A Oneindia Venture
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Accounting Policies of Chemcon Speciality Chemicals Ltd. Company
Mar 31, 2025
E. Material Accounting Policies:
i. Fair Value Measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to sell the asset or transfer the
liability takes place either:
⢠In the principal market for the asset or liability, or
⢠In the absence of a principal market, in the most advantageous market for the asset or
liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market
participants would use when pricing the asset or liability, assuming that market participants act
in their best economic interest.
The Company uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximizing the use of relevant observable
inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements
are categorized within the fair value hierarchy, described as follows, based on the lowest level
input that is significant to the fair value measurement as a whole:
Level 1: Category includes financial assets and liabilities, that are measured in whole or in
significant part by reference to published quoted price (unadjusted) in an active market.
Level 2: Category includes financial assets and liabilities measured using a valuation technique
based on assumptions that are supported by prices from observable current market
transactions.
Level 3: Category includes financial assets and liabilities measured using valuation techniques
based on non-market observable inputs.
For the purpose of fair value disclosures, the Company has determined classes of assets and
liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level
of the fair value hierarchy as explained above.
ii. Property Plant and Equipment (PPE)
Property, Plant & Equipment (PPE) comprises of Tangible assets and Capital Work in progress.
PPE are stated at cost, less accumulated depreciation and accumulated impairment losses, if
any; until the date of the Balance Sheet. The cost of PPE comprises of its purchase price or its
construction cost (net of eligible applicable tax credit, if any), any cost directly attributable to
bring the asset into the location and condition necessary for it to be capable of operating in
the manner intended by the management and decommissioning costs. Direct costs are
capitalized until the asset is ready for use and includes borrowing cost capitalized in accordance
with the Company''s accounting policy.
Subsequent expenditure related to an item of property, plant and equipment is added to its
book value only if it increases the future benefits from its previously assessed standard of
performance. All other expenses on existing property, plant and equipment, 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.
Depreciation of these PPE commences when the assets are ready for their intended use.
Freehold Land is not depreciated. Depreciation on PPE other than Land has been provided on
Straight line method over the useful lives of the assets as per Schedule II to the Companies Act
Useful lives of each class of PPE as prescribed under Part C of Schedule II to the Companies Act,
2013:
The estimated useful lives and residual values are reviewed on an annual basis and if necessary,
changes in estimates are accounted for prospectively.
Depreciation on additions/deletions to PPE during the year is provided for on a pro-rata basis
with reference to the date of additions/deletions.
Depreciation on subsequent expenditure on PPE arising on account of capital improvement or
other factors is provided for prospectively over the remaining useful life.
An item of PPE is de-recognised upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any gain or loss arising on the disposal
or retirement of an item of PPE is determined as the difference between the sales proceeds and
the carrying amount of the asset and is recognized in the Statement of Profit and Loss.
iii. Intangible Assets and Amortisation
Intangible assets with finite useful life acquired separately, are recognized only if it is probable
that future economic benefits that are attributable to the assets will flow to the enterprise and
the cost of assets can be measured reliably. The intangible assets are recorded at cost and are
carried at cost less accumulated amortization and accumulated impairment losses, if any.
Intangible assets including Computer software are amortized on straight-line basis over a
period of three years.
The estimated useful life is reviewed at the end of each reporting period and the effect of any
changes in estimate is accounted for prospectively.
Intangible assets are derecognised on disposal, or when no future economic benefits are
expected from use or disposal. Gains or losses arising from derecognition of an intangible asset
are determined as the difference between the net disposal proceeds and the carrying amount
of the asset, and recognised in the Statement of Profit and Loss when the asset is derecognised.
iv. Impairment of tangible assets and intangible assets
The Company reviews at each reporting period whether there is any indication that an asset
may be impaired. If any such indication exists, the company estimates the recoverable amount
of the asset. If such recoverable amount of the asset or the recoverable amount of the cash
generating unit to which the asset belongs is less than its carrying amount, the carrying amount
is reduced to its recoverable amount. The reduction is treated as an impairment loss and is
recognized in the Statement of Profit & Loss. If at the reporting period, there is an indication
that there is change in the previously assessed impairment loss, the recoverable amount is
reassessed and the asset is reflected at the recoverable amount.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In
assessing value in use, 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 the risks specific to the asset for which the estimates of future cash flows have not
been adjusted.
An assessment is made at the end of each reporting period to see if there are any indications
that impairment losses recognized earlier may no longer exist or may have decreased. The
impairment loss is reversed, if there has been a change in the estimates used to determine the
asset''s recoverable amount since the previous impairment loss was recognized. If it is so, the
carrying amount of the asset is increased to the lower of its recoverable amount and the
carrying amount that have been determined, net of depreciation, had no impairment loss been
recognized for the asset in prior years. After a reversal, the depreciation charge is adjusted in
future periods to allocate the asset''s revised carrying amount, less any residual value, on a
systematic basis over its remaining useful life. Reversals of Impairment loss are recognized in
the Statement of Profit and Loss.
Net realizable value is the estimated selling price in the ordinary course of business, less the
estimated costs of completion and selling expenses.
The net realizable value of work-in-progress is determined with reference to the selling prices
of related finished products. Raw materials and other supplies held for use in production of
finished products are not written down below cost except in cases where material prices have
declined and it is estimated that the cost of the finished products will exceed their net realizable
value.
vi. Revenue recognition
The Company earns revenue primarily from sale of products and sale of services.
Sale of Products and Services
Revenue towards satisfaction of a performance obligation is measured at the amount of
transaction price (net of variable consideration) allocated to that performance obligation.
The transaction price of goods sold and services rendered is net of variable consideration on
account of various discounts and schemes offered by the Company as part of the contract and
represents amounts receivable for goods and services provided in the normal course of
business, net off Goods and Services Tax (GST), etc. Any retrospective revision in prices is
accounted for in the year of such revision.
Interest Income:
Interest on investments is booked on a time proportion basis taking into account the amounts
invested and the rate of interest.
Export Incentives and Other Income:
Export Incentives and Other Income is recognized on accrual basis except when realisation of
such income is uncertain.
Insurance Claim:
Insurance and other claims are recognised only when it is reasonably certain that the ultimate
collection will be made.
vii. Leases
The Company assesses at contract inception whether a contract is, or contains, a lease. That is,
if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration.
The Company as a Lessee:
The Company applies a single recognition and measurement approach for all leases, except for
short-term leases and leases of low-value assets. The Company recognises lease liabilities to
make lease payments and right-of-use assets representing the right to use the underlying
assets.
At the date of commencement of the lease, the company recognizes a right-of-use asset
("ROU") and a corresponding lease liability for all lease arrangements in which it is a lessee,
except for leases with a term of twelve months or less (short-term leases) and low value leases.
