Accounting Policies of Finolex Industries Ltd. Company
Mar 31, 2022
1. Corporate Information
Finolex Industries Limited (âFILâ or âthe Companyâ) is a company domiciled in India and incorporated under the provisions of Companies Act 1956. The equity shares of the company are listed on BSE Limited and National Stock Exchange of India Limited. Its registered office is situated at Gat No.399, Village Urse, Taluka Maval, District Pune, India.
The company is engaged in the business of manufacturing PVC pipes & fittings and PVC resin. The Company has manufacturing facilities in the states of Maharashtra & Gujarat.
2. Summary of significant accounting policies2.1 Basis of Preparation
The Companyâs standalone financial statements have been prepared in accordance with the provisions of the Companies Act, 2013 and the Indian Accounting Standards (âInd ASâ) as issued under the Companies (Indian Accounting Standards) Rules, 2015 and amendments thereof issued by the Ministry of Corporate Affairs in exercise of the powers conferred by section 133 read with rule 7 of the companies (Accounts) Rules, 2014. In addition, the guidance notes/announcements issued by the Institute of Chartered Accountants of India (ICAI) and the guidelines issued by the Securities and Exchange Board of India are also applied.
The financial statements were approved and were authorized for issue in accordance with a resolution of the Board of Directors on May 18, 2022.
The standalone financial statements have been prepared on accrual basis following historical cost convention, except for:
(i) certain financial assets and financial liabilities that are measured at fair value or amortised cost in accordance with Ind AS.
(ii) defined benefit plans - plan assets measured at fair value.
2.3 Functional and presentation currency
The financial statements are presented in Indian rupees (INR) which is the Companyâs functional currency.
Amounts in the financial statements are presented in Indian Rupees in crore rounded off to two decimal places as permitted by Schedule III to the Companies Act, 2013 unless otherwise stated.
2.4 Current or non-current classification
The Company presents assets and liabilities in the Balance Sheet based on current/non -current classification.
An asset is classified as current when it is:
a. Expected to be realised or intended to be sold or consumed in normal operating cycle
b. Held primarily for the purpose of trading
c. Expected to be realised within twelve months after the reporting period, or
d. Cash or cash equivalents 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 classified as current when it is:
a. Expected to be settled in normal operating cycle
b. Held primarily for the purpose of trading
c. Due to be settled within twelve months after the reporting period, or
d. There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
All other liabilities are classified as non - current.
Deferred tax assets and liabilities are classified as non - current assets and liabilities.
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.
2.5 Significant accounting judgements, estimates and assumptions
The preparation of financial statements in conformity with Ind AS requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenue, expenses, current assets, non-current assets, current liabilities, non-current liabilities and disclosure of the contingent liabilities at the end of each reporting period. Although these estimates are based on managementâs best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying value of assets or liabilities in future periods. These estimates are reviewed regularly and any change in estimates are adjusted prospectively.
In the process of applying the Companyâs accounting policies, management has made the following estimates, assumptions and judgements, which have significant effect on the amounts recognized in the financial statements:
Government Grant/Subsidy
The company was entitled to receive Industrial Promotion Subsidy under the Package Scheme of Incentives, for the period from April1, 2011 to March 31, 2018. Further, the company during the previous year has received extension for 5 years which will expire by March 2023. The aforesaid subsidy is in relation to investments in property, plant and equipment at Ratnagiri plant. Accordingly, the same has been classified as grant related to assets and the company is recognising revenue from grant over the life of the property, plant and equipment.
Leases
From April 1, 2019, Ind AS 116 - âLeasesâ had become effective and the management of the Company has opted for the modified retrospective method along with the transition option to recognise Right-of-Use asset (ROU) at an amount equal to the lease liability. However, the management has assessed the impact of Ind AS 116 and concluded them to be immaterial. Therefore no effects have been taken in the books of account.
Estimates
Defined benefit plan
The cost of defined benefit gratuity plan and present value of such obligation are determined using actuarial valuation. 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, mortality rates and attrition rate. Due to the long-term nature of the plan, such estimates are subject to significant uncertainty. All assumption are reviewed at each reporting date.
The most sensitive parameter is the discount rate. In determining the appropriate discount rate, management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation and extrapolated as needed along the yield curve to correspond with the expected term of the defined benefit obligation.
The mortality rate is based on publicly available mortality tables. Those mortality tables tend to change only at intervals in response to demographic changes. Future salary increases are mainly based on expected future inflation rates for the country.
Further details about defined benefit obligations are provided in Note 36.
Property, Plant and Equipment & Intangible Assets:
The determination of depreciation and amortization charge depends on the useful lives for
which judgements and estimations are required. The residual values, useful lives, and method of depreciation of property, plant and equipment and intangible assets are reviewed at each financial year end and adjusted prospectively, if appropriate.
Claims, Provisions and Contingent Liabilities:
The Company has ongoing litigations with various regulatory authorities and third parties. Where an outflow of funds is believed to be probable and a reliable estimate of the outcome of the dispute can be made based on managementâs assessment of specific circumstances of each dispute and relevant external advice, management provides for its best estimate of the liability. Such accruals are by nature complex and can take number of years to resolve and can involve estimation uncertainty. Information about such litigations is provided in notes to the financial statements.
Fair Value Measurement of Financial Instruments:
Some of the Companyâs assets and liabilities are measured at fair value for financial reporting purposes. In estimating the fair value of an asset or a liability, the Company uses market-observable data to the extent it is available. Where Level 1 inputs i.e. market-observable inputs are not available, the Company engages third party valuers, where required, to perform the valuation.
Impairment of financial assets:
The impairment provisions for financial assets are based on assumptions about risk of default and expected cash loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on Companyâs past history, existing market conditions as well as forward-looking estimates at the end of each reporting period.
Deferred Tax
Deferred tax assets are recognised for all deductible temporary differences including the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized.
The Company measures financial instruments, such as non-current and current investments, at fair value, at each balance sheet date.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an armâs length transaction. Quoted market prices, when available, are used as the measure of fair value. In cases where
quoted market prices are not available, fair values are determined using present value estimates or other valuation techniques which maximize the use of relevant observable inputs and minimize the use of unobservable inputs, for example, the present value of estimated expected future cash flows using discount rates commensurate with the risks involved. Fair value estimation techniques normally incorporate assumptions that market participants would use in their estimates of values, future revenues, and future expenses, including assumptions about interest rates, default, prepayment and volatility. Because assumptions are inherently subjective in nature, the estimated fair values cannot be substantiated by comparison to independent market quotes and, in many cases, the estimated fair values would not necessarily be realised in an immediate sale or settlement of the instrument.
For cash and other liquid assets, the fair value is assumed to approximate to book value, given the short-term nature of these instruments. For those items with a stated maturity exceeding twelve months, fair value is calculated using a discounted cash flow methodology.
The financial instruments carried at fair value are categorized under the three levels of the Ind AS fair value hierarchy as follows:
Level 1: Quoted market prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. This level of the fair value hierarchy provides the most reliable evidence of fair value and is used to measure fair value whenever available.
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs). These inputs reflect the Companyâs own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). These inputs are developed based on the best information available in the circumstances, which include the Companyâs own data. The Companyâs own data used to develop unobservable inputs is adjusted if information indicates that market participants would use different assumptions
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by
re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
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. This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes (refer note 39 for detailed disclosures.)
Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for, as follows:
|
⢠Raw materials |
Purchase cost on a moving |
|
and traded goods |
weighted average basis and inward transportation. Refundable indirect taxes and discounts are excluded from cost. |
|
⢠Finished goods |
Cost of direct raw materials |
|
and work in |
and labour and a proportion |
|
progress |
of manufacturing overheads based on normal operating capacity but excluding borrowing costs |
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sell.
2.8 Property, plant and equipment (PPE)
Items of property, plant and equipment are measured at cost of acquisition or construction less accumulated depreciation and/or accumulated impairment loss, if any. The cost of an item of property, plant and equipment comprises its purchase price, including import duties, and other non-refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition for its intended use; any trade discounts and rebates are deducted in arriving at the purchase price.
Capital work-in-progress comprises cost of property, plant and equipment that are not yet installed and not ready for their intended use at the balance sheet date.
Advances paid towards the acquisition of property, plant and equipment outstanding at each reporting date are disclosed under âOther non-current assetsâ.
Subsequent costs
The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company, and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognised in the statement of profit and loss as incurred.
Disposal
An item of property, plant and equipment is derecognized upon disposal or when no future benefits are expected from its use. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised net within other income/expenses in the statement of profit and loss.
Depreciation
Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value. Depreciation is recognised in the statement of profit and loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment as prescribed in Schedule II of the Act, which are as follows:
|
Asset |
Useful life (in years) |
|
Plant and machinery |
3 to 25 |
|
Building |
60 |
|
Factory Building |
30 |
|
Furniture and fixtures |
10 |
|
Office equipment |
5 |
|
Vehicles |
8 to 13 |
|
Other Intangible Assets |
3 to 6 |
In the case of Captive Power Plant the management, based on a technical evaluation, has estimated the life of asset to be 25 years which is lower than the life prescribed in Schedule - II. Also, in case of moulds and water works, management has estimated a lower life than prescribed in Schedule - II based on technical evaluation.
The management undertakes a review of the residual values, useful lives and methods of depreciation of property, plant and equipment at the end of each reporting period and adjustments are made whenever necessary.
2.9 Intangible assets and amortization Recognition and measurement
Intangible assets are recognised when the asset is identifiable, is within the control of the
Company, it is probable that the future economic benefits that are attributable to the asset will flow to the Company and cost of the asset can be reliably measured.
Intangible assets acquired by the Company that have finite useful lives are measured at cost less accumulated amortisation and any accumulated impairment losses.
Research and development expenditure on new products:
Expenditure on research is expensed under respective heads of account in the period in which it is incurred. Development expenditure on new products is capitalised as intangible asset, if all of the following can be demonstrated:
a) the technical feasibility of completing the intangible asset so that it will be available for use or sale;
b) the Company has intention to complete the intangible asset and use or sell it;
c) the Company has ability to use or sell the intangible asset;
d) the manner in which the probable future economic benefits will be generated including the existence of a market for output of the intangible asset or intangible asset itself or if it is to be used internally, the usefulness of intangible assets;
e) the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
f) t he Company has ability to reliably measure the expenditure attributable to the intangible asset during its development.
Development expenditure that does not meet the above criteria is expensed in the period in which it is incurred. Intangible assets not ready for the intended use on the date of the Balance Sheet are disclosed as Intangible assets under development.
Subsequent measurement
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates.
Amortisation
Amortisation is calculated over the cost of the asset, or other amount substituted for cost, less its residual value. Amortisation is recognised in statement of profit and loss on a straight-line basis over a period of 6 years from the date that they are available for use, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.
Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised.
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer based on delivery terms i.e. when the customer is able to direct the use of the transferred goods or rendering of services and obtains substantially all of the remaining benefits at an amount that reflects the consideration entitled in exchange for those goods or services. The Company is generally the principal as it typically controls the goods or services before transferring them to the customer
The specific recognition criteria described below must also be met before revenue is recognised.
Sale of goods
Revenue from sale of goods is recognised when the significant control of the goods have passed to the buyer, usually when goods are dispatched or on delivery, as per the terms of sale. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates.
Interest Income
For all financial instruments measured at amortised cost, interest income is recorded using the effective interest rate (EIR). The EIR is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset. Interest income is included in finance income in the statement of profit or loss.
The company presents interest income on financial assets at Fair Value through Profit & Loss separately from fair value changes on financials assets.
Dividends
Revenue is recognised when the Companyâs right to receive the payment is established, which is in the year when shareholders approve the dividend.
Borrowing costs
Borrowing costs are interest and other costs that an entity incurs in connection with the borrowing of funds. It also includes exchange differences in relation to the foreign currency borrowings to the extent those are regarded as an adjustment to the borrowing costs.
Borrowing costs such as interest expenses and foreign exchange loss to the extent considered as part of borrowing costs (if any) directly attributable to the construction of a qualifying asset (asset that takes substantial period of time to get ready for use usually 12 months) are capitalised as part of the cost.
Parts of an item of property, plant and equipment having different useful lives, (if any) are accounted for as separate items (major components) of property, plant and equipment.
All other borrowing costs are expensed in the period in which they are incurred.
2.11 Foreign currency transactions:
Items included in the financial statements are measured using the currency of the primary economic environment in which the Company operates (functional currency). The financial statements are presented in INR, which is also the companyâs functional and presentation currency.
Transactions and balances
Transactions in foreign currencies are recorded at functional currency spot rates at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Differences arising on settlement or translation of monetary items are recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss are also recognised in OCI or profit or loss, respectively).
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.
When loans or similar assistance are provided by governments or related institutions with an interest rate below the current applicable market rate, the effect of this favourable interest is regarded as a government grant.
The income tax expense or credit for the period is the tax payable on the current periodâs taxable income based on the applicable income tax rate under the Income Tax Act, 1961 adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Tax is recognised in statement of Profit and Loss, except to the extent that it relates to items recognised in the Other Comprehensive Income or in Equity. In which case, the tax is also recognised in Other Comprehensive Income or Equity
Current income tax
Current income tax assets and liabilities are measured at the amounts expected to be recovered from or paid to the taxation authorities; on the basis of the taxable profits computed for the current accounting period in accordance with Income Tax Act, 1961. The tax rates and tax laws used to compute the amount are those that are enacted at the reporting date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred Tax
Deferred tax is provided using the balance sheet approach on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised
deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
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.
Lease is a contract that provides to the customer (lessee) the right to use an asset for a period of time in exchange for consideration.
A lessee is required to recognize assets and liabilities for all leases with a term that is greater than 12 months, unless the underlying asset is of low value, and to recognize depreciation of leased assets separately from interest on lease liabilities in the statement of Profit and Loss.
Initial Measurement Right to use asset
At the commencement date, the Company measures the right-of-use asset at cost. The cost of the right-of-use asset shall comprise:
⢠the amount of the initial measurement of the lease liability
⢠any lease payments made at or before the commencement date, less any lease incentives received;
⢠any initial direct costs incurred by the lessee; and
⢠an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. The lessee incurs the obligation for those costs either at the commencement date or as a consequence of having used the underlying asset during a particular period.
Lease liability
At the commencement date, the Company measures the lease liability at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise the following payments:
⢠fixed payments (including in-substance fixed payments), less any lease incentives receivable;
⢠variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
⢠amounts expected to be payable by the Company under residual value guarantees;
⢠the exercise price of a purchase option if the Company is reasonably certain to exercise that option; and
⢠payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.
Subsequent measurement Right to use asset
Subsequently the Company measures the right-of-use asset at cost less any accumulated depreciation and any accumulated impairment losses.
Lease Liability
Subsequently the Company measures the lease liability by:
⢠increasing the carrying amount to reflect interest on the lease liability at the interest rate implicit in the lease, if that rate can be readily determined or the Companyâs incremental borrowing rate.
⢠r educing the carrying amount to reflect the lease payments made; and
⢠re-measuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised in-substance fixed lease payments.
In the current year the management has assessed the impact of Ind AS 116 and concluded them to be immaterial. Therefore no effects have been taken in the books of account.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
2.15.1Financial assets
Initial recognition and measurement
Financial assets are recognised initially at fair value plus, in the case of financial assets not classified as fair value through profit or loss (âFVTPLâ), transaction costs that are attributable to the acquisition of the financial asset.
