Accounting Policies of Deepak Chemtex Ltd. Company

Mar 31, 2025

1. Basis of Preparation of Financial Statements

The financial statements have been prepared in accordance with the applicable Accounting Standards
notified under Section 133 of the Companies Act, 2013 read with Rule 7 of Companies (Accounts Rules),
2014 under historical cost convention on accrual basis. All the assets and liabilities have been classified as
current or non-current as per Company''s normal operating cycle and other criteria set out in the Sched- ule-
III to the Companies Act, 2013. Based on the nature of activities, the Company has ascertained its operating
cycle as 12 months for the purpose of current and non-current classification of assets and liabilities.

2. Use of Estimates

The preparation of the financial statements is in conformity with Indian GAAP (Generally Accepted
Accounting Principles) which requires the management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent liabilities as on the date of the
financial statements. The estimates and assumptions made and applied in preparing the financial state¬
ments are based upon management''s best knowledge of current events and actions as on the date of
financial statements. However, due to uncertainties attached to the assumptions and estimates made
actual results could differ from those estimates. Any revision to accounting estimates is recognised pro¬
spectively in current and future periods.

3. Basis of Accounting

Deepak Chemtex Limited follows the accrual basis of accounting, recognizing transactions when they
occur rather than when cash is received or paid, in accordance with AS 1, Disclosure of Accounting Poli¬
cies. This approach ensures a more accurate representation of the company''s financial position and
performance.

4. Revenue Recognition

Revenue is recognized following AS 9, Revenue Recognition, and AS 18, Related Party Disclosures. Reve¬
nue is recognized when:

• The significant risks and rewards of ownership of the goods have been transferred to the buyer.

• The amount of revenue can be reliably measured.

• It is probable that the economic benefits associated with the transaction will flow to the company.
•Revenue from the sale of colorants is recognized

• At the point of dispatch to customers, net of discounts, returns, and allowances.

5. Inventory Valuation

Inventories are valued at the lower of cost or net realizable value as per AS 2, Valuation of Inventories.

The cost of inventory includes:

• Raw materials

• Direct labour

• Manufacturing overhead

Cost is determined using the weighted average cost method. Inventories are reviewed periodically to
identify and write down any obsolete or slow-moving items to their net realizable value.

6. Property, Plant, and Equipment

Property, plant, and equipment (PPE) are recorded at historical cost less accumulated depreciation and
impairment losses, in accordance with AS 10, Property, Plant and Equipment. Depreciation is calculated on a
straight-line basis over the estimated useful lives of the assets. The useful lives are reviewed annually and
adjusted if necessary.

7. Intangible Assets

Intangible assets, such as patents and trademarks, are initially recognized at cost as per AS 26, Intangible
Assets. They are amortized over their estimated useful lives. The useful life and residual value of intangi¬
ble assets are reviewed annually.

8. Accounts Receivable

Accounts receivable are initially recognized at invoice value. An allowance for doubtful debts is estab¬
lished based on historical collection patterns and current economic conditions, as per AS 3, Cash Flow
Statements. Receivables are reviewed regularly for potential impairment.

9. Accounts Payable

Accounts payable are recognized at the amount invoiced by suppliers. They are recorded at fair value and
settled in accordance with the agreed payment terms. Any discounts received are recorded as a reduction in
expense.

10. Foreign Currency Transactions

Foreign currency transactions are recorded at the exchange rate on the transaction date, in accordance
with AS 11, The Effects of Changes in Foreign Exchange Rates. At each reporting date, foreign currency
monetary items are translated at the closing rate, with exchange differences recognized in profit or loss.

11. Taxation

Income tax expense comprises current and deferred tax as per AS 22, Income Taxes. The income tax
expense includes:

• Current Tax: Based on taxable income for the period, adjusted for any differences between accounting
profit and taxable profit.

• Deferred Tax: Reflects temporary differences between the carrying amount of assets and liabilities and
their tax bases. Deferred tax assets and liabilities are recognized using the tax rates expected to apply when
the asset is realized or the liability is settled. Deferred tax assets are recognized to the extent that it is
probable that future taxable profits will be available against which the asset can be utilized.

12. Borrowing Costs

Borrowing costs are accounted for in accordance with AS 16, Borrowing Costs. The treatment of borrow¬
ing costs is as follows:

• Capitalization: Borrowing costs that are directly attributable to the acquisition, construction, or produc¬
tion of a qualifying asset are capitalized as part of the cost of that asset. A qualifying asset is one that takes
a substantial period of time to get ready for its intended use or sale.

• Expense: All other borrowing costs are recognized as an expense in the period in which they are incurred.

13. Employees Benefits

The Employee Benefits is accounted for as follows:

• Recognition: Gratuity is a defined benefit plan as per AS 15, Employee Benefits. The company provides
for gratuity based on an actuarial valuation performed annually.

• Actuarial Valuation:

o The actuarial valuation is carried out using the projected unit credit method, which involves estimating
the future gratuity payments based on employees'' current salaries, years of service, and expected rate
of salary increases.

o The present value of the defined benefit obligation is determined using the discount rate that reflects
the time value of money and is based on market yields on government bonds.

• Expenses:

o The cost of providing gratuity is recognized as an employee benefit expense in the profit and loss
account. This includes current service cost, interest cost on the defined benefit obligation, and actuarial
gains and losses.

o Actuarial gains and losses are recognized in other comprehensive income and are not reclassified to
profit or loss in subsequent periods.