For these short-term and low value leases, the company recognizes the lease payments as an
operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements include the options to extend or terminate the lease before the end
of the lease term. ROU assets and lease liabilities includes these options when it is reasonably
certain that they will be exercised.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of
the lease liability adjusted for any lease payments made at or prior to the commencement date
of the lease plus any initial direct costs less any lease incentives. They are subsequently
measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over
the shorter of the lease term and useful life of the underlying asset.
Right of use assets are evaluated for recoverability whenever events or changes in
circumstances indicate that their carrying amounts may not be recoverable. For the purpose of
impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and
the value-in-use) is determined on an individual asset basis unless the asset does not generate
cash flows that are largely independent of those from other assets. In such cases, the
recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset
belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease
payments. The lease payments are discounted using the interest rate implicit in the lease or, if
not readily determinable, using the incremental borrowing rates in the country of domicile of
these leases. Lease liabilities are remeasured with a corresponding adjustment to the related
right of use asset if the company changes its assessment if whether it will exercise an extension
or a termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease
payments have been classified as financing cash flows.
viii. Foreign Currency Transactions
The functional currency of the Company is Indian Rupees which represents the currency of the
primary economic environment in which the Company operates.
Transactions in currencies other than the Company''s functional currency (foreign currencies)
are recognized at the rates of exchange prevailing at the dates of the transactions. At the end
of each reporting period, monetary items denominated in foreign currencies are translated
using closing exchange rate prevailing on the last day of the reporting period.
Exchange differences on monetary items are recognized in the Statement of Profit and Loss in
the period in which they arise.
Non-monetary items denominated in foreign currency, (such as PPE, capital/revenue advances
other than expected to be settled in cash etc.) are recorded at the exchange rate prevailing on
the date of the transaction, other than those measured at fair value.
ix. Employee Benefits
Short-term employee Benefits
Short-term employee benefits expected to be paid in exchange for the services rendered by
employees are recognised, undiscounted, during the period the employee renders services.
These benefits include salary, wages, bonus, performance incentives etc.
Post-Employment Benefits
Defined contribution plans:
Contributions to defined contribution schemes such as provident fund, superannuation scheme,
employee pension scheme etc. are charged as an expense based on the amount of contribution
required to be made as and when services are rendered by the employees. The above benefits
are classified as Defined Contribution Schemes as the Company has no further defined
obligations beyond the monthly contributions.
Defined benefit plans:
The liabilities towards defined benefit schemes are determined using the Projected Unit Credit
method. Actuarial valuations under the Projected Unit Credit method are carried out at the
balance sheet date. Actuarial gains and losses are recognized in the Statement of Profit and
Loss in the period of occurrence of such gains and losses. Past service cost is recognized
immediately to the extent that the benefits are already vested and otherwise it is amortized on
straight-line basis over the remaining average period until the benefits become vested.
The retirement benefit obligation recognised in the balance sheet represents the present value
of the defined benefit obligation as reduced by plan assets.
Other long-term employee benefits
Compensated absences which are not expected to occur within twelve months after the end of
the period in which the employee renders the related services are recognized as an actuarially
determined liability at present value of the defined benefit obligation at the balance sheet date.
Remeasurements:
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling
(excluding amounts included in net interest on the net defined benefit liability) and the return
on plan assets (excluding amounts included in net interest on the net defined benefit liability),
are recognised immediately in the Balance Sheet with a corresponding debit or credit to
retained earnings through Other Comprehensive Income (OCI) in the period in which it occurs.
Remeasurements are not reclassified to profit or loss in subsequent periods. Remeasurements
in respect of other long-term benefits are recognised in the Statement of Profit and Loss.
Net interest is calculated by applying the discount rate to the net defined benefit liability or
asset.
The Company recognises the following changes in the net defined benefit obligation as an
expense in the Statement of Profit and Loss:
Service cost comprising current service cost, past-service cost, gains and losses on curtailments
and nonroutine settlements; and Net interest expense or income.
Past service cost is recognised in profit or loss on the earlier of; The date of the plan amendment
or curtailment, and the date that the Company recognises related restructuring cost.
x. Taxes on Income
Income tax expense represents the sum of the current tax and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year.
Current income tax assets and liabilities are measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted, at the reporting 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 are generally recognised for all taxable
temporary differences. Deferred tax assets are generally recognised for all deductible temporary
differences to the extent that it is probable that taxable profits will be available against which
those deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting date and
reduced to the extent that it is no longer probable that sufficient taxable profits will be available
to allow all or part of the deferred tax asset to be utilized.
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 measurement of deferred tax liabilities and assets reflects the tax consequences that would
follow from the manner in which the Company expects, at the end of the reporting period, to
recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets include Minimum Alternative Tax (MAT) paid in accordance with the tax laws
in India, which is likely to give future economic benefits in the form of availability of set off
against future income tax liability. Accordingly, MAT is recognised as deferred tax asset in the
Balance sheet when the asset can be measured reliably, and it is probable that the future
economic benefit associated with asset will be realised.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to
set off current tax assets against current tax liabilities and the deferred taxes relate to the same
taxable entity and the same taxation authority.
Current and deferred tax expense for the year / period
Current and deferred tax expense is recognised in the Statement of Profit and Loss, except when
they relate to items that are recognised in other comprehensive income or directly in equity, in
which case, the current and deferred tax are also recognised in other comprehensive income or
directly in equity respectively.
xi. Borrowing Costs
Borrowing costs are interest and ancillary costs incurred in connection with the arrangement of
borrowings.
General and specific borrowing costs attributable to acquisition and construction of qualifying
assets is added to the cost of the assets upto the date the asset is ready for its intended use. A
qualifying asset is an asset that necessarily takes a substantial period of time to get ready for
its intended use Capitalisation of borrowing costs is suspended and charged to the Statement
of Profit and Loss during extended periods when active development activity on the qualifying
assets is interrupted. All other borrowing costs are recognised in the Statement of Profit and
Loss in the period in which they are incurred.
Mar 31, 2024
E. Material Accounting Policies:
i. Fair Value Measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
⢠In the principal market for the asset or liability, or
⢠In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 : Quoted (unadjusted) market prices in active markets for identical assets or liabilities. Level 2 : Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3 : Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
ii. Property Plant and Equipment (PPE)
Property, Plant & Equipment (PPE) comprises of Tangible assets and Capital Work in progress. PPE are stated at cost, less accumulated depreciation and accumulated impairment losses, if any, until the date of the Balance Sheet. The cost of PPE comprises of its purchase price or its construction cost (net of eligible applicable tax credit, if any), any cost directly attributable to bring the asset into the location and condition necessary for it to be capable of operating in the manner intended by the management and decommissioning costs. Direct costs are capitalized until the asset is ready for use and includes borrowing cost capitalized in accordance with the Company''s accounting policy.
Subsequent expenditure related to an item of property, plant and equipment is added to its book value only if it increases the future benefits from its previously assessed standard of performance. All other expenses on existing property, plant and equipment, including day-today 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. Depreciation of these PPE commences when the assets are ready for their intended use.