Financial assets are recognised in the Balance Sheet when the Company becomes a party to the contractual provisions of the instrument. A regular way purchase or sale of financial assets shall be recognised using trade date or settlement date accounting.
For purposes of subsequent measurement, financial assets are classified in three categories:
a) At amortised cost
b) At fair value through Other Comprehensive Income (âFVTOCIâ)
c) At fair value through profit or loss (âFVTPLâ)
(a) Financial assets classified as measured at amortised cost
A financial asset shall be measured at amortised cost if both of the following conditions are met:
⢠the financial asset is held within a business model whose objective is to hold financial 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.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (âEIRâ) method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance expense/ (other income) in the profit and loss statement. The losses arising from impairment are recognised in the statement of profit and loss.
This category generally applies to trade receivables, security and other deposits receivable by the company.
The Companyâs investment in its Associate is measured at cost.
(b) Financial assets classified as measured at FVOCI
A financial asset shall be measured at fair value through other comprehensive income if both of the following conditions are met:
⢠the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and
⢠the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
After initial measurement, such financial assets, until they are derecognised or reclassified, are subsequently measured at fair value with unrealised gains or losses recognised in other comprehensive income except for interest income, impairment gains or losses and foreign exchange gains and losses which are recognised in the statement of profit and loss.
On de-recognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from equity to statement of profit and loss.
(c) Financial assets classified as measured at FVTPL
A Financial asset is to be measured at FVTPL, unless it is measured at amortised cost or at FVOCI. The Company classifies all equity or puttable financial instruments held for trading as measured at FVTPL. Such instruments are measured at fair value at initial recognition as well as at each reporting date. The fair value changes are recognised in the statement of profit and loss. Further, the Company may make an irrevocable election to designate a financial asset as FVTPL, at initial recognition, to reduce or eliminate a measurement or recognition inconsistency.
The Company derecognises a financial asset when the contractual rights to the cash flows from the
financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the company neither transfers nor retain substantially all of the risks and rewards of ownership and it does not retain control of the financial asset
Impairment of financial assets
The Company applies expected credit loss (âECLâ) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
⢠Financial assets measured at amortised cost
⢠Financial assets measured at FVOCI, except investments in equity instruments designated as such by the Company.
⢠Trade receivables
The Company follows âsimplified approachâ for recognition of impairment loss allowance on Trade receivables.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. . However, if credit risk has increased significantly, lifetime ECL is used.
Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Companyâs senior management determines change in the business model as a result of external or internal changes which are significant to the Companyâs operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
|
Original Classification |
Revised Classification |
Accounting Treatment |
|
Amortised cost |
FVTPL |
Fair value is measured at reclassification date. Difference between previous amortized cost and fair value is recognised in the statement of Profit and loss. |
|
FVTPL |
Amortised cost |
Fair value at reclassification date becomes its new gross carrying amount. EIR is calculated based on the new gross carrying amount. |
|
Amortised cost |
FVOCI |
Fair value is measured at reclassification date. Difference between previous amortised cost and fair value is recognised in OCI. No change in EIR due to reclassification. |
|
FVOCI |
Amortised cost |
Fair value at reclassification date becomes its new amortised cost carrying amount. However, cumulative gain or loss in OCI is adjusted against fair value. Consequently, the asset is measured as if it had always been measured at amortised cost. |
|
FVTPL |
FVOCI |
Fair value at reclassification date becomes its new carrying amount. No other adjustment is required. |
|
FVTOCI |
FVTPL |
Assets continue to be measured at fair value. Cumulative gain or loss previously recognized in OCI is reclassified to statement of profit and loss at the reclassification date. |
2.15.2 Financial liabilities
Initial recognition and measurement
Financial liabilities are recognised initially at fair value net of, in the case of financial liabilities not classified as fair value through profit or loss (âFVTPLâ), transaction costs that are attributable to the issue of the financial liability. financial liabilities are recognised in the Balance Sheet when the Company becomes a party to the contractual provisions of the instrument.
(a) Financial liabilities at FVTPL
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated as such upon initial recognition. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the group that are not designated as hedging instruments in hedge relationships as defined by Ind-AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the statement of profit and loss.
Financial liabilities designated as such upon initial recognition at the initial date of recognition, if the criteria in Ind-AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risks are recognized in OCI. These gains/ loss are not subsequently transferred to the statement of profit and loss. However,
the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the statement of profit and loss.
The Company has not designated any financial liability as at fair value through profit and loss.
(b) Financial liabilities at amortised cost
This is the most relevant category to the Company. The Company generally classifies interest bearing borrowings as financial liabilities carried at amortised cost. After initial recognition, these instruments are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in statement of profit and loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
2.16 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.
2.17 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, balances with banks and short-term deposits with a maturity of three months or less, which are subject to an insignificant risk of changes in value.
Cash equivalents are short term, highly liquid investments that are readily convertible into known amounts of cash and are subject to an insignificant risk of changes in value.
2.18 Provisions and Contingent Liabilities
A Provision is recognized when the Company has a present obligation as a result of a past event and it is probable that an outflow of resources is expected to settle the obligation, in respect of which a reliable estimate can be made.
If the effect of the time value of money is material, provisions are discounted using a current pretax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent liability is disclosed in case of
⢠a present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation.
⢠present obligation arising from past events, when no reliable estimate is possible
⢠a possible obligation arising from past events where the probability of outflow of resources is not remote.
Provisions and contingent liabilities are reviewed at each Balance Sheet date.
2.19 Provision for employment benefits Defined contribution plans
The Company has the following defined contribution plans: state governed provident fund scheme and employee state insurance scheme. The contributions paid and payable under the scheme are recognised in the period when the employee renders the related service.
Defined benefit plans
The employeesâ gratuity fund scheme managed by the Life Corporations of India (LIC) is the Companyâs defined benefit plans. The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plans, is based on the market yields on Government securities as at the balance sheet date, having maturity periods approximating to the terms of related obligations.
Re-measurements, 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 OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
In case of funded plans, the fair value of the planâs assets is reduced from the gross obligation under the defined benefit plans, to recognize the obligation on net basis.
Gains or losses on the curtailment or settlement of any defined benefit plan are recognized when the curtailment or settlement occurs. Past service cost is recognized as expenses on a straight-line basis over the average period until the benefits become vested. 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 under âemployee benefit expensesâ in the statement of profit and loss:
⢠Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements
⢠Net interest expense or income
Refer Note 36 for additional disclosures relating to Companyâs defined benefit plan.
Provision for compensated absences
Provision for short term compensated absences is recognised for accumulated leaves that are expected to be utilized within a period of twelve months from the balance sheet date. Long term compensated absences are provided for on the basis of an actuarial valuation, using projected unit credit method, as at each reporting date.
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period as reduced by number of shares bought back, if any. The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue, bonus element in a rights issue, share split, and reverse share split (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
2.21 Dividend to equity holders of the Company
Dividends paid (including income tax thereon) is recognised in the period in which the interim dividends are approved by the Board of Directors, or in respect of the final dividend when approved by shareholders.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decision.
Segment accounting policies are in line with the accounting policies of the Company.
Standards issued but not yet effective:
Exposure Drafts:
Following exposure drafts have been issue by the Institute of Chartered Accountants of India:
1. Amendment to Ind AS 116, âLeases" - Covid-19-Related Rent Concessions beyond 30 June 2021
On 24 July 2020, the MCA issued the Companies (Indian Accounting Standard) Amendment Rules, 2020 which amended Ind AS 116 to provide relief for lessees in accounting for eligible rent concessions upto 31 July 2021 that are a direct consequence of COVID-19. The exposure draft on amendments to Ind AS 116 issued by the Institute of Chartered Accountants of India proposes amendments to extend the relief for lessees in accounting for eligible rent concessions upto 31 July 2022.
2. Amendment to Ind AS 116, âLeases" - Interest Rate Benchmark Reform: Phase 2
The exposure draft on amendments to Ind AS 116 issued by the Institute of Chartered Accountants of India proposes amendments to include a practical expedient in respect of all lease modifications that change the basis for determining future lease payments as a result of interest rate benchmark reform.
3. Amendments to Ind AS 37, âProvisions, Contingent Liabilities and Contingent Assets" - Onerous Contracts
The exposure draft on amendments to Ind AS 37 issued by the Institute of Chartered Accountants of India proposes amendments regarding costs a company should include as the cost of fulfilling a contract when assessing whether a contract is onerous.
4. Amendments to Ind AS 16, âProperty, Plant and Equipment" - Proceeds before Intended Use
The exposure draft on amendments to Ind AS 16 issued by the Institute of Chartered Accountants of India proposes amendments regarding proceeds from selling items produced while bringing an asset into the location and condition necessary for it to be capable of operating in the manner intended by management.
5. Amendments to Ind AS 103, âBusiness Combinations" - Reference to the Conceptual Framework
The exposure draft on amendments to Ind AS 103 issued by the Institute of Chartered Accountants of India proposes amendments to change out updated reference to âFramework for the Preparation and Presentation of Financial Statements in accordance with Indian Accounting Standardsâ and update it with reference to âConceptual Framework for Financial Reporting under Indian Accounting Standardsâ. It also proposes certain consequential amendments.
6. Amendments to 101, âFirst-time Adoption of Indian Accounting Standards" - Subsidiary as a First-time Adopter
The exposure draft on amendments to Ind AS 101 issued by the Institute of Chartered Accountants of India proposes amendments to simplify the application of Ind AS 101 by a subsidiary that becomes a first-time adopter after its parent in relation to the measurement of cumulative translation differences.
7. Amendments to 41, âAgriculture" - Taxation in Fair Value Measurements
The exposure draft on amendments to Ind AS 41 issued by the Institute of Chartered Accountants of India proposes amendments to remove a requirement to exclude cash flows from taxation when measuring fair value thereby aligning the fair value measurement requirements in Ind AS 41 with those in other Ind ASâs.
8. Amendments to Ind AS 109, âFinancial Instruments" and Ind AS 107, âFinancial Instruments: Disclosures" - Interest Rate Benchmark Reform: Phase 2
The exposure draft on amendments to Ind AS 109 and Ind AS 107 issued by the Institute of Chartered Accountants of India proposes amendments to assist entities in providing useful information about the effects of the transition to alternative benchmark rates and support preparers in applying the requirements of Ind ASâs when changes are made to contractual cash flows or hedging relationships as a result of the tr
Mar 31, 2021
1. Corporate Information
Finolex Industries Limited (''FI L'' or ''the Company'') is a company domiciled in India and incorporated under the provisions of Companies Act 1956.The equity shares of the company are listed on BSE Limited and National Stock Exchange of India Limited. Its registered office is situated at Gat No.399, Village Urse, Taluka Maval, District Pune, India.
The company is engaged in the business of manufacturing PVC pipes & fittings and PVC resin. The Company has manufacturing facilities in the states of Maharashtra & Gujarat.
2. Summary of significant accounting policies
2.1 Basis of Preparation
The Company''s standalone financial statements have been prepared in accordance with the provisions of the Companies Act, 2013 and the Indian Accounting Standards ("Ind AS") as issued under the Companies (Indian Accounting Standards) Rules, 2015 and amendments thereof issued by the Ministry of Corporate Affairs in exercise of the powers conferred by section 133 read with rule 7 of the companies (Accounts) Rules, 2014. In addition, the guidance notes/announcements issued by the Institute of Chartered Accountants of India (ICAI) and the guidelines issued by the Securities and Exchange Board of India are also applied.
The financial statements were approved and were authorized for issue in accordance with a resolution of the Board of Directors on June 25, 2021.
2.2 Basis of measurement
The standalone financial statements have been prepared on accrual basis following historical cost convention, except for:
(i) certain financial assets and financial liabilities that are measured at fair value or amortised cost in accordance with Ind AS.
(ii) defined benefit plans - plan assets measured at fair value.
2.3 Functional and presentation currency
The financial statements are presented in Indian rupees (INR) which is the Company''s functional currency.
Amounts in the financial statements are presented in Indian Rupees in crore rounded off to two decimal places as permitted by Schedule III to the Companies Act, 2013 unless otherwise stated.
2.4 Current or non-current classification
The Company presents assets and liabilities in the Balance Sheet based on current/non - current classification.
An asset is classified as current when it is:
a. Expected to be realised or intended to be sold or consumed in normal operating cycle
b. Held primarily for the purpose of trading
c. Expected to be realised within twelve months after the reporting period, or
d. Cash or cash equivalents 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 classified as current when it is:
a. Expected to be settled in normal operating cycle
b. Held primarily for the purpose of trading
c. Due to be settled within twelve months after the reporting period, or
d. There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
All other liabilities are classified as non - current.
Deferred tax assets and liabilities are classified as non - current assets and liabilities.
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.
2.5 Significant accounting judgements, estimates and assumptions
The preparation of financial statements in conformity with Ind AS requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenue, expenses, current assets, non-current assets, current liabilities, non-current liabilities and disclosure of the contingent liabilities at the end of each reporting period. Although these estimates are based on management''s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying value of assets or liabilities in future periods. These estimates are reviewed regularly and any change in estimates are adjusted prospectively.
In the process of applying the Company''s accounting policies, management has made the following estimates, assumptions and judgements, which have significant effect on the amounts recognized in the financial statements:
Judgements
Government Grant/Subsidy
The company was entitled to receive Industrial Promotion Subsidy under the Package Scheme of Incentives, for the period from 1st April, 2011 to 31st March 2018. Further, the company during the current year has received extension for 5 years which will expire by March 2023. The aforesaid subsidy is in relation to investments in property, plant and equipment at Ratnagiri plant. Accordingly, the same has been classified as grant related to assets and the company is recognising revenue from grant over the life of the property, plant and equipment.
Leases
From April 1, 2019, Ind AS 116 - ''Leases'' had become effective and the management of the Company has opted for the modified retrospective method along with the transition option to recognise Right-of-Use asset (ROU) at an amount equal to the lease liability. However, the management has assessed the impact of Ind AS 116 and concluded them to be immaterial. Therefore no effects have been taken in the books of account.
Estimates
Defined benefit plan
The cost of defined benefit gratuity plan and present value of such obligation are determined using actuarial valuation. 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, mortality rates and attrition rate. Due to the longterm nature of the plan, such estimates are subject to significant uncertainty. All assumption are reviewed at each reporting date.
The most sensitive parameter is the discount rate. In determining the appropriate discount rate, management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation and extrapolated as needed along the yield curve to correspond with the expected term of the defined benefit obligation.
The mortality rate is based on publicly available mortality tables. Those mortality tables tend to change only at intervals in response to demographic changes. Future salary increases are mainly based on expected future inflation rates for the country.
Further details about defined benefit obligations are provided in Note 35.
Property, Plant and Equipment & Intangible Assets:
The determination of depreciation and amortization charge depends on the useful lives for which judgements and estimations are required. The residual values, useful lives, and method of depreciation of property, plant and equipment and intangible assets are reviewed at each financial year end and adjusted prospectively, if appropriate.
Claims, Provisions and Contingent Liabilities:
The Company has ongoing litigations with various regulatory authorities and third parties. Where an outflow of funds is believed to be probable and a reliable estimate of the outcome of the dispute can be made based on management''s assessment of specific circumstances of each dispute and relevant external advice, management provides for its best estimate of the liability. Such accruals are by nature complex and can take number of years to resolve and can involve estimation uncertainty. Information about such litigations is provided in notes to the financial statements.