• Disclosures:

o The financial statements disclose the amounts recognized in the financial statements, including the
total expense recognized for gratuity, the principal assumptions used in the actuarial valuation, and the
recon- ciliation of the opening and closing balances of the defined benefit obligation.

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Mar 31, 2024

1. Basis of Preparation of Financial Statements

The financial statements have been prepared in accordance with the applicable Accounting Standards notified under Section 133 of the Companies Act, 2013 read with Rule 7 of Companies (Accounts Rules), 2014 under historical cost convention on accrual basis. All the assets and liabilities have been classified as current or non-current as per Company''s normal operating cycle and other criteria set out in the Sched-ule-III to the Companies Act, 2013. Based on the nature of activities, the Company has ascertained its operating cycle as 12 months for the purpose of current and non-current classification of assets and liabilities.

2. Use of Estimates

The preparation of the financial statements is in conformity with Indian GAAP (Generally Accepted Accounting Principles) which requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities as on the date of the financial statements. The estimates and assumptions made and applied in preparing the financial statements are based upon management''s best knowledge of current events and actions as on the date of financial statements. However, due to uncertainties attached to the assumptions and estimates made actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

3. Basis of Accounting

Deepak Chemtex Limited follows the accrual basis of accounting, recognizing transactions when they occur rather than when cash is received or paid, in accordance with AS 1, Disclosure of Accounting Policies. This approach ensures a more accurate representation of the company''s financial position and performance.

4. Revenue Recognition

Revenue is recognized following AS 9, Revenue Recognition, and AS 18, Related Party Disclosures. Revenue is recognized when:

• The significant risks and rewards of ownership of the goods have been transferred to the buyer.

• The amount of revenue can be reliably measured.

• It is probable that the economic benefits associated with the transaction will flow to the company. Revenue from the sale of colorants is recognized

• at the point of dispatch to customers, net of discounts, returns, and allowances.

5. Inventory Valuation

Inventories are valued at the lower of cost or net realizable value as per AS 2, Valuation of Inventories. The cost of inventory includes:

• Raw materials

• Direct labour

• Manufacturing overhead

Cost is determined using the weighted average cost method. Inventories are reviewed periodically to identify and write down any obsolete or slow-moving items to their net realizable value.

6. Property, Plant, and Equipment

Property, plant, and equipment (PPE) are recorded at historical cost less accumulated depreciation and impairment losses, in accordance with AS 10, Property, Plant and Equipment. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets. The useful lives are reviewed annually and adjusted if necessary.

7. Intangible Assets

Intangible assets, such as patents and trademarks, are initially recognized at cost as per AS 26, Intangible Assets. They are amortized over their estimated useful lives. The useful life and residual value of intangible assets are reviewed annually.

8. Accounts Receivable

Accounts receivable are initially recognized at invoice value. An allowance for doubtful debts is established based on historical collection patterns and current economic conditions, as per AS 3, Cash Flow Statements. Receivables are reviewed regularly for potential impairment.

9. Accounts Payable

Accounts payable are recognized at the amount invoiced by suppliers. They are recorded at fair value and settled in accordance with the agreed payment terms. Any discounts received are recorded as a reduction in expense.

10. Foreign Currency Transactions

Foreign currency transactions are recorded at the exchange rate on the transaction date, in accordance with AS 11, The Effects of Changes in Foreign Exchange Rates. At each reporting date, foreign currency monetary items are translated at the closing rate, with exchange differences recognized in profit or loss.

11. Taxation

Income tax expense comprises current and deferred tax as per AS 22, Income Taxes. The income tax expense includes:

• Current Tax: Based on taxable income for the period, adjusted for any differences between accounting profit and taxable profit.

• Deferred Tax: Reflects temporary differences between the carrying amount of assets and liabilities and their tax bases. Deferred tax assets and liabilities are recognized using the tax rates expected to apply when the asset is realized or the liability is settled. Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which the asset can be utilized.

12. Borrowing Costs

Borrowing costs are accounted for in accordance with AS 16, Borrowing Costs. The treatment of borrowing costs is as follows:

• Capitalization: Borrowing costs that are directly attributable to the acquisition, construction, or production of a qualifying asset are capitalized as part of the cost of that asset. A qualifying asset is one that takes a substantial period of time to get ready for its intended use or sale.

• Expense: All other borrowing costs are recognized as an expense in the period in which they are incurred.

13. Employees Benefits

The Employee Benefits is accounted for as follows:

• Recognition: Gratuity is a defined benefit plan as per AS 15, Employee Benefits. The company provides for gratuity based on an actuarial valuation performed annually.

• Actuarial Valuation: o

The actuarial valuation is carried out using the projected unit credit method, which involves estimating the future gratuity payments based on employees'' current salaries, years of service, and expected rate of salary increases. o

The present value of the defined benefit obligation is determined using the discount rate that reflects the time value of money and is based on market yields on government bonds.

• Expenses: o

The cost of providing gratuity is recognized as an employee benefit expense in the profit and loss account. This includes current service cost, interest cost on the defined benefit obligation, and actuarial gains and losses. o

Actuarial gains and losses are recognized in other comprehensive income and are not reclassified to profit or loss in subsequent periods.

• Disclosures: o

The financial statements disclose the amounts recognized in the financial statements, including the total expense recognized for gratuity, the principal assumptions used in the actuarial valuation, and the reconciliation of the opening and closing balances of the defined benefit obligation.