Freehold Land is not depreciated. Depreciation on PPE other than Land has been provided on Straight line method over the useful lives of the assets as per Schedule II to the Companies Act
Useful lives of each class of PPE as prescribed under Part C of Schedule II to the Companies Act, 2013:
The estimated useful lives and residual values are reviewed on an annual basis and if necessary, changes in estimates are accounted for prospectively.
Depreciation on additions/deletions to PPE during the year is provided for on a pro-rata basis with reference to the date of additions/deletions.
Depreciation on subsequent expenditure on PPE arising on account of capital improvement or other factors is provided for prospectively over the remaining useful life.
An item of PPE is de-recognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of PPE is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in the Statement of Profit and Loss.
iii. Intangible Assets and Amortisation
Intangible assets with finite useful life acquired separately are recognized only if it is probable that future economic benefits that are attributable to the assets will flow to the enterprise and the cost of assets can be measured reliably. The intangible assets are recorded at cost and are carried at cost less accumulated amortization and accumulated impairment losses, if any.
Intangible assets including Computer software are amortized on straight-line basis over a period of three years.
The estimated useful life is reviewed at the end of each reporting period and the effect of any changes in estimate is accounted for prospectively.
Intangible assets are derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset, and recognised in the Statement of Profit and Loss when the asset is derecognised.
iv. Impairment of tangible assets and intangible assets
The Company reviews at each reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Statement of Profit & Loss. If at the reporting period, there is an indication that there is change in the previously assessed impairment loss, the recoverable amount is reassessed and the asset is reflected at the recoverable amount.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, 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 the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
An assessment is made at the end of each reporting period to see if there are any indications that impairment losses recognized earlier may no longer exist or may have decreased. The impairment loss is reversed, if there has been a change in the estimates used to determine the asset''s recoverable amount since the previous impairment loss was recognized. If it is so, the carrying amount of the asset is increased to the lower of its recoverable amount and the carrying amount that have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. After a reversal, the depreciation charge is adjusted in future periods to allocate the asset''s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. Reversals of Impairment loss are recognized in the Statement of Profit and Loss.
v. Inventories
The inventories are valued at cost or net realizable value whichever is lower. The basis of determining the value of each class of inventory is as follows:
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
The net realizable value of work-in-progress is determined with reference to the selling prices of related finished products. Raw materials and other supplies held for use in production of finished products are not written down below cost except in cases where material prices have declined, and it is estimated that the cost of the finished products will exceed their net realizable value.
vi. Revenue recognition
The Company earns revenue primarily from sale of products and sale of services.
Sale of Products and Services
Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price (net of variable consideration) allocated to that performance obligation.
The transaction price of goods sold and services rendered is net of variable consideration on account of various discounts and schemes offered by the Company as part of the contract and represents amounts receivable for goods and services provided in the normal course of business, net off Goods and Services Tax (GST), etc. Any retrospective revision in prices is accounted for in the year of such revision.
Interest Income:
Interest on investments is booked on a time proportion basis taking into account the amounts invested and the rate of interest.
Export Incentives and Other Income:
Export Incentives and Other Income is recognized on accrual basis except when realisation of such income is uncertain.
Insurance Claim:
Insurance and other claims are recognised only when it is reasonably certain that the ultimate collection will be made.
vii. Leases
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company as a Lessee:
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
At the date of commencement of the lease, the company recognizes a right-of-use asset ("ROU") and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements include the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset.
Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the company changes its assessment if whether it will exercise an extension or a termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
viii. Foreign Currency Transactions
The functional currency of the Company is Indian Rupees which represents the currency of the primary economic environment in which the Company operates.
Transactions in currencies other than the Company''s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are translated using closing exchange rate prevailing on the last day of the reporting period.
Exchange differences on monetary items are recognized in the Statement of Profit and Loss in the period in which they arise.
Non-monetary items denominated in foreign currency, (such as PPE, capital/revenue advances other than expected to be settled in cash etc.) are recorded at the exchange rate prevailing on the date of the transaction, other than those measured at fair value.
ix. Employee Benefits
Short-term employee Benefits
Short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognised, undiscounted, during the period the employee renders services. These benefits include salary, wages, bonus, performance incentives etc.
Post-Employment Benefits
Defined contribution plans:
Contributions to defined contribution schemes such as provident fund, superannuation scheme, employee pension scheme etc. are charged as an expense based on the amount of contribution required to be made as and when services are rendered by the employees. The above benefits are classified as Defined Contribution Schemes as the Company has no further defined obligations beyond the monthly contributions.
Defined benefit plans:
The liabilities towards defined benefit schemes are determined using the Projected Unit Credit method. Actuarial valuations under the Projected Unit Credit method are carried out at the balance sheet date. Actuarial gains and losses are recognized in the Statement of Profit and Loss in the period of occurrence of such gains and losses. Past service cost is recognized immediately to the extent that the benefits are already vested and otherwise it is amortized on straight-line basis over the remaining average period until the benefits become vested.
The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as reduced by plan assets.
Other long-term employee benefits
Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognized as an actuarially determined liability at present value of the defined benefit obligation at the balance sheet date.
Remeasurements:
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling (excluding amounts included in net interest on the net defined benefit liability) and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through Other Comprehensive Income (OCI) in the period in which it occurs.
Remeasurements are not reclassified to profit or loss in subsequent periods. Remeasurements in respect of other long-term benefits are recognised in the Statement of Profit and Loss.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset.
The Company recognises the following changes in the net defined benefit obligation as an expense in the Statement of Profit and Loss:
Service cost comprising current service cost, past-service cost, gains and losses on curtailments and nonroutine settlements; and Net interest expense or income
Past service cost is recognised in profit or loss on the earlier of; The date of the plan amendment or curtailment, and the date that the Company recognises related restructuring cost
x. Taxes on Income
Income tax expense represents the sum of the current tax and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year.
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting 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 are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be utilized.
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 measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets include Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future income tax liability. Accordingly, MAT is recognised as deferred tax asset in the Balance sheet when the asset can be measured reliably, and it is probable that the future economic benefit associated with asset will be realised.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Current and deferred tax expense for the year / period
Current and deferred tax expense is recognised in the Statement of Profit and Loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.
xi. Borrowing Costs
Borrowing costs are interest and ancillary costs incurred in connection with the arrangement of borrowings.
General and specific borrowing costs attributable to acquisition and construction of qualifying assets is added to the cost of the assets upto the date the asset is ready for its intended use. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use Capitalisation of borrowing costs is suspended and charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted. All other borrowing costs are recognised in the Statement of Profit and Loss in the period in which they are incurred.
Mar 31, 2023
1. COMPANY INFORMATION
Chemcon Speciality Chemicals Limited ("the Company") is a Public limited company incorporated and domiciled in India. Its shares are listed on Bombay Stock Exchange Limited (BSE) and National Stock Exchange in India Limited (NSE). The Company is registered with the ROC, Gujarat, Dadra and Nagar Haveli at Ahmedabad under having Corporate Identification number (CIN) L24231GJ1988PLC011652.The Registered office of the Company is located at Block No 355, Manjusar Kunpad Road Vill: Manjusar, Tal:Salvi Baroda Gujarat.