Fair Value Measurement of Financial Instruments:
Some of the Company''s assets and liabilities are measured at fair value for financial reporting purposes. In estimating the fair value of an asset or a liability, the Company uses market-observable data to the extent it is available. Where Level 1 inputs i.e. market-observable inputs are not available, the Company engages third party valuers, where required, to perform the valuation.
Impairment of financial assets:
The impairment provisions for financial assets are based on assumptions about risk of default and expected cash loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on Company''s past history, existing market conditions as well as forward-looking estimates at the end of each reporting period.
Deferred Tax
Deferred tax assets are recognised for all deductible temporary differences including the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized.
2.6 Fair value measurement
The Company measures financial instruments, such as non-current and current investments, at fair value, at each balance sheet date.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm''s length transaction. Quoted market prices, when available, are used as the measure of fair value. In cases where quoted market prices are not
available, fair values are determined using present value estimates or other valuation techniques which maximize the use of relevant observable inputs and minimize the use of unobservable inputs, for example, the present value of estimated expected future cash flows using discount rates commensurate with the risks involved. Fair value estimation techniques normally incorporate assumptions that market participants would use in their estimates of values, future revenues, and future expenses, including assumptions about interest rates, default, prepayment and volatility. Because assumptions are inherently subjective in nature, the estimated fair values cannot be substantiated by comparison to independent market quotes and, in many cases, the estimated fair values would not necessarily be realised in an immediate sale or settlement of the instrument.
For cash and other liquid assets, the fair value is assumed to approximate to book value, given the short-term nature of these instruments. For those items with a stated maturity exceeding twelve months, fair value is calculated using a discounted cash flow methodology.
The financial instruments carried at fair value are categorized under the three levels of the Ind AS fair value hierarchy as follows:
Level 1: Quoted market prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. This level of the fair value hierarchy provides the most reliable evidence of fair value and is used to measure fair value whenever available.
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs). These inputs reflect the Company''s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). These inputs are developed based on the best information available in the circumstances, which include the Company''s own data. The Company''s own data used to develop unobservable inputs is adjusted if information indicates that market participants would use different assumptions
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
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. This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes (refer note 38 for detailed disclosures.)
2.7 Inventories
Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for, as follows:
⢠Raw materials and traded goods. Purchase cost on a moving weighted average basis and inward transportation. Refundable indirect taxes and discounts are excluded from cost.
⢠Finished goods and work in progress. Cost of direct raw materials and labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sell.
2.8 Property, plant and equipment (PPE)
Items of property, plant and equipment are measured at cost of acquisition or construction less accumulated depreciation and/or accumulated impairment loss, if any. The cost of an item of property, plant and equipment comprises its purchase price, including import duties, and other non-refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition for its intended use; any trade discounts and rebates are deducted in arriving at the purchase price.
Capital work-in-progress comprises cost of property, plant and equipment that are not yet installed and not ready for their intended use at the balance sheet date.
Advances paid towards the acquisition of property, plant and equipment outstanding at each reporting date are disclosed under "Other non-current assets".
Subsequent costs
The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company, and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of
property, plant and equipment are recognised in the statement of profit and loss as incurred.
Disposal
An item of property, plant and equipment is derecognized upon disposal or when no future benefits are expected from its use. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised net within other income/expenses in the statement of profit and loss.
Depreciation
Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value. Depreciation is recognised in the statement of profit and loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment as prescribed in Schedule II of the Act, which are as follows:
|
Asset |
Useful life |
|
(in years) |
|
|
Plant and machinery |
3 to 25 |
|
Building |
60 |
|
Factory Building |
30 |
|
Furniture and fixtures |
10 |
|
Office equipment |
5 |
|
Vehicles |
8 |
|
Other Intangible Assets |
6 |
In the case of Captive Power Plant the management, based on a technical evaluation, has estimated the life of asset to be 25 years which is lower than the life prescribed in Schedule - II. Also, in case of moulds and water works, management has estimated a lower life than prescribed in Schedule - II based on technical evaluation.
The management undertakes a review of the residual values, useful lives and methods of depreciation of property, plant and equipment at the end of each reporting period and adjustments are made whenever necessary.
2.9 Intangible assets and amortization
Recognition and measurement
Intangible assets are recognised when the asset is identifiable, is within the control of the Company, it is probable that the future economic benefits that are attributable to the asset will flow to the Company and cost of the asset can be reliably measured.
Intangible assets acquired by the Company that have finite useful lives are measured at cost less accumulated amortisation and any accumulated impairment losses.
Research and development expenditure on new products:
Expenditure on research is expensed under respective heads of account in the period in which it is incurred. Development expenditure on new
products is capitalised as intangible asset, if all of the following can be demonstrated:
a) the technical feasibility of completing the intangible asset so that it will be available for use or sale;
b) the Company has intention to complete the intangible asset and use or sell it;
c) the Company has ability to use or sell the intangible asset;
d) the manner in which the probable future economic benefits will be generated including the existence of a market for output of the intangible asset or intangible asset itself or if it is to be used internally, the usefulness of intangible assets;
e) the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
f) the Company has ability to reliably measure the expenditure attributable to the intangible asset during its development.
Development expenditure that does not meet the above criteria is expensed in the period in which it is incurred. Intangible assets not ready for the intended use on the date of the Balance Sheet are disclosed as Intangible assets under development.
Subsequent measurement
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates.
Amortisation
Amortisation is calculated over the cost of the asset, or other amount substituted for cost, less its residual value. Amortisation is recognised in statement of profit and loss on a straight-line basis over a period of 6 years from the date that they are available for use, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised.
2.10 Revenue recognition
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer based on delivery terms i.e. when the customer is able to direct the use of the transferred goods or rendering of services and obtains substantially all of the remaining benefits at an amount that reflects the consideration entitled in exchange
for those goods or services. The Company is generally the principal as it typically controls the goods or services before transferring them to the customer
The specific recognition criteria described below must also be met before revenue is recognised.
Sale of goods
Revenue from sale of goods is recognised when the significant control of the goods have passed to the buyer, usually when goods are dispatched or on delivery, as per the terms of sale. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates.
Interest Income
For all financial instruments measured at amortised cost, interest income is recorded using the effective interest rate (EIR). The EIR is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset. Interest income is included in finance income in the statement of profit or loss.
The company presents interest income on financial assets at Fair Value through Profit & Loss separately from fair value changes on financials assets.
Dividends
Revenue is recognised when the Company''s right to receive the payment is established, which is in the year when shareholders approve the dividend.
Borrowing costs
Borrowing costs are interest and other costs that an entity incurs in connection with the borrowing of funds. It also includes exchange differences in relation to the foreign currency borrowings to the extent those are regarded as an adjustment to the borrowing costs.
Borrowing costs such as interest expenses and foreign exchange loss to the extent considered as part of borrowing costs (if any) directly attributable to the construction of a qualifying asset (asset that takes substantial period of time to get ready for use usually 12 months) are capitalised as part of the cost.
Parts of an item of property, plant and equipment having different useful lives, (if any) are accounted for as separate items (major components) of property, plant and equipment.
All other borrowing costs are expensed in the period in which they are incurred.
2.11 Foreign currency transactions:
Items included in the financial statements are measured using the currency of the primary economic environment in which the Company operates (functional currency). The financial statements are presented in INR, which is also the company''s functional and presentation currency.
Transactions and balances
Transactions in foreign currencies are recorded at functional currency spot rates at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Differences arising on settlement or translation of monetary items are recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss are also recognised in OCI or profit or loss, respectively).
2.12 Government Grant
Government grants are recognised where there is reasonable assurance
that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.
When loans or similar assistance are provided by governments or related institutions with an interest rate below the current applicable market rate, the effect of this favourable interest is regarded as a government grant.
2.13 Taxes
The income tax expense or credit for the period is the tax payable on the current period''s taxable income based on the applicable income tax rate under the Income Tax Act, 1961 adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Tax is recognised in statement of Profit and Loss, except to the extent that it relates to items recognised in the Other Comprehensive Income or in Equity. In which case, the tax is also recognised in Other Comprehensive Income or Equity
Current income tax
Current income tax assets and liabilities are measured at the
amounts expected to be recovered from or paid to the taxation authorities; on the basis ofthe taxable profits computed for the current accounting period in accordance with Income Tax Act, 1961. The tax rates and tax laws used to compute the amount are those that are enacted at the reporting date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred Tax
Deferred tax is provided using the balance sheet approach on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will
be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
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.
2.14 Leases
Lease is a contract that provides to the customer (lessee) the right to use an asset for a period of time in exchange for consideration.
A lessee is required to recognize assets and liabilities for all leases with a term that is greater than 12 months, unless the underlying asset is of low value, and to recognize depreciation of leased assets separately from interest on lease liabilities in the statement of Profit and Loss.
Initial Measurement
Right to use asset
At the commencement date, the Company measures the right-of-use asset at cost. The cost of the right-of-use asset shall comprise:
⢠the amount of the initial measurement of the lease liability
⢠any lease payments made at or before the commencement date, less any lease incentives received;
⢠any initial direct costs incurred by the lessee; and
⢠an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of
the lease, unless those costs are incurred to produce inventories. The lessee incurs the obligation for those costs either at the commencement date or as a consequence of having used the underlying asset during a particular period.
Lease liability
At the commencement date, the Company measures the lease liability at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise the following payments:
⢠fixed payments (including insubstance fixed payments), less any lease incentives receivable;
⢠variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
⢠amounts expected to be payable by the Company under residual value guarantees;
⢠the exercise price of a purchase option if the Company is reasonably certain to exercise that option; and
⢠payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.
Subsequent measurement
Right to use asset
Subsequently the Company measures the right-of-use asset at cost less any accumulated depreciation and any accumulated impairment losses.
Lease Liability
Subsequently the Company measures the lease liability by:
⢠increasing the carrying amount to reflect interest on the lease liability at the interest rate implicit in the lease, if that rate can be readily determined or the Company''s incremental borrowing rate.
⢠reducing the carrying amount to reflect the lease payments made; and
⢠re-measuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised in-substance fixed lease payments.
In the current year the management has assessed the impact of Ind AS 116 and concluded them to be immaterial. Therefore no effects have been taken in the books of account.
2.15 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.
2.15.1 Financial assets
Initial recognition and measurement
Financial assets are recognised initially at fair value plus, in the case of financial assets not classified as fair value through profit or loss (''FVTPL''), transaction costs that are attributable to the acquisition of the financial asset.
Financial assets are recognised in the Balance Sheet when the Company becomes a party to the contractual provisions of the instrument. A regular way purchase or sale of financial assets shall be recognised using trade date or settlement date accounting.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three categories:
a) At amortised cost
b) At fair value through Other Comprehensive Income (''FVTOCI'')
c) At fair value through profit or loss (''FVTPL'')
(a) Financial assets classified as measured at amortised cost
A financial asset shall be measured at amortised cost if both of the following conditions are met:
⢠the financial asset is held within a business model whose objective is to hold financial 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.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (''EIR'') method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance expense/ (other income) in the profit and loss statement. The losses arising from impairment are recognised in the statement of profit and loss.
This category generally applies to trade receivables, security and other deposits receivable by the company.
The Company''s investment in its Associate is measured at cost.
(b) Financial assets classified as measured at FVOCI
A financial asset shall be measured at fair value through other comprehensive income if both of the following conditions are met:
⢠the financial asset is held within a business model whose objective is achieved by both
collecting contractual cash flows and selling financial assets and
⢠the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
After initial measurement, such financial assets, until they are derecognised or reclassified, are subsequently measured at fair value with unrealised gains or losses recognised in other comprehensive income except for interest income, impairment gains or losses and foreign exchange gains and losses which are recognised in the statement of profit and loss.
On de-recognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from equity to statement of profit and loss.
(c) Financial assets classified as measured at FVTPL
A Financial asset is to be measured at FVTPL, unless it is measured at amortised cost or at FVOCI. The Company classifies all equity or puttable financial instruments held for trading as measured at FVTPL. Such instruments are measured at fair value at initial recognition as well as at each reporting date. The fair value changes are recognised in the statement of profit and loss. Further, the Company may make
an irrevocable election to designate a financial asset as FVTPL, at initial recognition, to reduce or eliminate a measurement or recognition inconsistency.
De-recognition
The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the company neither transfers nor retain substantially all of the risks and rewards of ownership and it does not retain control of the financial asset
Impairment of financial assets
The Company applies expected credit loss (''ECL'') model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
⢠Financial assets measured at amortised cost
⢠Financial assets measured at FVOCI, except investments in equity instruments designated as such by the Company.
⢠Trade receivables
The Company follows ''simplified approach'' for recognition of impairment loss allowance on Trade receivables.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. . However, if credit risk has increased significantly, lifetime ECL is used.
Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Company''s senior management determines change in the business model as a result of external or internal changes which are significant to the Company''s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The
Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
|
Particulars |
Revised Classification |
Accounting Treatment |
|
Amortised cost |
FVTPL |
Fair value is measured at reclassification date. Difference between previous amortized cost and fair value is recognised in the statement of Profit and loss. |
|
Fair value at reclassification date becomes |
||
|
FVTPL |
Amortised |
its new gross carrying amount. EIR is |
|
cost |
calculated based on the new gross carrying amount. |
|
|
Fair value is measured at reclassification date. Difference between previous |
||
|
Amortised cost |
FVOCI |
amortised cost and fair value is recognised in OCI. No change in EIR due to reclassification. |
|
Fair value at reclassification date becomes its new amortised cost carrying amount. |
||
|
FVOCI |
Amortised |
However, cumulative gain or loss in OCI is |
|
cost |
adjusted against fair value. Consequently, the asset is measured as if it had always been measured at amortised cost. |
|
|
Fair value at reclassification date becomes |
||
|
FVTPL |
FVOCI |
its new carrying amount. No other adjustment is required. |
|
Assets continue to be measured at fair value. Cumulative gain or loss previously |
||
|
FVTOCI |
FVTPL |
recognized in OCI is reclassified to statement of profit and loss at the reclassification date. |
2.15.2 Financial liabilities
Initial recognition and measurement
Financial liabilities are recognised initially at fair value net of, in the case of financial liabilities not classified as fair value through profit
or loss (''FVTPL''), transaction costs that are attributable to the issue of the financial liability. financial liabilities are recognised in the Balance Sheet when the Company becomes a party to the contractual provisions of the instrument.
(a) Financial liabilities at FVTPL
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated as such upon initial recognition. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the group that are not designated as hedging instruments in hedge relationships as defined by Ind-AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the statement of profit and loss.
Financial liabilities designated as such upon initial recognition at the initial date of recognition, if the criteria in Ind-AS 1 09 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risks are recognized in OCI. These gains/ loss are not subsequently transferred to the statement of profit and loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the statement of profit and loss.
The Company has not designated any financial liability as at fair value through profit and loss.
(b) Financial liabilities at amortised cost
This is the most relevant category to the Company. The Company generally classifies interest bearing borrowings as financial liabilities carried at amortised cost. After initial recognition, these instruments are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in statement of profit and loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
De-recognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability
are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
2.16 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.
2.17 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, balances with banks and short-term deposits with a maturity of three months or less, which are subject to an insignificant risk of changes in value.
Cash equivalents are short term, highly liquid investments that are readily convertible into known amounts of cash and are subject to an insignificant risk of changes in value.
2.18 Provisions and Contingent Liabilities
A Provision is recognized when the Company has a present obligation as a result of a past event and it is probable that an outflow of resources is expected to settle the obligation, in respect of which a reliable estimate can be made.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Contingent liability is disclosed in case of
⢠a present obligation arising from past events, when it is
not probable that an outflow of resources will be required to settle the obligation.
