the
revised carrying amount of the assets over their remaining useful life.
(v) Foreign Currency Transactions
a) Initial Recognition: Foreign currency transactions are recorded in
the reporting currency by applying to the foreign currency amount the
exchange rate between the reporting currency and the foreign currency
at the date of the transaction.
b) Conversion: Foreign currency monetary items are reported using the
closing rate. Non-monetary items which are carried in terms of
historical cost denominated in a foreign currency are reported using
the exchange rate at the date of the transaction; and non-monetary
items which are carried at fair value or other similar valuation
denominated in a foreign currency are reported using the exchange rates
that existed when the values were determined.
c) Exchange Differences: Exchange differences arising on the settlement
/ or reporting of monetary items, at rates different from those at
which they were initially recorded during the period or reported in
previous financial statements, are recognized as income or expenses in
the period in which they arises.
d) Forward Exchange Contracts not intended for trading or speculation
purpose: The premium or discount arising at the inception of forward
exchange contracts is amortized as expenses or income over the life of
the respective contracts. Exchange differences on such contracts are
recognized in the statement of profit and loss in the period in which
the exchange rates change. Any profit or loss arising on cancellation
or renewal of forward exchange contract is recognized as income or
expense for the year.
e) Derivative Instruments: In terms of the announcement made by the
Institute of Chartered Accountants of India, the accounting for
derivative contracts (other than those covered under Accounting
Standard -11 ÃThe Effects of Changes in Foreign Exchange RatesÃ) is
done based on the Ãmarked to marketà on a portfolio basis, and the net
loss after considering the offsetting effect on the underlying hedge
item is charged to the income statement. Net gains are ignored as a
matter of prudence.
(vi) Investments
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are valued at lower of cost and net realizable value on
individual investment basis. Long term investments are valued at cost,
unless there is an Ãother than temporaryà decline in value thereof, in
which case, adequate provision/write-off is made in the accounts.
(vii) Inventories
a) Raw materials, Stores, spares & consumables are valued at lower of
cost and net realizable value. However, materials and other items held
for use in the production of finished goods are not written down below
cost if the finished products in which they will be incorporated are
expected to be sold at or above cost. Cost is determined on a weighted
average basis.
b) Goods under process and finished goods are valued at lower of cost
and net realizable value. Cost includes direct materials, labour cost
and a proportion of manufacturing overheads based on normal operating
capacity. Cost of finished goods includes excise duty.
c) Obsolete/damaged stores, saleable dust, discarded fixed assets and
saleable scrap are valued at estimated net realizable value.
d) Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
e) The recovery of ferro chrome and silico manganese from Slag
generated at the plant during the manufacturing operations is accounted
for on actual ascertainment of quantity thereof, since it is not
feasible to determine the quantum till the re-processing of such slag.
(viii) Retirement and Other Employee Benefits
a. Retirement benefits in the form of Provident Fund, Superannuation
Fund and Employee State Insurance are defined contribution schemes and
the contributions are charged to the Profit and Loss Account of the
year when the contributions to the respective funds are due. There are
no obligations other than the contribution payable to the respective
funds.
b. Gratuity liability is a defined benefit obligation and is provided
for on the basis of actuarial valuation on projected unit credit method
made at the end of each financial year.
c. Short term compensated absences are provided for based on
estimates. Long term compensated absences are provided for based on
actuarial valuation, as per projected unit credit method.
d. Actuarial gains/losses are taken to profit and loss account and are
not deferred.
(ix) Borrowing Costs
Borrowing costs relating to the acquisition / construction of
qualifying assets are capitalized until the time all substantial
activities necessary to prepare the qualifying assets for their
intended use are complete. A qualifying asset is one that necessarily
takes substantial period of time to get ready for its intended use. All
other borrowing costs are charged to revenue.
(x) Taxation
Tax expense comprises of current, deferred and prior year tax expenses,
if any (net of MAT credit entitlement).
Current income tax is measured at the amount expected to be paid to the
tax authorities in accordance with the Indian Income Tax Act. Deferred
income taxes reflect the impact of current year timing differences
between taxable income and accounting income for the year and reversal
of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognized only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. If the company
has carry forward unabsorbed depreciation and carry forward tax losses,
deferred tax assets are recognized only if there is virtual certainty
backed by convincing evidence that such deferred tax assets can be
realized against future taxable profits. Unrecognized deferred tax
assets of earlier periods are re-assessed and recognized to the extent
that it has become reasonably certain that future taxable income will
be available against which such deferred tax assets can be realized.
At each balance sheet date, the Company re-assesses unrecognised
deferred tax assets. It recognises unrecognised deferred tax assets to
the extent that it has become reasonably certain or virtually certain,
as the case may be, that sufficient future taxable income will be
available against which such deferred tax assets can be realized.
Minimum Alternative Tax (MAT) credit entitlement is recognised as an
asset only when and to the extent there is convincing evidence that the
company will pay normal income tax during the specified period. In the
year in which the MAT credit entitlement becomes eligible to be
recognized as an asset in accordance with the recommendations contained
in Guidance Note issued by the Institute of Chartered Accountants of
India, the said asset is created by way of a credit to the profit and
loss account and shown as MAT Credit Entitlement. The Company reviews
the same at each balance sheet date and writes down the carrying amount
of MAT Credit Entitlement to the extent there is no longer convincing
evidence to the effect that Company will pay normal Income Tax during
the specified period.
(xi) Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
Sale of Goods
Revenue from sale of goods is recognized on dispatch of goods to
customers, which is incidental to transfer of significant risk and
reward of ownership. Sales are net of returns, claims, discounts etc.
Interest
Interest is recognised on a time proportion basis taking into account
the amount outstanding and the rate applicable.
(xii) Segment Reporting
The company has identified ÃFerro Alloysà as its sole operating segment
and the same has been treated as the primary segment. The companyÃs
secondary geographical segments have been identified based on location
of customers and are demarcated into Indian & Overseas revenue
earnings.
(xiii) Provision
A provision is recognized when the company has a present obligation as
a result of past event and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made.
Provisions made in terms of Accounting Standard 29 are not discounted
to its present value and are determined based on management 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
management estimates.
(xiv) Earnings per Share
Basic earning per share is calculated by dividing the net profit or
loss 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 earnings per share, the net
profit or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
(xv) Excise duty & custom duty
Excise duty is accounted for at the point of manufacture of goods and
accordingly is considered for valuation of finished goods stock lying
in the factories as on the balance sheet date. Similarly, customs duty
on imported materials in transit / lying in bonded warehouse is
accounted for at the time of import / bonding of materials.
(xvi) Cash and Cash equivalents
Cash and cash equivalents as indicated in the cash flow statement
comprise cash on hand, cash at bank and short-term investments with an
original maturity of three months or less.
(xvii) Contingencies
Liabilities, which are material and whose future outcome cannot be
ascertained with reasonable certainty, are treated as contingent and
disclosed by way of notes to the accounts.