The Company is in pharmaceutical intermediates, Agro Chemicals and Oilfield Chemicals (Completion Fluids) Industry. The company is leading manufacturer of specialised chemicals, such as HMDS and CMIC which are predominantly used in the pharmaceuticals industry, Bromobenzene used as agrochemical intermediates and inorganic bromides, predominantly used as completion fluids in the oilfield industry.
2. SIGNIFICANT ACCOUNTING POLICIES2.1. Basis of preparation and Statement of compliance
The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013 (the Act) read with Companies (Indian Accounting Standards) Rules and other relevant provisions of the Act and Rules thereunder, as amended from time to time).
The financial statements are prepared, on a historical cost basis except for certain assets and liabilities which are measured at fair value at the end of each reporting period; as explained in the accounting policies below. These accounting policies have been applied consistently over all periods presented in these financials statements.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
The Financial Statements are presented in Indian Rupees which is Company''s presentation and functional currency and all values are rounded to the nearest lacs (up to two decimals) except when otherwise indicated
Application of Indian Accounting Standards
All the Indian Accounting Standards issued and notified by the Ministry of Corporate Affairs under the Companies (Indian Accounting Standards) Rules, 2015 (as amended) till the financial statements are authorized have been considered in preparing these financial statements.
New Standards/ amendments and other changes effective April 1,2022 or thereafter
Ministry of Corporate Affairs notifies new standard or amendments to the existing standards. During the year, no new standard or modifications in existing standards have been notified which will be applicable from April 1,2022, or thereafter.
New Standards/ amendments and other changes effective April 1, 2023 Ind AS 1 - Presentation of Financial Statements
The amendments require companies to disclose their material accounting policies rather than their significant accounting policies. Accounting policy information, together with other information, is material when it can reasonably be expected to influence decisions of primary users of general purpose financial statements. The Company does not expect this amendment to have any significant impact in its financial statements.
The amendments clarify how companies account for deferred tax on transactions such as leases and decommissioning, restoration and similar obligations. The amendments narrowed the scope of the recognition exemption in paragraphs 15 and 24 of Ind AS 12 (recognition exemption) so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. The Company is evaluating the impact, if any, in its financial statements.
Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors
The amendments will help entities to distinguish between accounting policies and accounting estimates. The definition of a change in accounting estimates has been replaced with a definition of accounting estimates. Under the new definition, accounting estimates are monetary amounts in financial statements that are subject to measurement uncertainty. Entities develop accounting estimates if accounting policies require items in financial statements to be measured in a way that involves measurement uncertainty. The Company does not expect this amendment to have any significant impact in its financial statements.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
⢠In the principal market for the asset or liability, or
⢠In the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
2.3. Property Plant and Equipment (PPE)
Property, Plant & Equipment (PPE) comprises of Tangible assets and Capital Work in progress. PPE are stated at cost, less accumulated depreciation and accumulated impairment losses, if any; until the date of the Balance Sheet. The cost of PPE comprises of its purchase price or its construction cost (net of eligible applicable tax credit, if any), any cost directly attributable to bring the asset into the location and condition necessary for it to be capable of operating in the manner intended by the management and decommissioning costs. Direct costs are capitalized until the asset is ready for use and includes borrowing cost capitalized in accordance with the Company''s accounting policy.
Subsequent expenditure related to an item of property, plant and equipment is added to its book value only if it increases the future benefits from its previously assessed standard of performance. All other expenses on existing property, plant and equipment, 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.
Depreciation of these PPE commences when the assets are ready for their intended use.
Freehold Land is not depreciated. Depreciation on PPE other than Land has been provided on Straight line method over the useful lives of the assets as per Schedule II to the Companies Act
Useful lives of each class of PPE as prescribed under Part C of Schedule II to the Companies Act, 2013:
|
Class of Assets |
Range of useful life |
|
Building |
03 - 60 Years |
|
Plant and Equipment |
10 - 20 Years |
|
Furniture and Fixtures |
10 Years |
|
Vehicles |
08 Years |
|
Office Equipment |
05 Years |
|
Computers |
03 Years |
The estimated useful lives and residual values are reviewed on an annual basis and if necessary, changes in estimates are accounted for prospectively.
Depreciation on additions/deletions to PPE during the year is provided for on a pro-rata basis with reference to the date of additions/deletions.
Depreciation on subsequent expenditure on PPE arising on account of capital improvement or other factors is provided for prospectively over the remaining useful life.
An item of PPE is de-recognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of PPE is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in the Statement of Profit and Loss.
2.4. Intangible Assets and Amortisation
Intangible assets with finite useful life acquired separately, are recognized only if it is probable that future economic benefits that are attributable to the assets will flow to the enterprise and the cost of assets can be measured reliably. The intangible assets are recorded at cost and are carried at cost less accumulated amortization and accumulated impairment losses, if any.
Intangible assets including Computer software are amortized on straight-line basis over a period of three years.
The estimated useful life is reviewed at the end of each reporting period and the effect of any changes in estimate is accounted for prospectively.
Intangible assets are derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset, and recognised in the Statement of Profit and Loss when the asset is derecognised.
2.5. Impairment of tangible assets and intangible assets
The Company reviews at each reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Statement of Profit & Loss. If at the reporting period, there is an indication that there is change in the previously assessed impairment loss, the recoverable amount is reassessed and the asset is reflected at the recoverable amount.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, 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 the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
An assessment is made at the end of each reporting period to see if there are any indications that impairment losses recognized earlier may no longer exist or may have decreased. The impairment loss is reversed, if there has been a change in the estimates used to determine the asset''s recoverable amount since the previous impairment loss was recognized. If it is so, the carrying amount of the asset is increased to the lower of its recoverable amount and the carrying amount that have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. After a reversal, the depreciation charge is adjusted in future periods to allocate the asset''s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. Reversals of Impairment loss are recognized in the Statement of Profit and Loss.
The inventories are valued at cost or net realizable value whichever is lower. The basis of determining the value of each class of inventory is as follows:
|
Inventories |
Cost Formula |
|
Raw material |
First in first out basis |
|
Raw Material (Goods in transit) |
At invoice value |
|
Work in Progress |
Raw material, labour and appropriate proportion of manufacturing expenses and overheads as per stage of completion. |
|
Finished Goods (Including in Transit) |
Raw material, labour and appropriate proportion of manufacturing expenses and overheads. |
|
Stores, spares, packing materials |
First in first out basis |
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
The net realizable value of work-in-progress is determined with reference to the selling prices of related finished products. Raw materials and other supplies held for use in production of finished
products are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realizable value.
The Company earns revenue primarily from sale of products and sale of services.
Sale of Products and Services
Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price (net of variable consideration) allocated to that performance obligation.