⢠present obligation arising from past events, when no reliable estimate is possible
⢠a possible obligation arising from past events where the probability of outflow of resources is not remote.
Provisions and contingent liabilities are reviewed at each Balance Sheet date.
2.19 Provision for employment benefits
Defined contribution plans
The Company has the following defined contribution plans: state governed provident fund scheme and employee state insurance scheme. The contributions paid and payable under the scheme are recognised in the period when the employee renders the related service.
Defined benefit plans
The employees'' gratuity fund scheme managed by the Life Corporations of India (LIC) is the Company''s defined benefit plans. The present value of the obligation under such defined benefit plan is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
The obligation is measured at the present value of the estimated future cash flows. The discount rates used for determining the present value of the obligation under defined benefit plans, is based on the market yields on Government securities as at the balance sheet date, having maturity periods approximating to the terms of related obligations.
Re-measurements, 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 OCI in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.
In case of funded plans, the fair value of the plan''s assets is reduced from the gross obligation under the defined benefit plans, to recognize the obligation on net basis.
Gains or losses on the curtailment or settlement of any defined benefit plan are recognized when the curtailment or settlement occurs. Past service cost is recognized as expenses on a straight-line basis over the average period until the benefits become vested. 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 under ''employee benefit expenses'' in the statement of profit and loss:
⢠Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements
⢠Net interest expense or income
Refer Note 35 for additional disclosures relating to Company''s defined benefit plan.
Provision for compensated absences
Provision for short term compensated absences is recognised for accumulated leaves that are expected to be utilized within a period of twelve months from the balance sheet date. Long term compensated absences are provided for on the basis of an actuarial valuation, using projected unit credit method, as at each reporting date.
2.20 Earnings per share
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period as reduced by number of shares bought back, if any. The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue, bonus element in a rights issue, share split, and reverse share split (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
2.21 Dividend to equity holders of the Company
Dividends paid (including income tax thereon) is recognised in the period in which the interim dividends are approved by the Board of Directors, or in respect of the final dividend when approved by shareholders.
2.22 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decisionmaker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decision.
Segment accounting policies are in line with the accounting policies of the Company.
Standards issued but not yet effective:
Amendments:
Amendment to Schedule III
On 24 March 2021, the Ministry of Corporate Affairs ("MCA") through a notification, amended Schedule III (Division I, II and III) of the Companies Act, 2013. The amendment is applicable from 1 April 2021 and it specifies additional disclosures in the financial statements.
Key amendments in Division II applicable to the Company include:
⢠Lease Liability be separately disclosed under the heading "Financial liabilities".
⢠Disclosures for prior period errors in the statement of changes in equity
⢠Disclosure of shareholdings of promoters
⢠Disclosure for ageing schedule of trade receivables, trade payables, capital work-in-progress and intangible asset under development
⢠Disclosure of deviation from stated purpose in use of borrowings from banks and financial institutions
⢠Disclosures under ''additional regulatory requirements'' such as compliance with approved schemes of arrangements, compliance with number of layers of companies, title deeds of immovable properties not held in the name of the company, loans and advances to promoters, directors, key managerial personnel and related parties, details of benami property held etc.
⢠Disclosures relating to amount of expenditure on CSR, crypto or virtual currency, undisclosed income etc.
The amendments are extensive and the Company is in the process of evaluating the same to give effect to the same as required by law.
Amendment to Indian Accounting Standard Rules, 2015
The Ministry of Corporate Affairs (MCA) vide Notification dated 18 June 2021 has issued Companies (Indian Accounting Standard)
Amendment Rules, 2021 in
consultation with the National Financial Reporting Authority (NFRA).
The notification states that these rules shall be applicable with immediate effect from the date of the notification i.e. from 18 June 2021 and would thus be applicable for the financial year ending 31 March 2022 and also for interim financial periods ending 30 June 2021, 30 September 2021, 31 December 2021.
The amendments to Ind ASs are
intended to keep the Ind ASs aligned with the amendments made in IFRS and are in terms of insertion of certain paragraphs, substituting the definition of certain terms used in the standard along with aligning the bare text of Standards with Conceptual Framework of Financial reporting under Ind AS''s.
While, largely, the amendments are clarificatory or editorial in nature, there are certain significant amendments as well.
Major amendments notified in the Companies (Ind AS) Amendment Rules, 2021 are provided below:-
a. Ind AS 116 Leases - The amendments extend the benefits of the COVID 19 related rent concession that were introduced earlier allowing lessees to recognize COVID 19 related rent concessions as income rather than as lease modification, from 30 June 2021 to 30 June 2022. The amendment also provides a practical expedient in respect of all lease modifications that change the basis for determining future lease pay
Mar 31, 2018
1.1 Fair value measurement
The Company measures financial instruments, such as non-current and current investments, at fair value, at each balance sheet date.
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 economic best interest.
A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, 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 assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The Companyâs management determines the policies and procedures for both recurring fair value measurement, such unquoted financial assets measured at fair value, and for non-recurring measurement, such as non-current assets held for sale.
External valuation experts are involved for valuation of significant assets and liabilities.
1.2 Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and revenue can be reliably measured, regardless when the payment is received. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty other than excise duty.
The Company has concluded that it is the principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements, has pricing latitude, and is also exposed to inventory risk.
Company has assumed that recovery of excise duty flows to the Company on its own account. Accordingly, it is the liability of the manufacturer which forms part of the cost of production, irrespective of whether the goods are sold or not. Since the recovery of excise duty flows to the Company on its own account, revenue includes excise duty (up to June 30, 2017)*.
However, sales tax/value added tax (VAT) & Goods and Service Tax (GST applicable from July 1, 2017) * is not received by the Company on its own account. Accordingly, it is excluded from revenue.
*Goods and Service Tax was introduced from July 1, 2017. Indirect taxes like excise duty, service tax and sales tax/ VAT have been subsumed into the new Act.
The specific recognition criteria described below must also be met before revenue is recognised.
Sale of goods
Revenue from sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually when goods are dispatched or on delivery, as per the terms of sale. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates.
Interest Income
For all financial instruments measured at amortised cost, interest income is recorded using the effective interest rate (EIR). The EIR is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset. Interest income is included in finance income in the statement of profit or loss.
The company presents interest income on financial assets at Fair Value Through Profit & Loss separately from fair value changes on financials assets.
Dividends
Revenue is recognised when the Companyâs right to receive the payment is established, which is generally when shareholders approve the dividend.
1.3 Foreign currencies
The Companyâs financial statements are presented in Indian Rupees (âINRâ), which is its functional currency.
1.3.1 Transactions and balances
Initial recognition: Transactions in foreign currency are initially recorded at the functional currency spot rate of exchange at the date the transaction first qualifies for recognition.
1.3.2 Translation and exchange differences
Monetary items: Monetary assets and liabilities denominated in foreign currencies are translated at their respective functional currency exchange rate prevailing at the reporting date. Exchange differences arising on settlement or translation of monetary items are recognised in statement of profit or loss.
1.4 Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.
When loans or similar assistance are provided by governments or related institutions with an interest rate below the current applicable market rate, the effect of this favourable interest is regarded as a government grant.
1.5 Taxes
1.5.1 Current income tax
Current income tax assets and liabilities are measured at the amounts expected to be recovered from or paid to the taxation authorities; on the basis of the taxable profits computed for the current accounting period in accordance with Income Tax Act, 1961. The tax rates and tax laws used to compute the amount are those that are enacted at the reporting date.
Current income tax relating to items recognised in other comprehensive income or directly in equity is recognised in other comprehensive income or in equity, respectively, and not in the Profit or Loss. The Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
1.5.2 Deferred tax
Deferred tax is provided using the balance sheet approach on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
- when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;
- in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:
- when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss
- in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
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.
1.6 Non-current assets held for sale
The Company classifies non-current assets as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Non-current assets classified as held for sale are measured at the lower of their carrying amount and the fair value less costs to sell (except for financial instruments, which are measured at fair value). The criteria for held for sale classification is regarded met only when the sale is highly probable and the asset is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the plan for sale will be made or that the plan will be withdrawn. Management must be committed to the sale expected within one year from the date of classification.
Assets and liabilities classified as held for sale are presented separately as current items in the Balance Sheet.
1.7 Property, plant and equipment (PPE)
Property, plant and equipment and capital work in progress, are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Cost comprises of purchase price, directly attributable cost of bringing the asset to its working condition for the intended use and and borrowing costs, if the recognition criteria are met.
When significant parts of property, plant and equipment are required to be replaced at intervals; the Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the statement of profit and loss as incurred.
Depreciation is calculated on a straight-line basis over the useful lives as specified in Schedule II to the Companies Act, 2013 which are as follows:
In the case of Captive Power Plant the management, based on a technical evaluation, has estimated the life of asset to be 25 years which is lower than the life prescribed in Schedule - II.
An item of property, plant and equipment and any signif cant part initially recognised is de-recognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognised.
The management undertakes a review of the residual values, useful lives and methods of depreciation of property, plant and equipment at the end of each reporting period and adjustments are made whenever necessary.
1.8 Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date. The arrangement is assessed for whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
1.8.1 Company as a lessee
Finance leases that transfer to the Company substantially all of the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between f nance charges and a reduction in the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the statement of profit or loss.
An operating lease is a lease other than a finance lease. Operating lease payments are recognised as an operating expense in the statement of profit and loss on a straight-line basis over the lease term.
1.8.2 Company as a lessor
Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. Contingent rents are recognised as revenue in the period in which they are earned.
1.9 Borrowings costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
1.10 Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses, if any.
The intangible assets are amortised over a period of 6 years using straight line method.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised.
1.11 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
1.11.1 Financial assets
1.11.1.1 Classification
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income (âFVOCIâ) or fair value through other profit or loss (âFVTPL).
1.11.1.2 Initial recognition and measurement
Financial assets are recognised initially at fair value plus, in the case of financial assets not classified as fair value through profit or loss (âFVTPLâ), transaction costs that are attributable to the acquisition of the financial asset. Financial assets and financial liabilities are recognised in the Balance Sheet when the Company becomes a party to the contractual provisions of the instrument. A regular way purchase or sale of financial assets shall be recognised using trade date or settlement date accounting.
1.11.1.3 Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three categories:
a) At amortised cost
b) At fair value through Other Comprehensive Income (âFVTOCIâ)
c) At fair value through profit or loss (âFVTPL)
(a) Financial assets classified as measured at amortised cost
A financial asset shall be measured at amortised cost if both of the following conditions are met:
- the financial asset is held within a business model whose objective is to hold financial 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.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (âEIRâ) method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance expense/ (income) in the profit and loss statement.
The losses arising from impairment are recognised in the statement of profit and loss. This category generally applies to trade receivables, security and other deposits receivable by the company.
(b) Financial assets classified as measured at FVOCI
A financial asset shall be measured at fair value through other comprehensive income if both of the following conditions are met:
- the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and
- the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Such instruments are measured at fair value at initial recognition as well as at each reporting date fair value movements are recognised in the Other Comprehensive Income (âOCIâ). Interest income, impairment losses and reversals and foreign exchange gain or loss are recognised in the statement of profit and loss. On de-recognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from equity to statement of profit and loss. Interest earned on such instruments is reported as interest income using the EIR method.
Further, the Company may make an irrevocable election at initial recognition, to classify as FVOCI, particular investments in equity instruments (except equity instruments held for trading) that would otherwise be measured as FVTPL. The Company makes such an election on an instrument-by-instrument basis. Such instruments are measured at fair value on initial recognition as well as at each reporting date. All fair value changes are recognised in OCI. There is no recycling of amounts from OCI to statement of profit and loss, even on de-recognition. However, the company may transfer the cumulative gain/loss within equity. Dividend received on these equity investments is recorded in the profit and loss statement.
(c) Financial assets classified as measured at FVTPL
A Financial asset shall be measured at FVTPL, unless it is measured at amortised cost or at FVOCI. The Company classifies all equity or puttable financial instruments held for trading as measured at FVTPL. Such instruments are measured at fair value at initial recognition as well as at each reporting date. The fair value changes are recognised in the statement of profit and loss. Further, the Company may make an irrevocable election to designate a financial asset as FVTPL, at initial recognition, to reduce or eliminate a measurement or recognition inconsistency.
1.11.1.4 De-recognition
A financial asset (or, where applicable, a part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Companyâs Balance Sheet) when the rights to receive cash flows from the asset have expired; or the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement; and either (a) the group has transferred substantially all the risks and rewards of the asset, or (b) the group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
1.11.1.5 Impairment of financial assets
The Company applies expected credit loss (âECU) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
- Financial assets measured at amortised cost
- Financial assets measured at FVOCI, except investments in equity instruments designated as such by the Company.
- Trade receivables under Ind-AS 18 The Company follows âsimplified approachâ for recognition of impairment loss allowance on Trade receivables.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss.
The impairment loss/ (gain) is recognised in the statement of profit and loss, except for impairment loss/ (gain) on financial assets measured at FVOCI, which shall be recognised in the OCI.
1.11.2 Financial liabilities
1.11.2.1 Classification
Financial liabilities are classified, at initial recognition, as subsequently measured at amortised cost or at fair value through profit or loss (âFVTPLâ).
1.11.2.2 Initial recognition and measurement
Financial liabilities are recognised initially at fair value net of, in the case of financial liabilities not classified as fair value through profit or loss (âFVTPLâ), transaction costs that are attributable to the issue of the financial liability. Financial assets and financial liabilities are recognised in the Balance Sheet when the Company becomes a party to the contractual provisions of the instrument.
(a) Financial liabilities at FVTPL
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated as such upon initial recognition. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the group that are not designated as hedging instruments in hedge relationships as defined by Ind-AS 109. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the statement of profit and loss.
Financial liabilities designated as such upon initial recognition at the initial date of recognition, if the criteria in Ind-AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risks are recognized in OCI. These gains/ loss are not subsequently transferred to the statement of profit and loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the statement of profit and loss.
The Company has not designated any financial liability as at fair value through profit and loss.
(b) Financial liabilities at amortised cost
This is the most relevant category to the Company. The Company generally classifies interest bearing borrowings as financial liabilities carried at amortised cost. After initial recognition, these instruments are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in statement of profit and loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
1.11.2. 3 De-recognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
1.11.3 Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
1.12 Inventories
Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for, as follows:
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs to sell.
1.13 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.
1.14 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, balances with banks and shortterm deposits with a maturity of three months or less, which are subject to an insignificant risk of changes in value.
Cash equivalents are short term, highly liquid investments that are readily convertible into known amounts of cash and are subject to an insignificant risk of changes in value.
1.15 Provisions
Provisions are recognised when the Company has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
1.16 Contingent liability
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company.
A contingent liability can arise for obligations that are possible, but it is yet to be confirmed whether there is present obligation that could lead to an outflow of resources embodying economic benefits.
The Company discloses contingent liability when it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or a sufficiently reliable estimate of the amount of the obligation cannot be made.
The Company does not recognise a contingent liability but only makes disclosures for the same in the financial statements.
1.17 Provision for employment benefits
1.17.1 Defined contribution plans
The Company has the following defined contribution plans: state governed provident fund scheme and employee state insurance scheme. The contributions paid and payable under the scheme are recognised in the period when the employee renders the related service.