The transaction price of goods sold and services rendered is net of variable consideration on account of various discounts and schemes offered by the Company as part of the contract and represents amounts receivable for goods and services provided in the normal course of business, net off Goods and Services Tax (GST), etc. Any retrospective revision in prices is accounted for in the year of such revision.
Interest on investments is booked on a time proportion basis taking into account the amounts invested and the rate of interest.
Export Incentives and Other Income:
Export Incentives and Other Income is recognized on accrual basis except when realisation of such income is uncertain.
Insurance and other claims are recognised only when it is reasonably certain that the ultimate collection will be made.
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
At the date of commencement of the lease, the company recognizes a right-of-use asset ("ROU") and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these
short-term and low value leases, the company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements include the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset.
Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-inuse) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the company changes its assessment if whether it will exercise an extension or a termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
2.9. Foreign Currency Transactions
The functional currency of the Company is Indian Rupees which represents the currency of the primary economic environment in which the Company operates.
Transactions in currencies other than the Company''s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are translated using closing exchange rate prevailing on the last day of the reporting period.
Exchange differences on monetary items are recognized in the Statement of Profit and Loss in the period in which they arise.
Non-monetary items denominated in foreign currency, (such as PPE, capital/revenue advances other than expected to be settled in cash etc.) are recorded at the exchange rate prevailing on the date of the transaction, other than those measured at fair value.
Short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognised, undiscounted, during the period the employee renders services. These benefits include salary, wages, bonus, performance incentives etc.
Post-Employment Benefits and Other Long Term Employee Benefits
Contributions to defined contribution schemes such as provident fund, superannuation scheme, employee pension scheme etc. are charged as an expense based on the amount of contribution required to be made as and when services are rendered by the employees. The above benefits are classified as Defined Contribution Schemes as the Company has no further defined obligations beyond the monthly contributions.
The liabilities towards defined benefit schemes are determined using the Projected Unit Credit method. Actuarial valuations under the Projected Unit Credit method are carried out at the balance sheet date. Actuarial gains and losses are recognized in the Statement of Profit and Loss in the period of occurrence of such gains and losses. Past service cost is recognized immediately to the extent that the benefits are already vested and otherwise it is amortized on straight-line basis over the remaining average period until the benefits become vested.
The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as reduced by plan assets.
Other long-term employee benefits
Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognized as an actuarially determined liability at present value of the defined benefit obligation at the balance sheet date.
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling (excluding amounts included in net interest on the net defined benefit liability) and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through Other Comprehensive Income (OCI) in the period in which it occurs. Remeasurements are not reclassified to profit or loss in subsequent periods. Remeasurements in respect of other long-term benefits are recognised in the Statement of Profit and Loss.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset.
The Company recognises the following changes in the net defined benefit obligation as an expense in the Statement of Profit and Loss:
⢠Service cost comprising current service cost, past-service cost, gains and losses on curtailments and nonroutine settlements; and
⢠Net interest expense or income
Past service cost is recognised in profit or loss on the earlier of.
⢠The date of the plan amendment or curtailment, and
⢠The date that the Company recognises related restructuring cost
Income tax expense represents the sum of the current tax and deferred tax.
The tax currently payable is based on taxable profit for the year.
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
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 are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be utilized.
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 measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets include Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future income tax liability. Accordingly, MAT is recognised as deferred tax asset in the Balance
sheet when the asset can be measured reliably, and it is probable that the future economic benefit associated with asset will be realised.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Current and deferred tax expense for the year / period
Current and deferred tax expense is recognised in the Statement of Profit and Loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.
Borrowing costs are interest and ancillary costs incurred in connection with the arrangement of borrowings.
General and specific borrowing costs attributable to acquisition and construction of qualifying assets is added to the cost of the assets upto the date the asset is ready for its intended use. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use Capitalisation of borrowing costs is suspended and charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted. All other borrowing costs are recognised in the Statement of Profit and Loss in the period in which they are incurred.
2.13. Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
Contingent assets are disclosed in the Financial Statements by way of notes to accounts when an inflow of economic benefits is probable.
Contingent liabilities are disclosed in the Financial Statements by way of notes to accounts, unless possibility of an outflow of resources embodying economic benefit is remote.
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit and loss) are added to or deducted from the fair value measured on initial recognition of financial asset or financial liability. The transaction costs directly attributable to the acquisition of financial assets and financial liabilities at fair value through profit and loss are immediately recognised in the statement of profit and loss. However, Trade receivables that do not contain a significant financing component are measured at transaction price.
The effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts future cash receipts or payments through the expected life of the financial instrument, or where appropriate, a shorter period.
(i) Financial assetsCash and bank balances
Cash and bank balances consist of:
Cash and cash equivalents - which includes cash in hand, deposits held at call with banks and other short-term deposits which are readily convertible into known amounts of cash, are subject to an insignificant risk of change in value and have maturities of less than one year from the date of such deposits. These balances with banks are unrestricted for withdrawal and usage.
Other bank balances - which includes balances and deposits with banks that are restricted for withdrawal and usage.
Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business model whose objective is to hold these assets 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.
Financial assets measured at fair value through other comprehensive income
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business model whose objective is to hold these assets in order to collect contractual cash flows or to sell these 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.
Financial assets are measured at fair value through profit or loss unless it is measured at amortized cost or at fair value through other comprehensive income on initial recognition.
Impairment of financial assets
The Company assesses at each balance sheet date whether a financial asset or a group of financial assets is impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. The Company recognizes lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to 12 month expected credit losses or at an amount equal to lifetime expected losses, if the credit risk on the financial asset has increased significantly since initial recognition.
De-recognition of financial assets
The Company de-recognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all risks and rewards of ownership of the asset to another entity. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the assets and an associated liability for amounts it may have to pay.
If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial asset.
On derecognition of a financial asset in its entirety, the difference between the asset''s carrying amount and the sum of the consideration received and receivable is recognized in statement of profit and loss.
(ii) Financial liabilities and equity instruments Classification as debt or equity
Financial liabilities and equity instruments issued by the Company are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs, if any.
Trade and other payables are initially measured at fair value, net of directly attributable costs, and are subsequently measured at amortised cost, using the effective interest rate method where the time value of money is significant. Interest bearing issued debt are initially measured at fair value and are subsequently measured at amortised cost using the effective interest rate method.
De-recognition of financial liabilities
The Company de-recognises financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or they expire.
Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amount is included in the Balance Sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously
Basic earnings per share are computed by dividing the net profit after tax by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by dividing the profit after tax by the weighted average number of equity shares considered for deriving the basic earnings per share and the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares.
Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows are segregated into operating, investing and financing activities.
2.17. Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and shortterm deposits, which are subject to insignificant risk of changes in value.
For the purpose of presentation in the statement of cash flows, cash and cash equivalents consists of cash and short-term deposit, as defined above.
Operating segments are identified and reported taking into account the different risks and returns, the organization structure and the internal reporting systems.
2.19. Current/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
⢠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.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash Equivalents. The Company has identified twelve months as its operating cycle.