1.17.2 Defined benefit plans
Post-employment benefit in the form of gratuity fund scheme is a defined benefit plan. The present value of obligation under the scheme is determined based on actuarial valuation using the projected unit credit method (âPUCMâ). The scheme is funded with an insurance company in the form of a qualifying insurance policy.
Re-measurements, comprising of actuarial gains and losses 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 OCI in the period in which they occur. Re-measurements are not reclassified to the statement of profit and loss in subsequent periods.
Past service costs are recognised in profit or loss on the earlier of:
- The date of the plan amendment or curtailment and
- The date on which the Company recognises related restructuring costs
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 under âemployee benefit expensesâ in the statement of profit and loss:
- Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements
- Net interest expense or income
Refer Note 36 for additional disclosures relating to Companyâs defined benefit plan.
1.17.3 Provision for compensated absences
Provision for short term compensated absences is recognised for accumulated leaves that are expected to be utilized within a period of twelve months from the balance sheet date. Long term compensated absences are provided for on the basis of an actuarial valuation, using projected unit credit method, as at each reporting date.
1.18 Significant accounting judgements, estimates and assumptions
The preparation of the 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. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of asset or liability affected in future periods.
1.19 Judgements
In the process of applying the accounting policies, management has made the following judgements, which have significant effect on the amounts recognised in the financial statements:
1.19.1 Non-current asset held for sale
On February 6, 2018, the Company had received an offer from Peninsula Investment Management Company Limited to purchase the units of âPReF Indigo Schemeâ Subsequently the Company has accepted the offer vide letter dated February 23,2018 to Peninsula Investment Management Company expressing its intent to irrevocably sell its units to the company at the Net Asset Value (NAV) of March 31, 2017. The Company has an active plan and taken all necessary approvals to execute the sale. Accordingly, this investment was classified as noncurrent asset held for sale as on March 31, 2018, on account of the following factors:
- The asset is available for sale in the present condition
- The sale is highly probable, which is evident from the following:
- The Companyâs management has a committed to plan to sell the noncurrent asset
- Active program to complete the plan is initiated
- The sale is expected to be executed within one year
1.19.2 Classification of non-current investments
The Company has classified investment in Finolex Plasson Industries Limited and Pawas Port Limited as investment in associates and accordingly investment in equity shares of these companies have been measured at cost.
The non-current investments in equity shares of Finolex Cables Limited and Finolex Infrastructure Limited which the Company considers to be strategic in nature have been classified as investments measured at fair value through Other Comprehensive Income.
1.20 Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the Companyâs control. Such changes are reflected in the assumptions when they occur.
1.20.1 Defined benefit plans
The Company has a defined benefit plan i.e. gratuity fund scheme. The cost and the present value of the obligation arising out of the gratuity scheme are determined using actuarial valuations.
An actuarial valuation involves making various assumptions which 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 complexity of the valuation, the underlying assumptions and its longterm nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
1.20.2 Fair value measurement of financial instruments
When the fair value of financial assets and financial liabilities recorded in the statement of balance sheet cannot be measured based on quoted prices in active markets, their fair value is determined using valuation techniques including the discounted cash flow (âDCFâ) model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. The judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions relating to these factors could affect the reported fair value of financial instruments. Please refer Note 39 for further details of fair valuation approach and inputs used for various financial instruments.
The discount for lack of marketability represents the amounts that the Company has determined that market participants would take into account when pricing the investments.
Standards issued but not yet effective
Standards issued but not yet effective up to the date of issuance of the companyâs financial statements are listed below. This listing is of standards and interpretations issued, which the company reasonably expects to be applicable at a future date. The company intends to adopt those standards when they become effective.
The Ministry of Corporate Affairs (MCA) has issued the Companies (Indian Accounting Standards) (Amendment) Rules, 2018 amending Ind AS 115 Revenue from Contracts with Customers, Appendix D to Ind AS 115 Service Concession Arrangements and Appendix B to Ind AS 21, Foreign Currency Transactions and Advance Consideration (corresponding to IFRIC 22). Ind AS 11 Construction Contracts and Ind AS 18 Revenue will be omitted.
Mar 31, 2017
1. Corporate Information
Finolex Industries Limited (''FIL or ''the Company'') is a company incorporated and domiciled in India and its equity shares are listed on Bombay Stock Exchange and National Stock Exchange. Its registered office is situated at Gat No.399, Village Urse, Taluka Maval, District Pune, India.
The company is engaged in the business of manufacturing PVC pipes & fittings, manufacturing of PVC resin and power generation.
The financial statements were authorized for issue in accordance with a resolution of the Board of Directors on May 26,
2017.
2. Basis of Preparation
The financial statements of the Company have been prepared in accordance with the Indian Accounting Standards (''Ind AS'') notified under Section 133 of the Companies Act 2013 (''Act''), read together with the Companies (Indian Accounting Standards) Rules, 2015, as amended (''Rules'').
The financial statements have been prepared on accrual basis and under historical cost convention, except for financial assets and financial liabilities that have been measured at fair value.
For all periods up to and including the year ended March 31, 2016, the company prepared its financial statements in accordance with generally accepted accounting principles in India (''Indian GAAP''), including the Accounting Standards (''AS'' of ''Indian GAAP'') specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013. These financial statements for the year ended March 31, 2017 are the first financial statements that the Company has prepared in accordance with Ind AS. Refer Note 4 for information on first time adoption of Ind AS by the Company.
The financial statements are presented in t and all values are rounded to the nearest Lakh [t 00,000), except when otherwise indicated.
3. Summary of significant accounting policies
3.1 Fair value measurement
The Company measures financial instruments, such as non-current and current investments, at fair value, at each balance sheet date. Fair-value related disclosures for financial instruments and non-financial assets that are measured at fair value or where fair values are disclosed in Note 42.
Fair value is the price that would be received to sell an assertor 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 economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. 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, 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 assets and liabilities that are recognized in the financial statements at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The Company''s management determines the policies and procedures for both recurring fair value measurement, such unquoted financial assets measured at fair value, and for non-recurring measurement, such as non-current assets held for sale.
External valuation experts are involved for valuation of significant assets and liabilities.
3.2 Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and revenue can be reliably measured, regardless when the payment is received. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty other than excise duty.
The Company has concluded that it is the principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements, has pricing latitude, and is also exposed to inventory risk.
The specific recognition criteria described below must also be met before revenue is recognized.
Sale of goods
Revenue from sale of goods is recognized when the significant risks and rewards of ownership of the goods have sassed to the buyer, usually when goods are dispatched or on delivery, as per the terms of sale. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates.
Interest Income
For all financial instruments measured at amortized cost, interest income is recorded using the effective interest rate (ElR). The EIR is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset. Interest income is included in finance income in the statement of profit or loss.
Dividends
Revenue is recognized when the Company''s right to receive the payment is established, which is generally when shareholders approve the dividend.
3.3 Foreign currencies
The Company''s financial statements are presented in Indian Rupees (T), which is its functional currency.
3.3.1 Transactions and balances
Initial recognition: Transactions in foreign currency are initially recorded at the functional currency spot rate of exchange at the date the transaction first qualifies for recognition.
3.3.2Translation and exchange differences
Monetary items: Monetary assets and liabilities denominated in foreign currencies are translated at their respective functional currency exchange rate prevailing at the reporting date. Exchange differences arising on settlement or translation of monetary items are recognized in statement of profit or loss.
3.4 Government grants
Government grants are recognized where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognized as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognized as income in equal amounts over the expected useful life of the related asset.
When loans or similar assistance are provided by governments or related institutions with an interest rate below the current applicable market rate, the effect of this favorable interest is regarded as a government grant.
3.5 Taxes
3.5.1 Current income tax
Current income tax assets and liabilities are measured at the amounts expected to be recovered from or paid to the taxation authorities; on the basis of the taxable profits computed for the current accounting period in accordance with Income Tax Act, 1961. The tax rates and tax laws used to compute the amount are those that are enacted at the reporting date.
Current income tax relating to items recognized in other comprehensive income or directly in equity is recognized in other comprehensive income or in equity, respectively, and not in the Profit or Loss. The Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
3.5.2 Deferred Tax
Deferred tax is provided using the balance sheet approach on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognized for all taxable temporary differences, except:
- when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;
- in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except:
- when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss
- in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity.
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.
3.6 Non-current assets held for sale
The Company classifies non-current assets as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Non-current assets classified as held for sale are measured at the lower of their carrying amount and the fair value less costs to sell (except for financial instruments, which are measured at fair value). The criteria for held for sale classification is regarded met only when the sale is highly probable and the asset is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the plan for sale will be made or that the plan will be withdrawn. Management must be committed to the sale expected within one year from the date of classification.
Assets and liabilities classified as held for sale are presented separately as current items in the Balance Sheet.
3.7 Property, plant and equipment
The Company has opted to disclose the previous GAAP (Indian GAAP) carrying value of Property, plant and equipment (''PPE'') as the deemed cost under Ind-AS as at April 1, 2015.
Property, plant and equipment and capital work in progress, are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Cost comprises of purchase price, directly attributable cost of bringing the asset to its working condition for the intended use and and borrowing costs, if the recognition criteria are met.
When significant parts of property, plant and equipment are required to be replaced at intervals; the Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in the statement of profit and loss as incurred.
Depreciation is calculated on a straight-line basis over the useful lives as specified in Schedule II to the Companies Act, 2013 which are as follows:
In the case of Captive Power Plant the management, based on a technical evaluation, has estimated the life of asset to be 25 years which is lower than the life prescribed in Schedule -
II.An item of property, plant and equipment and any significant part initially recognized is de-recognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognized.
The management undertakes a review of the residual values, useful lives and methods of depreciation of property, plant and equipment at the end of each reporting period and adjustments are made whenever necessary.
3.8 Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date. The arrangement is assessed for whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
3.8.1 Company as a lessee
Finance leases that transfer to the Company substantially all of the risks and benefits incidental to ownership of the leased item, are capitalized at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and a reduction in the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in finance costs in the statement of profit or loss.
An operating lease is a lease other than a finance lease. Operating lease payments are recognized as an operating expense in the statement of profit and loss on a straight-line basis over the lease term.
3.8.2 Company as a less or
Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same bases as rental income. Contingent rents are recognized as revenue in the period in which they are earned.
3.9 Borrowings costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
3.10 Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any.
The intangible assets are amortized over a period of 6 years using straight line method.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit or loss when the asset is derecognized.
3.11 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
3.11.1 Financial assets
3.11.1.1 Classification
Financial assets are classified, at initial recognition, as subsequently measured at amortized cost, fair value through comprehensive income (''FVOCI'') or fair value through other profit or loss (''FVTPL).
3.11.1.2 Initial recognition and measurement
Financial assets are recognized initially at fair value plus, in the case of financial assets not classified as fair value through profit or loss (''FVTPL), transaction costs that are attributable to the acquisition of the financial asset. Financial assets and financial liabilities are recognized in the Balance Sheet when the Company becomes a party to the contractual provisions of the instrument. A regular way purchase or sale of financial assets shall be recognized using trade date or settlement date accounting.
3.11.1.3 Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three categories:
a) At amortized cost
b) At fair value through Other Comprehensive Income (''FVTOCI'')
c) At fair value through profit or loss (''FVTPL)
(a) Financial assets classified as measured at amortized cost
A financial asset shall be measured at amortized cost if both of the following conditions are met:
- the financial asset is held within a business model whose objective is to hold financial 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.
After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate (''ElR'') method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance expense/ (income) in the profit and loss statement. The losses arising from impairment are recognized in the statement of profit and loss. This category generally applies to trade receivables, security and other deposits receivable by the company.
(b) Financial assets classified as measured at FVOCI
A financial asset shall be measured at fair value through other comprehensive income if both of the following conditions are met:
- the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and
- the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Such instruments are measured at fair value at initial recognition as well as at each reporting date fair value movements are recognized in the Other Comprehensive Income (''OCI''). Interest income, impairment losses and reversals and foreign exchange gain or loss are recognized in the statement of profit and loss. On de-recognition of the asset, cumulative gain or loss previously recognized in OCI is reclassified from equity to statement of profit and loss. Interest earned on such instruments is reported as interest income using the EIR method.
Further, the Company may make an irrevocable election at initial recognition, to classify as FVOCI, particular investments in equity instruments (except equity instruments held for trading) that would otherwise be measured as FVTPL. The Company makes such an election on an instrument-by-instrument basis. Such instruments are measured at fair value on initial recognition as well as at each reporting date. All fair value changes are recognized in OCI. There is no recycling of amounts from OCI to statement of profit and loss, even on de-recognition. However, the company may transfer the cumulative gain/loss within equity. Dividend received on these equity investments is recorded in the profit and loss statement.
(c) Financial assets classified as measured at FVTPL
A Financial asset shall be measured at FVTPL, unless it is measured at amortized cost or at FVOCI. The Company classifies all equity or potable financial instruments held for trading as measured at FVTPL. Such instruments are measured at fair value at initial recognition as well as at each reporting date. The fair value changes are recognized in the statement of profit and loss. Further, the Company may make an irrevocable election to designate a financial asset as FVTPL, at initial recognition, to reduce or eliminate a measurement or recognition inconsistency.
3.11.1.4 De-recognition
A financial asset (or, where applicable, a part of a group of similar financial assets) is primarily derecognized (i.e. removed from the Company''s Balance Sheet) when the rights to receive cash flows from the asset have expired; or the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''pass-through'' arrangements and either (a) the group has transferred substantially all the risks and rewards of the asset, or
(b) the group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
3.11.1.5 Impairment of financial assets
The Company applies expected credit loss (''ECL) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
- Financial assets measured at amortized cost
- Financial assets measured at FVOCI, except investments in equity instruments designated as such by the Company.
- Trade receivables under Ind-AS 18
The Company follows ''simplified approach'' for recognition of impairment loss allowance on Trade receivables.
The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss.
The impairment loss/ (gain) is recognized in the statement of profit and loss, except for impairment loss/ (gain) on financial assets measured at FVOCI, which shall be recognized in the OCI.
3.11.2 Financial liabilities
3.11.2.1 Classification
Financial liabilities are classified, at initial recognition, as subsequently measured at amortized cost or at fair value through profit or loss (''FVTPL).
3.11.2.2 Initial recognition and measurement
Financial liabilities are recognized initially at fair value net of, in the case of financial liabilities not classified as fair value through profit or loss (''FVTPL), transaction costs that are attributable to the issue of the financial liability. Financial assets and financial liabilities are recognized in the Balance Sheet when the Company becomes a party to the contractual provisions of the instrument.
(a) Financial liabilities at FVTPL
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated as such upon initial recognition. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the group that are not designated as hedging instruments in hedge relationships as defined by Ind-AS 109. Separated embedded derivatives are also classified as held for trading unless they are
designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognized in the statement of profit and loss.
Financial liabilities designated as such upon initial recognition at the initial date of recognition, if the criteria in Ind-AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risks are recognized in OCI. These gains/ loss are not subsequently transferred to the statement of profit and loss. However, the Company may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognized in the statement of profit and loss.
The Company has not designated any financial liability as at fair value through profit and loss.
(b) Financial liabilities at amortized cost
This is the most relevant category to the Company. The Company generally classifies interest bearing borrowings as financial liabilities carried at amortized cost. After initial recognition, these instruments are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in statement of profit and loss when the liabilities are derecognized as well as through the EIR amortization process.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of profit and loss.