2.20. Critical accounting judgements, assumptions and Key sources of estimation uncertainty:
The preparation of the Company''s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities at the date of the financial statements. Estimates and assumptions are continuously evaluated and are based on management''s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. 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 future periods.
Key source of judgments, assumptions and estimates in the preparation of the Financial Statements which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are in respect of useful lives of Property, Plant and
Equipment, impairment, employee benefit obligations, provisions, provision for income tax, measurement of deferred tax assets and contingent assets & liabilities.
2.21. Critical judgments in applying accounting policies
The following are the critical judgements, apart from those involving estimations (Refer note 2.23), that the Management have made in the process of applying the Company''s accounting policies and that have the significant effect on the amounts recognized in the Financial Statements.
(i) Determining whether an arrangement contain leases and classification of leases
Ind AS 116 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease, if the use of such option is reasonably certain. The company makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination of the lease and the importance of the underlying asset to operations taking into account the location of the underlying asset and the availability of suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances.
(ii) Evaluation of indicators for impairment of Property, Plant and Equipment
The evaluation of applicability of indicators of impairment of assets requires assessment of external factors (significant decline in asset''s value, significant changes in the technological, market, economic or legal environment, market interest rates etc.) and internal factors (obsolescence or physical damage of an asset, poor economic performance of the asset etc.) which could result in significant change in recoverable amount of the Property, Plant and Equipment.
2.22. Key sources of estimates and assumptions
Information about estimates and assumptions that have the significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may differ from these estimates.
(i) Defined benefit obligation (DBO)
The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate, the management considers the interest rates of government bonds in currencies
consistent with the currencies of the post-employment benefit obligation. The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates for the respective countries.
(ii) Contingent Liabilities and Assets
Contingent liabilities may arise from the ordinary course of business in relation to claims against the Company, including legal, contractor, land access and other claims. By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence, and potential quantum, of contingencies inherently involves the exercise of significant judgment and the use of estimates regarding the outcome of future events.
(iii) 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, or when annual impairment testing for an asset is required, the Company estimates the asset''s recoverable amount. An asset''s recoverable amount is the higher of an asset''s or CGU''s 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 a 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. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.
(iv) Allowance for impairment of trade receivables
The expected credit loss is mainly based on the ageing of the receivable balances and historical experience. The receivables are assessed on an individual basis assessed for impairment collectively, depending on their significance. Moreover, trade receivables are written off on a case-to-case basis if deemed not to be collectible on the assessment of the underlying facts and circumstances.
(v) 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. The useful lives and residual values are based on the Company''s historical experience with similar assets and taking into account anticipated technological changes or commercial obsolescence. 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
depreciation/amortisaion for future periods is revised, if there are significant changes from previous estimates and accordingly, the unamortised/depreciable amount is charged over the remaining useful life of the assets.
The Company uses estimates and judgements based on the relevant facts, circumstances, present and past experience, rulings, and new pronouncements while determining the provision for income tax. A deferred tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilised.
Mar 31, 2022
1. COMPANY INFORMATION
Chemcon Speciality Chemicals Limited (âthe Companyâ) is a Public limited company incorporated and domiciled in India. Its shares are listed on Bombay Stock Exchange Limited (BSE) and National Stock Exchange in India Limited (NSE). The Company is registered with the ROC, Gujarat, Dadra and Nagar Haveli at Ahmedabad under having Corporate Identification number (CIN) L24231GJ1988PLC011652.The Registered office of the Company is located at Block No 355, Manjusar Kunpad Road Vill: Manjusar, Tal:Salvi Baroda Gujarat.
The Company is in pharmaceutical intermediates, Silanes and Oilfield Chemicals (Completion Fluids) Industry. The company is leading manufacturer of specialised chemicals, such as HMDS and CMIC which are predominantly used in the pharmaceuticals industry and inorganic bromides, predominantly used as completion fluids in the oilfield industry.
2. SIGNIFICANT ACCOUNTING POLICIES2.1. Basis of preparation and Statement of compliance
The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013 (the Act) read with Companies (Indian Accounting Standards) Rules and other relevant provisions of the Act and Rules thereunder, as amended from time to time).
The financial statements are prepared, on a historical cost basis except for certain assets and liabilities which are measured at fair value at the end of each reporting period; as explained in the accounting policies below. These accounting policies have been applied consistently over all periods presented in these financials statements.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
The Financial Statements are presented in Indian Rupees which is Companyâs presentation and functional currency, and all values are rounded to the nearest lacs (up to two decimals) except when otherwise indicated
Application of Indian Accounting Standards
All the Indian Accounting Standards issued and notified by the Ministry of Corporate Affairs under the Companies (Indian Accounting Standards) Rules, 2015 (as amended) till the financial statements are authorized have been considered in preparing these financial statements.
The following standards / amendments to standards have been issued and will be effective from 1st April 2022. The Company is evaluating the requirements of these standards, improvements and amendments and has not yet determined the impact on the financial statements.
Indian Accounting Standard (Ind AS) 103 - Business Combinations - Qualifications prescribed for recognition of the identifiable assets acquired and liabilities assumed, as part of applying the acquisition method - should meet the definition of assets and liabilities in the Conceptual Framework for Financial Reporting under Ind AS (Conceptual Framework) issued by the ICAI at the acquisition date.
Modification to the exceptions to recognition principle relating to contingent liabilities and contingent assets acquired in a business combination at the acquisition date.
Indian Accounting Standard (Ind AS) 109 - Financial Instruments - Modification in accounting treatment of certain costs incurred on derecognition of financial liabilities.
Indian Accounting Standard (Ind AS) 16 - Property, Plant and Equipment - Modification in treatment of excess of net sale proceeds of items produced over the cost of testing as part of cost of an item of property, plant, and equipment.
Indian Accounting Standard (Ind AS) 37 - Provisions, Contingent Liabilities and Contingent Assets -Modifications in application of recognition and measurement principles relating to onerous contracts.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
⢠In the principal market for the asset or liability, or
⢠In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
2.3. Property Plant and Equipment (PPE)
Property, Plant & Equipment (PPE) comprises of Tangible assets and Capital Work in progress. PPE are stated at cost, less accumulated depreciation and accumulated impairment losses, if any; until the date of the Balance Sheet. The cost of PPE comprises of its purchase price or its construction cost (net of eligible applicable tax credit, if any), any cost directly attributable to bring the asset into the location and condition necessary for it to be capable of operating in the manner intended by the management and decommissioning costs. Direct costs are capitalized until the asset is ready for use and includes borrowing cost capitalized in accordance with the Companyâs accounting policy.
Subsequent expenditure related to an item of property, plant and equipment is added to its book value only if it increases the future benefits from its previously assessed standard of performance. All other expenses on existing property, plant and equipment, 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.
Depreciation of these PPE commences when the assets are ready for their intended use.