3.11.2.3 De-recognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statement of profit and loss.
3.11.3 Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
3.12 Inventories
Inventories are valued at the lower of cost and net realizable value. Costs incurred in bringing each product to its present location and condition are accounted for, as follows:
Raw materials Purchase cost on a moving weighted average basis
Finished goods and work in progress Cost of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs to sell.
3.13 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 foran 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.
3.14 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, balances with banks and short-term deposits with a maturity of three months or less, which are subject to an insignificant risk of changes in value.
Cash equivalents are short term, highly liquid investments that are readily convertible into known amounts of cash and are subject to an insignificant risk of changes in value.
3.15 Provisions
Provisions are recognized when the Company has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
3.16 Contingent liability
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company.
A contingent liability can arise for obligations that are possible, but it is yet to be confirmed whether there is present obligation that could lead to an outflow of resources embodying economic benefits.
The Company discloses contingent liability when it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or a sufficiently reliable estimate of the amount of the obligation cannot be made.
The Company does not recognize a contingent liability but only makes disclosures for the same in the financial statements.
3.17 Provision for employment benefits
3.17.1 Defined contribution plans
The Company has the following defined contribution plans: state governed provident fund scheme and employee state insurance scheme. The contributions paid and payable under the scheme are recognized in the period when the employee renders the related service.
3.17.2 Defined benefit plans
Post-employment benefit in the form of gratuity fund scheme is a defined benefit plan. The present value of obligation under the scheme is determined based on actuarial valuation using the projected unit credit method (''PUCM'').The scheme is funded with an insurance company in the form of a qualifying insurance policy.
Re-measurements, comprising of actuarial gains and losses and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to the statement of profit and loss in subsequent periods.
Past service costs are recognized in profit or loss on the earlier of:
- The date of the plan amendment or curtailment and
- The date on which the Company recognizes related restructuring costs
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognizes the following changes in the net defined benefit obligation under ''employee benefit expenses'' in the statement of profit and loss:
- Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements
- Net interest expense or income
Refer Note 39 for additional disclosures relating to Company''s defined benefit plan.
3.17.3 Provision for compensated absences
Provision for short term compensated absences is recognized for accumulated leaves that are expected to be utilized within a period of twelve months from the balance sheet date. Long term compensated absences are provided for on the basis of an actuarial valuation, using projected unit credit method, as at each reporting date.
4. First time adoption of Ind AS
These financial statements, for the year ended March 31, 2017, are the first financial statements prepared by the Company in accordance with Ind AS. For periods up to and including the year ended March 31, 2016, the Company prepared its financial statements in accordance with Indian GAAP
Accordingly, the Company has prepared financial statements that comply with
Ind AS at March 31, 2017, along with comparative period data for the year ended March 31, 2016. In order to prepare the first financial statements in accordance with Ind AS, the opening Ind AS financial statements was prepared as at April 1, 2015, being the date of transition to Ind AS.
The principal adjustments made by the Company in restating its Indian GAAP financial statements, including the Balance Sheet as at April 1, 2015 and the financial statements as at and for the year ended March 31, 2016, are explained in the following explanatory notes for first time adoption of Ind AS.
Exemptions and exceptions applied
Ind AS 101 allows first time adopters certain exemptions and exceptions from the retrospective application of certain requirements under Ind AS.
The Company has applied the following exemptions and exceptions in translating its Indian GAAP financial statements:
- Since there is no change in the functional currency, the Company has elected to continue with the carrying value of all its property, plant and equipment and intangible assets, as recognized in its Indian GAAP financial statements, as the deemed cost at the date of transition.
- The Company has elected to continue with the carrying value of its investments in associates, as recognized in its Indian GAAP financial statements, as the deemed cost at the date of transition.
- The company has determined the classification and measurement of financial assets on the basis of the facts and circumstances that existed as at April 1, 2015, the date of transition to Ind AS.
- The Company has designated investments in equity instruments as measured at fair value through other comprehensive income on the basis of the facts and circumstances that exist at April 1, 2015, the date of transition to Ind AS.
- The Company has designated current investments as measured at fair value through profit or loss on the basis of the facts and circumstances that exist at April 1, 2015, the date of transition to Ind AS.
- The Company has assessed all arrangements for determining whether any of the arrangements contains a lease, in accordance with Appendix C of Ind AS 17-Leases, based on the facts and circumstances existing at April 1, 2015, the date of transition to Ind AS.
- The Company has classified certain investments in equity instruments as non-current assets held for sale, on the basis of the facts and circumstances that exist at April 1, 2015, the date of transition to Ind AS. The same has been measured at fair value as at April 1, 2015. Any difference between its fair value thus computed and the carrying value under Indian GAAP was recognized directly in retained earnings as at April 1, 2015.
- The Company has applied the requirements for de-recognition of financial instruments, as required in Ind AS 109-Financial Instruments prospectively for financial transactions occurring on or after April 1, 2015, the date of transition to Ind AS.
- The Company shall continue to measure and disclose the sales tax deferral loan as per Indian GAAP principles until it is repaid, as Ind AS 101 prohibits retrospective recognition of benefit of the government loan at a below market rate of interest.
Estimates
The estimates as at April 1, 2015 and as at March 31, 2016 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any difference in accounting policies).
The estimates used by the Company to present these amounts in accordance with principles of Ind AS reflect conditions as at April 1, 2015 and for the year ended March 31, 2016.
Notes to the reconciliation of equity as at April 1, 2015 and March 31, 2016 and reconciliation of statement of profit and loss for the year ended March 31, 2016
4.1 Investments
Under Indian GAAR the Company classified all investments acquired with the intention of being held for more than
1 year as non-current investments. Under Ind AS, the Company has classified an investment as non-current asset held for sale, as their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Refer Note 17 for further details.
Under Indian GAAR the Company accounted for long term investments in quoted and unquoted equity shares and units of mutual funds as investments measured at cost less provision for other than temporary diminution in the value of investments and for current investments in quoted and unquoted mutual fund and indexed linked debentures, as investments measured at lower of cost and fair value, determined on individual basis. Under Ind AS, the Company has designated such instruments as financial assets at fair value through profit or loss or fair value through other comprehensive income. Ind AS requires such financial assets to be measured at fair value. On the date of transition to Ind AS, the difference between the fair value
and the Indian GAAP carrying value of the instruments has been recognized as an adjustment against the retained earnings, net of related deferred tax.
4.2 Government Grant
Under Indian GAAR incentives accrued under the Industrial Promotion Subsidy under the Package Scheme of Incentives is considered to be in the nature of promoters'' contribution and is recognized directly in the balance sheet as capital reserve. Under Ind AS, these incentives qualify as grant related to assets. This is disclosed as deferred income in the balance sheet and recognized in the statement of profit and loss over the life of the property, plant and equipment..
4.3 Long term loans and short term loans
Under Indian GAAR the Company classified all its advances, including advance tax, deposits held under protest, advances for capital purchases, statutory balances, as part of long term loans and advances, in the absence of distinction between financial and non-financial assets. Under Ind AS, financial and non-financial assets have to be classified and measured separately, hence, certain items forming part of long term loans and advances in Indian GAAP have been regrouped to other non-current assets under Ind AS
4.4 Other non-current assets
Other non-current assets consist of amounts classified from Indian GAAP long term loans and advances (refer Note 4.3 above).
4.5 Current tax assets (net)
This comprises of advance tax reclassified from short term loans and advances in Indian GAAP Refer Note 4.3 above for details.
4.6 Financial liabilities at amortized cost
Under Indian GAAR the Company recognized the liability at cost and the issue expenses were recognized as an expense in the period in which they were incurred. Under Ind AS, the liability is measured at amortized cost following effective interest rate method. The issue expenses are factored in the computation of effective interest rate and hence will get amortized over the period and not in the year in which they are incurred. On the date of transition to Ind AS, adjustment arising on account measuring financial liability at amortized cost has been recognized as an adjustment against the retained earnings.
4.7 Other current financial liabilities
Under Indian GAAR the Company classified all its liabilities such as payables to employees and provision for expense, as part of other current liabilities, in the absence of distinction between financial and non-financial liabilities. Under Ind AS, financial and non-financial liabilities have to be classified and measured separately. Hence, such items forming part of other current liabilities in Indian GAAP have been regrouped to ''other current financial liabilities'' in Ind AS.
4.8 Other current liabilities
Under Indian GAAR current liabilities included current portion of long term borrowings, payables to employees and provision for expense (as discussed on Note 4.7 above). It also included interest accrued but not due on Company''s borrowings, which is now included in the value of borrowings computed as per the amortized cost method.
4.9 Short term provisions
Under Indian GAAR the Company recognized as a liability, provision for dividend in the year to which it relates, even though the same is subsequently approved by the shareholders in the Annual General Meeting (''AGM''). However, under Ind AS, liability will be recognized in the financial statement after it is approved by the shareholders in the AGM. Consequently, proposed dividend relating to FY 2015-16 that was recognized as a provision in Indian GAAP as at March 31, 2015, will be recognized under Ind AS in the year ended March 31, 2016, by corresponding debit to retained earnings.
4.10 Other equity
Adjustments in other equity are on account of changes in measurement
Further, the Company had a Capital reserve (Rs, 60 Lakhs as at March 31, 2015) created out of receipt of government grants in prior years and a Contingency reserve (Rs, 1,215 Lakhs as at March 31, 2015) created for certain mark to market losses not recognized as a provision in prior years. These reserves are treated as part of retained earnings under Ind AS.
4.11 Defined benefit obligation
Both under Indian GAAP and Ind AS, the Company recognized costs related to its post-employment defined benefit plan on an actuarial basis. Under Indian GAAR the entire cost, including actuarial gains and losses, are charged to profit or loss. Under Ind-AS, re-measurements 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 recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI net of tax.
4.12 Other comprehensive income
Under Indian GAAR there were no requirements to separately disclose Other Comprehensive Income (''OCI'') and hence, the Company had not presented other comprehensive income (OCI) separately. Hence, the Company has reconciled the profit under Indian GAAP to the profit as per Ind-AS. Further, the profit under Ind-AS is reconciled to total comprehensive income as per Ind-AS.
4.13 Deferred taxes
Indian GAAP requires deferred taxes to be accounted using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind-AS 12- Income Taxes requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind-AS 12 has resulted in recognition of deferred tax on new temporary differences which was not required under Indian GAAR
4.14 Sale of goods
Under Indian GAAR sale of goods was presented as net of excise duty. However, under Ind AS, sale of goods includes excise duty. Thus sale of goods under Ind AS has increased with a corresponding increase in cost of material consumed.
4.15 Statement of cash flows
The transition from Indian GAAP to Ind AS has not had a material impact on the statement of cash flows.
5. Significant accounting judgments, estimates and assumptions
The preparation of the financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of asset or liability affected in future periods.
5.1 Judgments
In the process of applying the accounting policies, management has made the following judgments, which have significant effect on the amounts recognized in the financial statements:
5.1.1 Non-current asset held for sale
On March 16, 2015, the Board of Directors of the Company had decided to sell the Company''s investment in equity instruments of Rajasthan Olive Cultivation Limited. Subsequently the Company had written a letter dated June 2, 2015 to the Rajasthan State Agriculture Board (''State Board'') (the majority shareholder in Rajasthan Olive Cultivation Limited) expressing its intent to sell its shares to the State Board at face value. The Company had an active plan to execute the sale. If the Company would not receive a response from the State Board, the Company had plans to sell these shares to external parties. Accordingly, this investment was
classified as non-current asset held for sale as on April 1, 2015, on account of the following factors:
- The asset was available for sale in the present condition
- The sale was highly probable, which was evident from the following:
- The Company''s management had a committed to plan to sell the non-current asset
- Active program to locate buyer and complete the plan was initiated
- The sale was expected to be executed within one year
During the year ended March 31, 2016, the Company sold this investments in Rajasthan Olive Cultivation Limited.
5.1.2 Classification of non-current investments
The Company has classified investment in Finolex Plasson Industries Limited and Pawas Port Limited as investment in associates and accordingly investment in equity shares of these companies have been measured at cost.
The non-current investments in equity shares of Finolex Cables Limited, Finolex Infrastructure Limited and 12IT Private Limited, which the Company considers to be strategic in nature have been classified as investments measured at fair value through Other Comprehensive Income.
5.2 Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the Company''s control. Such changes are reflected in the assumptions when they occur.
5.2.1 Defined benefit plans
The Company has a defined benefit plan i.e. gratuity fund scheme. The cost and the present value of the obligation arising out of the gratuity scheme are determined using actuarial valuations. An actuarial valuation involves making various assumptions which 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 complexity of the valuation, the underlying assumptions 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.
5.2.2 Fair value measurement of financial instruments
When the fair value of financial assets and financial liabilities recorded in the statement of balance sheet cannot be measured based on quoted prices in active markets, their fair value is determined using valuation techniques including the discounted cash flow (''DCF'') model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions relating to these factors could affect the reported fair value of financial instruments. Please refer Note 40 for further details of fair valuation approach and inputs used for various financial instruments.
The discount for lack of marketability represents the amounts that the Company has determined that market participants would take into account when pricing the investments.
12 Current investments
Current investments comprise of investments in mutual funds with growth option and redeemable debentures. These are held for trading and hence are measured at fair value through profit and loss. Fair value of quoted but not listed investments in mutual funds have been determined by reference to the Net Asset Value (''NAV'') available from respective Asset Management Company (AMC'').
For terms and conditions relating to related party receivables, refer Note 40 Trade receivables from companies in which director is a director or member
Company''s trade receivables consist of receivables from dealers and customers against sales of pipes and fittings and PVC resin. Trade receivables are mostly on terms of advance payment or credit period supported by bank guarantee or letter of credit. Company also charges interest @ 18% p.a in case of default in collection of trade receivables.
As at March 31, 2017, the Company had available Rs, 132,000.53 Lakh (March 31, 2016: Rs, 130,247.80 Lakh; April 01, 2015: Rs, 111,491.19 Lakh) of undrawn committed borrowing facilities.
Terms/ Rights attached to equity shares:
The Company has only class of equity shares having a par value of 110 per share. Each holder of the equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
In the event of liquidation of the company the holders of equity shares are entitled to receive remaining assets of the company after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
19.1 Nature and purpose of reserves
1) Share capital buyback reserve
During financial year ended March 31, 2002 and March 31, 2003, the company bought back shares of the company out of free reserves and in order to comply with the requirements of company law the company created share capital buy back reserve to the extent of the face value of shares bought back.
2) General reserve
Till April 1, 2013, the company was governed by provisions of the Companies Act of 1956. As per the requirements of this act read along with Companies (Transfer of
Profit to Reserve) Rules, 1975, any company declaring dividend in excess of 10% of face value of equity share was mandatorily required to transfer specified % of amount to general reserve. Accordingly, the company has transferred amount to this reserve over the years to comply with the company law requirements.
3) Debenture redemption reserve
The company has issued 1000 secured redeemable non-convertible debentures of t 1,000,000 each. Please refer to note 20 for further details relating to debentures. As per the Companies Act of 2013, the company is required to create debenture redemption reserve account out of profits of the company which are available for distribution of dividend and the amount credited to such account shall not be utilized by the company except for redemption of debentures.
Proposed dividend on equity shares are subject to approval of the shareholders of their Company at the annual general meeting and are not recognized as a liability (including taxes thereon) as at 31 March, 2017.
Details of terms of borrowings and security for the borrowings
20.1 Debentures
1,000 privately placed 10.90% secured redeemable non-convertible debentures of 110 Lakh each (''NCD''), aggregating to Rs, 10,000 Lakh was due for redemption at the end of 3 years from the date of allotment i.e. 31st December, 2013.