Freehold Land is not depreciated. Depreciation on PPE other than Land has been provided on Straight line method over the useful lives of the assets as per Schedule II to the Companies Act
Useful lives of each class of PPE as prescribed under Part C of Schedule II to the Companies Act, 2013:
|
Class of Assets |
Range of useful life |
|
Building |
03 - 60 Years |
|
Plant and Equipment |
10 - 20 Years |
|
Furniture and Fixtures |
10 Years |
|
Vehicles |
08 Years |
|
Office Equipment |
05 Years |
|
Computers |
03 Years |
The estimated useful lives and residual values are reviewed on an annual basis and if necessary, changes in estimates are accounted for prospectively.
Depreciation on additions/deletions to PPE during the year is provided for on a pro-rata basis with reference to the date of additions/deletions.
Depreciation on subsequent expenditure on PPE arising on account of capital improvement or other factors is provided for prospectively over the remaining useful life.
An item of PPE is de-recognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of PPE is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in the Statement of Profit and Loss.
2.4. Intangible Assets and Amortisation
Intangible assets with finite useful life acquired separately, are recognized only if it is probable that future economic benefits that are attributable to the assets will flow to the enterprise and the cost of assets can be measured reliably. The intangible assets are recorded at cost and are carried at cost less accumulated amortization and accumulated impairment losses, if any.
Intangible assets including Computer software are amortized on straight-line basis over a period of three years.
The estimated useful life is reviewed at the end of each reporting period and the effect of any changes in estimate is accounted for prospectively.
Intangible assets are derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset, and recognised in the Statement of Profit and Loss when the asset is derecognised.
2.5. Non-Current Assets held for Sale
Non-current assets or disposal groups are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification as held for sale, and actions required to complete the plan of sale should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
Non-current assets or disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
Property, plant and equipment and intangible assets are not depreciated or amortized once classified as held for sale.
The Company classifies Non-Current Assets as held for sale if their carrying amounts will be recovered principally through a sale rather than through continuing use of the assets and actions required to complete such sale indicate that it is unlikely that significant changes to the plan to sell will be made or that the decision to sell will be withdrawn. Also, such assets are classified as held for sale only if the management expects to complete the sale within one year from the date of classification.
Non-current assets or disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
2.6. Impairment of tangible assets and intangible assets
The Company reviews at each reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the Statement of Profit & Loss. If at the reporting period, there is an indication that there is change in the previously assessed impairment loss, the recoverable amount is reassessed, and the asset is reflected at the recoverable amount.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, 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 the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
An assessment is made at the end of each reporting period to see if there are any indications that impairment losses recognized earlier may no longer exist or may have decreased. The impairment loss is reversed, if there has been a change in the estimates used to determine the assetâs recoverable amount since the previous impairment loss was recognized. If it is so, the carrying amount of the asset is increased to the lower of its recoverable amount and the carrying amount that have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. After a reversal, the depreciation charge is adjusted in future periods to allocate the assetâs revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. Reversals of Impairment loss are recognized in the Statement of Profit and Loss.
The inventories are valued at cost or net realizable value whichever is lower. The basis of determining the value of each class of inventory is as follows:
|
Inventories |
Cost Formula |
|
Raw material |
First in first out basis |
|
Raw Material (Goods in transit) |
At invoice value |
|
Work in Progress |
Raw material, labour and appropriate proportion of manufacturing expenses and overheads as per stage of completion. |
|
Finished Goods (Including in Transit) |
Raw material, labour and appropriate proportion of manufacturing expenses and overheads. |
|
Stores, spares, packing materials |
First in first out basis |
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
The net realizable value of work-in-progress is determined with reference to the selling prices of related finished products. Raw materials and other supplies held for use in production of finished products are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realizable value.
The Company earns revenue primarily from sale of products and sale of services.
Revenues are recognized when the Company satisfies the performance obligation by transferring a promised product or service to a customer. A product is transferred when the customer obtains control of that product, which is at the point of transfer of custody to customers where usually the title is passed, provided that the contract price is fixed or determinable and collectability of the receivable is reasonably assured.
Revenue is measured at the transaction price of the consideration received or receivable duly adjusted for variable consideration and represents amounts receivable for goods and services provided in the normal course of business, net off Goods and Services Tax (GST), etc. Any retrospective revision in prices is accounted for in the year of such revision.
Interest on investments is booked on a time proportion basis taking into account the amounts invested and the rate of interest.
Export Incentives and Other Income:
Export Incentives and Other Income is recognized on accrual basis except when realisation of such income is uncertain.
Insurance and other claims are recognised only when it is reasonably certain that the ultimate collection will be made.
The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company applies a single recognition and measurement approach for all leases, except for shortterm leases and leases of low-value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
At the date of commencement of the lease, the company recognizes a right-of-use asset (âROUâ) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements include the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset.
Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e., the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the company changes its assessment if whether it will exercise an extension or a termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
2.10. Foreign Currency Transactions
The functional currency of the Company is Indian Rupees which represents the currency of the primary economic environment in which the Company operates.
Transactions in currencies other than the Companyâs functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are translated using closing exchange rate prevailing on the last day of the reporting period.
Exchange differences on monetary items are recognized in the Statement of Profit and Loss in the period in which they arise.
Non-monetary items denominated in foreign currency, (such as PPE, capital/revenue advances other than expected to be settled in cash etc.) are recorded at the exchange rate prevailing on the date of the transaction, other than those measured at fair value.
2.11. Employee BenefitsShort-term employee Benefits
Short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognised, undiscounted, during the period the employee renders services. These benefits include salary, wages, bonus, performance incentives etc.
Post-Employment Benefits and Other Long Term Employee Benefits
Contributions to defined contribution schemes such as provident fund, superannuation scheme, employee pension scheme etc. are charged as an expense based on the amount of contribution required to be made as and when services are rendered by the employees. The above benefits are classified as Defined Contribution Schemes as the Company has no further defined obligations beyond the monthly contributions.
The liabilities towards defined benefit schemes are determined using the Projected Unit Credit method. Actuarial valuations under the Projected Unit Credit method are carried out at the balance sheet date. Actuarial gains and losses are recognized in the Statement of Profit and Loss in the period of occurrence of such gains and losses. Past service cost is recognized immediately to the extent that the benefits are already vested and otherwise it is amortized on straight-line basis over the remaining average period until the benefits become vested.
The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as reduced by plan assets.
Other long-term employee benefits
Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognized as an actuarially determined liability at present value of the defined benefit obligation at the balance sheet date.
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling (excluding amounts included in net interest on the net defined benefit liability) and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through Other Comprehensive Income (OCI) in the period in which it occurs. Remeasurements are not reclassified to profit or loss in subsequent periods. Remeasurements in respect of other long-term benefits are recognised in the Statement of Profit and Loss.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset.
The Company recognises the following changes in the net defined benefit obligation as an expense in the Statement of Profit and Loss:
⢠Service cost comprising current service cost, past-service cost, gains and losses on curtailments and nonroutine settlements; and
⢠Net interest expense or income
Past service cost is recognised in profit or loss on the earlier of.