The outstanding amount payable on NCDs of Rs, 10,000 Lakh with the interest accrued thereon (to the extent not paid) and all other costs, charges, expenses and fees payable to the debenture trustees namely Axis Trustee services Limited (ATSL) was secured under the Debenture Trust deed by creation of simple mortgage on pari passu basis in favour of ATSL, on immovable properties of the company falling within the battery limit of the site of the company''s plant for the manufacture of PVC resin, situated at village Golap, district Ratnagiri in the state of Maharashtra together with all buildings and structures thereon and all plants and machinery attached to the earth or permanently fastened to anything attached to the earth.
20.2Term Loans Central Bank
The term loan from Central Bank of India amounting to Rs, 10,000 Lakh was availed in the financial year 2011-12 and 2012-13 and carried interest at the Base rate of 10.25% 0.75 % p.a. The loan was repayable in 3 equal annual installments starting from 31st March, 2015.
The outstanding amount payable on term loan of Rs, 10,000 Lakh availed from Central Bank of India with all interest, liquidated damages, commitment charges, premia on prepayment, costs, expenses and other moneys and fees payable as applicable was secured by equitable mortgage created in favour of Central Bank of India, Pimpri, Pune by depositing all the documents of title, evidences, title deeds and writings in respect of immovable properties of the Company falling within the battery limit of Company''s captive power plant situated at Village Golap, District Ratnagiri in the State of Maharashtra together with all buildings and structures thereon and all plant and machinery attached to the earth or permanently fastened to anything attached to the earth.
Bank of Maharashtra
The term loan from Bank of Maharashtra amounting to Rs, 5,000 Lakh was availed in the financial year 2013-14 at the Base interest rate of 10.25% 0.75% p.a. and it was repayable in 12 quarterly installments starting from January, 2015.
The outstanding amount payable on term loan of Rs, 5,000 Lakh availed from Bank of Maharashtra with all interest, liquidated damages, commitment charges, premia on prepayment, costs, expenses and other moneys and fees payable as applicable was secured by movable property of the Company viz., plant and machinery and other movable assets falling within the battery limit of the PVC manufacturing plant situated at Village Golap-Ratnagiri, District Ratnagiri, Maharashtra State.
20.3 Sales tax deferral loan
Deferred Sales tax loan was interest free and payable in 10 yearly installments of various amounts starting from March 2020.
The company has applied first time adoption exemption in accounting for sales tax deferral loan. Accordingly no benefit of below market interest rate has not been recognized in case of this loan. This loan has been recognized on historical cost basis. Please refer to note 4 for further details.
21 Non-current financial liabilities
Non-current financial liabilities include deposits by dealers. The Company believes that the impact of application of effective interest rate method will not be material, as the value of individual deposits is not significant. Hence, these have been measured at cost.
Employee benefits obligations
a) Gratuity
The Company provides gratuity for employees as per the Gratuity Act, 1972. Employees who are in continuous service for a period of five years are eligible for gratuity. The amount of gratuity is payable on retirement or termination whichever is earlier. The level of benefits provided depends on the member''s length of service and salary at retirement age. The gratuity plan is funded plan.
b) Compensated absences
The lease obligation cover the Company''s liability for earned leaves.
Also refer Note 39 for detailed disclosure.
The company is entitled to receive Industrial Promotion Subsidy under the Package Scheme of Incentives, during the period from 1st April, 2011 to 31st March 2018. The aforesaid subsidy is in relation to investments in property, plant and equipment at Ratnagiri plant. Accordingly, the same has been classified as grant related to assets and the company is recognizing revenue from grant over the life of the property, plant and equipment.
B Reconciliation between tax expense and accounting profit multiplied by tax rate
Current taxes are measured using the tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred taxes are measured using the tax rates that have been enacted or substantively enacted by the end of the reporting period.
The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.
Details of terms of borrowings and security for the borrowings
The aggregate limits of working capital borrowings of Rs, 1,39,575 Lakh (Rs, 1,39,575 Lakh as at March 31, 2016 and Rs, 1,39,575 Lakh as at March 31, 2015) from the Bank of India Consortium together with all interest, liquidated damages, costs, charges and other moneys payable under working capital consortium agreement/sanction letters are secured by:
1) Hypothecation of inventories and book debts; and
2) Extension of second equitable mortgage, created in favour of Bank of India Consortium on pari passu basis with other second charge holder by deposit of title deeds with Axis Bank Ltd (ABL), New Delhi. ABL acting as an agent for Bank of India Consortium, which ranks subsequent and subservient in rank of priority over the first equitable mortgages created by deposit of title deeds in respect of immoveable properties falling within the battery limit of the site of the Company''s plant for manufacture of PVC Resin, situated at Village Golap, District Ratnagiri in the State of Maharashtra together with all buildings and structures thereon and all plant and machinery attached to the earth or permanently fastened to anything attached to the earth.
Mar 31, 2016
I) Basis of preparation:
The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in India
(Indian GAAP). The Company has prepared these financial statements to
comply in all material respects with the Accounting Standards specified
under Section 133 of the Companies Act 2013, read with Rule 7 of the
Companies (Accounts) Rules, 2014 and the relevant provision of the
Companies Act, 2013. The financial statements have been prepared under
the historical cost convention on an accrual basis. The accounting
policies adopted in the preparation of financial statements are
consistent with those of the previous year.
ii) Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, current assets,
non-current assets, current liabilities and non-current liabilities and
the disclosure of contingent liabilities at the end of the reporting
period. Although these estimates are based on the management''s best
knowledge of current events and actions, uncertainty about these
assumptions and estimates could result in the outcomes requiring a
material adjustment to the carrying amounts of assets or liabilities in
future periods.
iii) Valuation of inventories:
Inventories are valued at lower of cost and net realizable value. Cost
is determined on moving weighted average method. Cost of inventories
comprises of cost of materials, conversion cost, other cost incurred in
bringing the inventories to their present location and condition and
excise duty wherever applicable.
iv) Cash and cash equivalents:
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short term, highly liquid investments that are readily
convertible into known amounts of cash which are subject to an
insignificant risk of changes in value.
v) Depreciation:
Depreciation on fixed assets has been provided in a manner that
amortizes the cost of the assets over their estimated useful lives on
straight line method as per the useful life prescribed under Schedule-
II to the Companies Act, 2013 except in the case of Captive Power Plant
where the management, based on a technical evaluation, have estimated
the life to be 25 years which is lower than the life prescribed in
Schedule - II
Amortisation is provided in respect of leasehold land over the period
of lease.
vi) Revenue recognition:
Revenue is recognized to the extent it is probable that the economic
benefits will flow to the company and the revenue can be reliably
measured. Sale of goods is recognized when the significant risks and
rewards of ownership of the goods have passed to the buyer.
Where the ability to assess the ultimate collection with reasonable
certainty is lacking at the time of raising any claim, revenue
recognition is postponed to the extent of uncertainty involved. In such
cases revenue is recognized only when it is reasonably certain that the
ultimate collection will be made.
Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the rate applicable.
Dividend from investments is not recognized in the profit and loss
statement until a right to receive payment is established in the
reporting period.
vii) Fixed assets:
Fixed Assets are stated at cost of acquisition or construction less
accumulated depreciation. Attributable finance costs and expenses of
bringing the respective assets to working condition for their intended
use are capitalised. Borrowing costs that are directly attributable to
the acquisition or production of a qualifying asset are capitalised as
part of the cost of those assets. Other borrowing costs are recognised
as expense in the period in which they are incurred.
viii) Foreign currency transactions:
Initial recognition: A foreign currency transaction is recorded on
initial recognition in the reporting currency by applying to the
foreign currency amount, the exchange rate between the reporting
currency and the foreign currency at the date of the transaction.
Conversion: At the year end, monetary items denominated in foreign
currencies are converted into rupee equivalents at the year-end
exchange rates.
Exchange differences: All exchange differences arising on
settlement/conversion on foreign currency transactions are included in
the Profit and Loss Statement.
In accordance with MCA notification on Accounting Standard 11 (AS 11),
in respect of long term foreign currency loan taken for acquisition of
assets, the exchange difference arising on reporting of said loan is
adjusted to the cost of the respective assets.
Forward exchange contracts: The Company uses foreign exchange forward
contracts and options to hedge its risks associated with foreign
currency fluctuations.
Forward contracts/options entered into to hedge foreign currency risk
on underlying liabilities are accounted as per Accounting Standard 11,
"The Effects of changes in Foreign Exchange Rates". The premium arising
at the inception of such forward contracts/options is amortised as
expense over the life of the contract. Gains and losses arising on
account of roll over/ cancellation of forward contracts are recognised
as income/ expense of the period in which such roll over/cancellation
takes place.
Forward contracts/options entered into to hedge foreign currency risk
on unexecuted firm commitments are accounted, keeping in view the
principle of prudence as enunciated in AS 1, "Disclosure of Accounting
Policies"; in pursuance of the announcement of the ICAI dated March 29,
2008 on Accounting for Derivative Losses.
ix) Accounting for Government Grants
Government grants available to the enterprise are considered for
inclusion in accounts:
(i) where there is reasonable assurance that the enterprise will comply
with the conditions attached to them; and (ii) where such benefits have
been earned by the enterprise and it is reasonably certain that the
ultimate collection will be made.
Government grants in the nature of promoters'' contribution, i.e., they
are given with reference to the total investment in undertaking or by
way of contribution towards its total capital outlay and no repayment
is ordinarily expected in respect thereof are treated as capital
reserve.
Government grants related to revenue are recognised on a systematic
basis in the statement of profit and loss over the periods necessary to
match them with the related costs which they are intended to
compensate. Such grants are shown separately under ''other income''.
x) Valuation of investments:
Investments that are readily realizable and intended to be held for not
more than a year from the date on which such investment is made are
classified as current investments. All other investments are classified
as long-term investments.
Current investments are carried at lower of cost and fair value
determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of such investments.
xi) Employee benefits:
I. Short term employee benefits
All employee benefits payable wholly within twelve months of rendering
the services are classified as short term employee benefits. Benefits
such as salaries, wages, expected cost of bonus and short term
compensated absences, etc. is recognized in the period in which the
employee renders the related service.
II. Post-employment benefits
a) Defined contribution plans
The Company''s superannuation scheme, state governed provident fund and
employee state insurance scheme are defined contribution plans. The
contribution paid/payable under the scheme is recognized during the
period in which the employee renders the related service.
b) Defined benefit plans
The employees'' gratuity fund scheme is the Company''s defined benefit
plan. The present value of the obligation under such defined benefit
plan is determined based on actuarial valuation using the Projected
Unit Credit Method, which recognizes each period of service as giving
rise to additional unit of employee benefit entitlement and measures
each unit separately to build up the final obligation. The obligation
is measured at the present value of the estimated future cash flows.
The discount rates used for determining the present value of the
obligation under defined benefit plan, is based on the market yields on
Government securities as at the balance sheet date, having maturity
periods approximating to the terms of related obligations. Actuarial
gains and losses are recognized immediately in the Profit & Loss
Statement. The fair value of the plan''s assets is reduced from the
gross obligation under the defined benefit plans, to recognize the
obligation on net basis. Gains or a loss on the curtailment or
settlement of the defined benefit plan is recognized, when the
curtailment or settlement occurs. Past service cost is recognized as
expenses on a straight-line basis over the average period until the
benefits become vested.
III. Long term employee benefits
The obligation of long term compensated absences are recognized in the
same manner as in the case of defined benefit plans as mentioned in
note II (b) above. Accumulated leaves that are expected to be utilized
within the next 12 months are treated as short term employee benefits.
xii) Segment accounting:
The Company''s operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operate.
Allocation of common costs
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Unallocable items
Unallocable items include general corporate income and expense items
which are not allocated to any business segment.
Inter-segment
Segment revenue from intersegment transactions is accounted on the
basis of transfer price agreed between the segments.
Segment accounting policies
The Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as a whole.
xiii) Accounting for leases:
Assets taken on lease where significant portion of risk and rewards
incidental to the ownership are not transferred are treated as
operating leases. Operating lease payments are recognised as an
expense in the Profit and Loss Statement on straight line basis over
the lease term.
xiv) Earnings per share:
Basic earnings per share is calculated by dividing the net profit or
loss for the period attributable to equity Shareholders by the weighted
average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
xv) Taxes on income:
Tax on income for the current period is determined on the basis of
taxable income after considering the various deductions available under
The Income Tax Act, 1961.
Deferred tax is recognized on timing differences between the accounting
income and the taxable income for the year. The tax effect is
calculated on the accumulated timing differences at the end of the
accounting period based on prevailing enacted or substantively enacted
regulations.
Deferred tax liabilities are recognized for all timing differences.
Deferred tax assets are recognized for deductible timing differences
only to the extent there is reasonable certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realized. At each reporting date the company reassesses the
unrecognized deferred tax assets and reviews the deferred tax assets
recognized.
xvi) Intangible assets:
Intangible Assets are amortised over the useful life of the assets on
Straight Line Method over a period of 6 years.
Research and development costs are expensed out as and when incurred,
except for development costs which relate to the design and testing of
new or improved material, products or processes which are recognized as
an asset, when it is expected that such assets will generate future
economic benefits.
xvii) Impairment policy:
The company assesses at each balance sheet date whether there is any
indication that an asset or cash generating unit (CGU) may be impaired.
If any such indication exists, the company estimates the recoverable
amount of the asset. The recoverable amount is the higher of an asset''s
or CGU''s net selling price or its value in use. 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.
xviii) Provisions:
A provision is recognized when the Company has a present obligation as
a result of past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
Provisions are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
reporting date. These estimates are reviewed at each reporting date and
adjusted to reflect the current best estimates.
xix) Contingent liability:
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognised
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognised because it cannot be measured reliably. The Company does not
recognise a contingent liability but discloses its existence in the
financial statements.
Mar 31, 2015
I) Basis of preparation:
The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in India
(Indian GAAP). The Company has prepared these financial statements to
comply in all material respects with the Accounting Standards specified
under section 133 of the Companies Act 2013, read with Rule 7 of the
Companies (Accounts) Rules, 2014 and the relevant provision of the
Companies Act, 2013. The financial statements have been prepared under
the historical cost convention on an accrual basis. The accounting
policies adopted in the preparation of financial statements are
consistent with those of the previous year.
ii) Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, current assets,
non-current assets, current liabilities and non-current liabilities and
the disclosure of contingent liabilities at the end of the reporting
period. Although these estimates are based on the management's best
knowledge of current events and actions, uncertainty about these
assumptions and estimates could result in the outcomes requiring a
material adjustment to the carrying amounts of assets or liabilities in
future periods.
iii) Valuation of inventories:
Inventories are valued at lower of cost and net realizable value. Cost
is determined on moving weighted average method. Cost of inventories
comprises of cost of materials, conversion cost, other cost incurred in
bringing the inventories to their present location and condition and
excise duty wherever applicable.
iv) Cash and cash equivalents:
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short term, highly liquid investments that are readily
convertible into known amounts of cash which are subject to an
insignificant risk of changes in value.
v) Depreciation:
Depreciation on fixed assets has been provided in a manner that
amortizes the cost of the assets over their estimated useful lives on
straight line method as per the useful life prescribed under Schedule-
II to the Companies Act, 2013 except in the case of Captive Power Plant
where the management, based on a technical evaluation, have estimated
the life to be 25 years which is lower than the life prescribed in
Schedule - II
Amortisation is provided in respect of leasehold land over the period
of lease.
vi) Revenue recognition:
Revenue is recognized to the extent it is probable that the economic
benefits will flow to the company and the revenue can be reliably
measured. Sale of goods is recognized when the significant risks and
rewards of ownership of the goods have passed to the buyer.