⢠The date of the plan amendment or curtailment, and
⢠The date that the Company recognises related restructuring cost
Income tax expense represents the sum of the current tax and deferred tax.
The tax currently payable is based on taxable profit for the year.
Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
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 are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be utilized.
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 measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets include Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India, which is likely to give future economic benefits in the form of availability of set off against future income tax liability. Accordingly, MAT is recognised as deferred tax asset in the Balance sheet when the asset can be measured reliably, and it is probable that the future economic benefit associated with asset will be realised.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Current and deferred tax expense for the year / period
Current and deferred tax expense is recognised in the Statement of Profit and Loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.
Borrowing costs are interest and ancillary costs incurred in connection with the arrangement of borrowings.
General and specific borrowing costs attributable to acquisition and construction of qualifying assets is added to the cost of the assets upto the date the asset is ready for its intended use. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use Capitalisation of borrowing costs is suspended and charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted. All other borrowing costs are recognised in the Statement of Profit and Loss in the period in which they are incurred.
2.14. Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
Contingent assets are disclosed in the Financial Statements by way of notes to accounts when an inflow of economic benefits is probable.
Contingent liabilities are disclosed in the Financial Statements by way of notes to accounts, unless possibility of an outflow of resources embodying economic benefit is remote.
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit and loss) are added to or deducted from the fair value measured on initial recognition of financial asset or financial liability. The transaction costs directly attributable to the acquisition of financial assets and financial liabilities at fair value through profit and loss are immediately recognised in the statement of profit and loss.
The effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts future cash receipts or payments through the expected life of the financial instrument, or where appropriate, a shorter period.
(i) Financial assetsCash and bank balances
Cash and bank balances consist of:
Cash and cash equivalents - which includes cash in hand, deposits held at call with banks and other short-term deposits which are readily convertible into known amounts of cash, are subject to an insignificant risk of change in value and have maturities of less than one year from the date of such deposits. These balances with banks are unrestricted for withdrawal and usage.
Other bank balances - which includes balances and deposits with banks that are restricted for withdrawal and usage.
Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business model whose objective is to hold these assets 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.
Financial assets measured at fair value through other comprehensive income
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business model whose objective is to hold these assets in order to collect contractual cash flows or to sell these 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.
Financial assets at fair value through profit or loss
Financial assets are measured at fair value through profit or loss unless it is measured at amortized cost or at fair value through other comprehensive income on initial recognition.
Impairment of financial assets
The Company assesses at each balance sheet date whether a financial asset or a group of financial assets is impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. The Company recognizes lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at an amount equal to 12 month expected credit losses or at an amount equal to lifetime expected losses, if the credit risk on the financial asset has increased significantly since initial recognition.
De-recognition of financial assets
The Company de-recognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all risks and rewards of ownership of the asset to another entity. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the assets and an associated liability for amounts it may have to pay.
If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial asset.
On derecognition of a financial asset in its entirety, the difference between the assetâs carrying amount and the sum of the consideration received and receivable is recognized in statement of profit and loss.
(ii) Financial liabilities and equity instruments Classification as debt or equity
Financial liabilities and equity instruments issued by the Company are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs, if any.
Trade and other payables are initially measured at fair value, net of directly attributable costs, and are subsequently measured at amortised cost, using the effective interest rate method where the time value of money is significant. Interest bearing issued debt are initially measured at fair value and are subsequently measured at amortised cost using the effective interest rate method.
De-recognition of financial liabilities
The Company de-recognises financial liabilities when, and only when, the Companyâs obligations are discharged, cancelled or they expire.
Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amount is included in the Balance Sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
Basic earnings per share are computed by dividing the net profit after tax by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by dividing the profit after tax by the weighted average number of equity shares considered for deriving the basic earnings per share and the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares.
Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows are segregated into operating, investing and financing activities.
2.18. Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits, which are subject to insignificant risk of changes in value.
For the purpose of presentation in the statement of cash flows, cash and cash equivalents consists of cash and short-term deposit, as defined above.
Operating segments are identified and reported taking into account the different risks and returns, the organization structure and the internal reporting systems.
2.20. Current/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
⢠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.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash Equivalents. The Company has identified twelve months as its operating cycle.
2.21. Critical accounting judgements, assumptions and Key sources of estimation uncertainty:
The preparation of the Companyâs financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities at the date of the financial statements. Estimates and assumptions are continuously evaluated and are based on managementâs experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. 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 future periods.
Key source of judgments, assumptions and estimates in the preparation of the Financial Statements which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are in respect of useful lives of Property, Plant and Equipment, impairment, employee benefit obligations, provisions, provision for income tax, measurement of deferred tax assets and contingent assets & liabilities.
2.22. Critical judgments in applying accounting policies
The following are the critical judgements, apart from those involving estimations (Refer note 2.23), that the Management have made in the process of applying the Company''s accounting policies and that have the significant effect on the amounts recognized in the Financial Statements.
(i) Determining whether an arrangement contain leases and classification of leases
Ind AS 116 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease, if the use of such option is reasonably certain. The company makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination of the lease and the importance of the underlying asset to operations taking into account the location of the underlying asset and the availability of suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances.
(ii) Evaluation of indicators for impairment of Property, Plant and Equipment
The evaluation of applicability of indicators of impairment of assets requires assessment of external factors (significant decline in assetâs value, significant changes in the technological, market, economic or legal environment, market interest rates etc.) and internal factors (obsolescence or physical damage of an asset, poor economic performance of the asset etc.) which could result in significant change in recoverable amount of the Property, Plant and Equipment.
2.23. Key sources of estimates and assumptions
Information about estimates and assumptions that have the significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may differ from these estimates.
(i) Defined benefit obligation (DBO)
The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates for the respective countries.
(ii) Contingent Liabilities and Assets
Contingent liabilities may arise from the ordinary course of business in relation to claims against the Company, including legal, contractor, land access and other claims. By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence, and potential quantum, of contingencies inherently involves the exercise of significant judgment and the use of estimates regarding the outcome of future events.
(iii) 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, or when annual impairment testing for an asset is required, the Company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or 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 a 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. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.
(iv) Allowance for impairment of trade receivables
The expected credit loss is mainly based on the ageing of the receivable balances and historical experience. The receivables are assessed on an individual basis assessed for impairment collectively, depending on their significance. Moreover, trade receivables are written off on a case-to-case basis if deemed not to be collectible on the assessment of the underlying facts and circumstances.
(v) 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. The useful lives and residual values are based on the Companyâs historical experience with similar assets and taking into account anticipated technological changes or commercial obsolescence. 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 depreciation/amortisaion for future periods is revised, if there are significant changes from previous estimates and accordingly, the unamortised/depreciable amount is charged over the remaining useful life of the assets.
The Company uses estimates and judgements based on the relevant facts, circumstances, present and past experience, rulings, and new pronouncements while determining the provision for income tax. A deferred tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilised.
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