Where the ability to assess the ultimate collection with reasonable
certainty is lacking at the time of raising any claim, revenue
recognition is postponed to the extent of uncertainty involved. In such
cases revenue is recognized only when it is reasonably certain that the
ultimate collection will be made.
Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the rate applicable.
Dividend from investments is not recognized in the profit and loss
statement until a right to receive payment is established in the
reporting period.
vii) Fixed assets:
Fixed Assets are stated at cost of acquisition or construction less
accumulated depreciation. Attributable finance costs and expenses of
bringing the respective assets to working condition for their intended
use are capitalised. Borrowing costs that are directly attributable to
the acquisition or production of a qualifying asset are capitalised as
part of the cost of those assets. Other borrowing costs are recognised
as expense in the period in which they are incurred.
viii) Foreign currency transactions:
Initial recognition: A foreign currency transaction is recorded on
initial recognition in the reporting currency by applying to the
foreign currency amount, the exchange rate between the reporting
currency and the foreign currency at the date of the transaction.
Conversion: At the year end, monetary items denominated in foreign
currencies are converted into rupee equivalents at the year-end
exchange rates.
Exchange differences: All exchange differences arising on
settlement/conversion on foreign currency transactions are included in
the Profit and Loss Statement.
In accordance with MCA notification on Accounting Standard 11 (AS 11),
in respect of long term foreign currency loan taken for acquisition of
assets, the exchange difference arising on reporting of said loan is
adjusted to the cost of the respective assets.
Forward exchange contracts: The Company uses foreign exchange forward
contracts and options to hedge its risks associated with foreign
currency fluctuations.
Forward contracts/options entered into to hedge foreign currency risk
on underlying liabilities are accounted as per Accounting Standard 11,
"The Effects of changes in Foreign Exchange Rates". The premium arising
at the inception of such forward contracts/options is amortised as
expense over the life of the contract. Gains and losses arising on
account of roll over/cancellation of forward contracts are recognised
as income/ expense of the period in which such roll over/cancellation
takes place.
Forward contracts/options entered into to hedge foreign currency risk
on unexecuted firm commitments are accounted, keeping in view the
principle of prudence as enunciated in AS 1, "Disclosure of Accounting
Policies"; in pursuance of the announcement of the ICAI dated March 29,
2008 on Accounting for Derivative Losses.
ix) Valuation of investments:
Investments that are readily realizable and intended to be held for not
more than a year from the date on which such investment is made are
classified as current investments. All other investments are classified
as long-term investments.
Current investments are carried at lower of cost and fair value
determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of such investments.
x) Employee benefits:
I. Short term employee benefits
All employee benefits payable wholly within twelve months of rendering
the services are classified as short term employee benefits. Benefits
such as salaries, wages, expected cost of bonus and short term
compensated absences, etc. is recognized in the period in which the
employee renders the related service.
II. Post-employment benefits
a) Defined contribution plans
The Company's superannuation scheme, state governed provident fund and
employee state insurance scheme are defined contribution plans. The
contribution paid/payable under the scheme is recognized during the
period in which the employee renders the related service.
b) Defined benefit plans
The employees' gratuity fund scheme is the Company's defined benefit
plan. The present value of the obligation under such defined benefit
plan is determined based on actuarial valuation using the Projected
Unit Credit Method, which recognizes each period of service as giving
rise to additional unit of employee benefit entitlement and measures
each unit separately to build up the final obligation. The obligation
is measured at the present value of the estimated future cash flows.
The discount rates used for determining the present value of the
obligation under defined benefit plan, is based on the market yields on
Government securities as at the balance sheet date, having maturity
periods approximating to the terms of related obligations. Actuarial
gains and losses are recognized immediately in the Profit & Loss
Statement. The fair value of the plan's assets is reduced from the
gross obligation under the defined benefit plans, to recognize the
obligation on net basis. Gains or a loss on the curtailment or
settlement of the defined benefit plan is recognized, when the
curtailment or settlement occurs. Past service cost is recognized as
expenses on a straight-line basis over the average period until the
benefits become vested.
III. Long term employee benefits
The obligation of long term compensated absences are recognized in the
same manner as in the case of defined benefit plans as mentioned in
note II (b) above. Accumulated leaves that are expected to be utilized
within the next 12 months are treated as short term employee benefits.
xi) Segment accounting:
The Company's operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operate.
Allocation of common costs
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Unallocable items
Unallocable items include general corporate income and expense items
which are not allocated to any business segment.
Inter-segment
Segment revenue from intersegment transactions is accounted on the
basis of transfer price agreed between the segments.
Segment accounting policies
The Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as a whole.
xii) Accounting for leases:
Assets taken on lease where significant portion of risk and rewards
incidental to the ownership are not transferred are treated as
operating leases. Operating lease payments are recognised as an expense
in the Profit and Loss Statement on straight line basis over the lease
term.
xiii) Earnings per share:
Basic earnings per share is calculated by dividing the net profit or
loss for the period attributable to equity Shareholders by the weighted
average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
xiv) Taxes on income:
Tax on income for the current period is determined on the basis of
taxable income after considering the various deductions available under
The Income Tax Act, 1961.
Deferred tax is recognized on timing differences between the accounting
income and the taxable income for the year. The tax effect is
calculated on the accumulated timing differences at the end of the
accounting period based on prevailing enacted or substantively enacted
regulations.
Deferred tax liabilities are recognized for all timing differences.
Deferred tax assets are recognized for deductible timing differences
only to the extent there is reasonable certainty that sufficient future
taxable income will be available against which such deferred tax assets
can be realized. At each reporting date the company reassesses the
unrecognized deferred tax assets and reviews the deferred tax assets
recognized.
xv) Intangible assets:
Intangible Assets are amortised over the useful life of the assets on
Straight Line Method over a period of 6 years.
Research and development costs are expensed out as and when incurred,
except for development costs which relate to the design and testing of
new or improved material, products or processes which are recognized as
an asset, when it is expected that such assets will generate future
economic benefits.
xvi) Impairment policy:
The company assesses at each balance sheet date whether there is any
indication that an asset or cash generating unit (CGU) may be impaired.
If any such indication exists, the company estimates the recoverable
amount of the asset. The recoverable amount is the higher of an asset's
or CGU's net selling price or its value in use. 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.
xvii) Provisions:
A provision is recognized when the Company has a present obligation as
a result of past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
Provisions are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
reporting date. These estimates are reviewed at each reporting date and
adjusted to reflect the current best estimates.
xviii) Contingent liability:
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognised
because it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability also arises
in extremely rare cases where there is a liability that cannot be
recognised because it cannot be measured reliably. The Company does
not recognise a contingent liability but discloses its existence in the
financial statements.
Mar 31, 2014
I) Basis of preparation:
The financial statements of the Company have been prepared in accordance
with generally accepted accounting principles in India (Indian GAAP).
The Company has prepared these financial statements to comply in all
material respects with the accounting standards notifed under the
Companies (Accounting Standards) Rules, 2006, (as amended) and the
relevant provisions of the Companies Act, 1956. The financial statements
have been prepared under the historical cost convention on an accrual
basis.The accounting policies adopted in the preparation of financial
statements are consistent with those of the previous year.
ii) Use of estimates:
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, current assets,
non-current assets, current liabilities and non-current liabilities and
the disclosure of contingent liabilities at the end of the reporting
period. Although these estimates are based on the management''s best
knowledge of current events and actions, uncertainty about these
assumptions and estimates could result in the outcomes requiring a
material adjustment to the carrying amounts of assets or liabilities in
future periods.
iii) Valuation of inventories:
Inventories are valued at lower of cost and net realizable value.Cost
is determined on moving weighted average method. Cost of semi-fnished
and fnished goods comprises of materials, conversion cost, other cost
incurred in bringing the inventories to their present location and
condition and excise duty wherever applicable.
iv) Cash and cash equivalents:
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short term, highly liquid investments that are readily
convertible into known amounts of cash which are subject to an
insignifcant risk of changes in value.
v) Depreciation:
Depreciation is provided on Straight-Line Method at the rates and in
the manner specifed in Schedule
XIV to the Companies Act, 1956.
Amortisation is provided in respect of leasehold land over the period
of lease.
vi) Revenue recognition:
Revenue is recognized to the extent it is probable that the economic
benefits will flow to the company and the revenue can be reliably
measured. Sale of goods is recognized when the signifcant risks and
rewards of ownership of the goods have passed to the buyer.
Where the ability to assess the ultimate collection with reasonable
certainty is lacking at the time of raising any claim, revenue
recognition is postponed to the extent of uncertainty involved. In such
cases revenue is recognized only when it is reasonably certain that the
ultimate collection will be made.
Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the rate applicable.
Dividend from investments is not recognized in the profit and loss
statement until a right to receive payment is established in the
reporting period.
vii) Fixed assets:
Fixed Assets are stated at cost of acquisition or construction less
accumulated depreciation. Attributable finance costs and expenses of
bringing the respective assets to working condition for their intended
use are capitalised. Borrowing costs that are directly attributable to
the acquisition or production of a qualifying asset are capitalised as
part of the cost of those assets. Other borrowing costs are recognised
as expense in the period in which they are incurred.
viii) Foreign currency transactions:
Initial recognition: A foreign currency transaction is recorded on
initial recognition in the reporting currency by applying to the
foreign currency amount, the exchange rate between the reporting
currency and the foreign currency at the date of the transaction.
Conversion: At the year end, monetary items denominated in foreign
currencies are converted into rupee equivalents at the year-end
exchange rates.
Exchange differences: All exchange differences arising on
settlement/conversion on foreign currency transactions are included in
the profit and Loss Statement.
In accordance with MCA notifcation on Accounting Standard 11 (AS 11),
in respect of long term foreign currency loan taken for acquisition of
assets, the exchange difference arising on reporting of said loan is
adjusted to the cost of the respective assets.
Forward exchange contracts: The Company uses foreign exchange forward
contracts and options to hedge its risks associated with foreign
currency fuctuations.
Forward contracts/options entered into to hedge foreign currency risk
on underlying liabilities are accounted as per Accounting Standard 11,
"The Effects of changes in Foreign Exchange Rates". The premium arising
at the inception of such forward contracts/options is amortised as
expense over the life of the contract. Gains and losses arising on
account of roll over/cancellation of forward contracts are recognised
as income/ expense of the period in which such roll over/cancellation
takes place.
Forward contracts/options entered into to hedge foreign currency risk
on unexecuted frm commitments are accounted, keeping in view the
principle of prudence as enunciated in AS 1, "Disclosure of Accounting
Policies"; in pursuance of the announcement of the ICAI dated March 29,
2008 on Accounting for Derivative Losses.
ix) Valuation of investments:
Investments that are readily realizable and intended to be held for not
more than a year from the date on which such investment is made are
classifed as current investments. All other investments are classifed
as long-term investments.
Current investments are carried at lower of cost and fair value
determined on an individual investment basis. Long-term investments are
carried at cost. However, provision for diminution in value is made to
recognize a decline other than temporary in the value of such
investments.
x) Employee benefits:
I. Short term employee benefits
All employee benefits payable wholly within twelve months of rendering
the services are classifed as short term employee benefits. benefits such
as salaries, wages, expected cost of bonus and short term compensated
absences, etc. is recognized in the period in which the employee
renders the related service.
II. Post-employment benefits
a) Defined contribution plans
The Company''s superannuation scheme, state governed provident fund and
employee state insurance scheme are Defined contribution plans. The
contribution paid/payable under the scheme is recognized during the
period in which the employee renders the related service.
b) Defined benefit plans
The employees'' gratuity fund scheme is the Company''s Defined benefit
plan. The present value of the obligation under such Defined benefit plan
is determined based on actuarial valuation using the Projected Unit
Credit Method, which recognizes each period of service as giving rise
to additional unit of employee benefit entitlement and measures each
unit separately to build up the fnal obligation.The obligation is
measured at the present value of the estimated future cash flows. The
discount rates used for determining the present value of the obligation
under Defined benefit plan, is based on the market yields on Government
securities as at the balance sheet date, having maturity periods
approximating to the terms of related obligations. Actuarial gains and
losses are recognized immediately in the profit & Loss Statement. The
fair value of the plan''s assets is reduced from the gross obligation
under the Defined benefit plans, to recognize the obligation on net
basis. Gains or a loss on the curtailment or settlement of the Defined
benefit plan is recognized, when the curtailment or settlement occurs.
Past service cost is recognized as expenses on a straight-line basis
over the average period until the benefits become vested.
III. Long term employee benefits
The obligation of long term compensated absences are recognized in the
same manner as in the case of Defined benefit plans as mentioned in note
II (b) above. Accumulated leaves that are expected to be utilized
within the next 12 months are treated as short term employee benefits.
xi) Segment accounting:
The Company''s operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operate.
Allocation of common costs
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Unallocable items
Unallocable items include general corporate income and expense items
which are not allocated to any business segment.
Inter-segment
Segment revenue from inter-segment transactions is accounted on the
basis of transfer price agreed between the segments.
Segment accounting policies
The Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as a whole.
xii) Accounting for leases:
Assets given on lease where signifcant portion of risk and rewards
incidental to the ownership is retained are classifed as ''Operating
lease''. Lease rentals are recognised on straight line basis over the
lease term.
xiii) Earnings per share:
Basic earnings per share is calculated by dividing the net profit or
loss for the period attributable to equity Shareholders by the weighted
average number of equity shares outstanding during the period.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
xiv) Taxes on income:
Tax on income for the current period is determined on the basis of
taxable income after considering the various deductions available under
The Income Tax Act, 1961.
Deferred tax is recognized on timing differences between the accounting
income and the taxable income for the year. The tax effect is
calculated on the accumulated timing differences at the end of the
accounting period based on prevailing enacted or substantively enacted
regulations.
Deferred tax liabilities are recognized for all timing differences.
Deferred tax assets are recognized for deductible timing differences
only to the extent there is reasonable certainty that suffcient future
taxable income will be available against which such deferred tax assets
can be realized. At each reporting date the company reassesses the
unrecognized deferred tax assets and reviews the deferred tax assets
recognized.
xv) Intangible assets:
Intangible Assets are amortised over the useful life of the assets on
SLM method.
Research and development costs are expensed out as and when incurred,
except for development costs which relate to the design and testing of
new or improved material, products or processes which are recognized as
an asset, when it is expected that such assets will generate future
economic benefits.
xvi) Impairment policy:
The company assesses at each balance sheet date whether there is any
indication that an asset or cash generating unit (CGU) may be impaired.
If any such indication exists, the company estimates the recoverable
amount of the asset. The recoverable amount is the higher of an asset''s
or CGU''s net selling price or its value in use. 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.
xvii) Provisions:
A provision is recognized when the Company has a present obligation as
a result of past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
Provisions are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
reporting date. These estimates are reviewed at each reporting date and
adjusted to refect the current best estimates.
xviii) Contingent liability:
A contingent liability is a possible obligation that arises from past
events whose existence will be confrmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the
Company or a present obligation that is not recognised because it is
not probable that an outflow of resources will be required to settle the
obligation. A contingent liability also arises in extremely rare cases
where there is a liability that cannot be recognised because it cannot
be measured reliably. The Company does not recognise a contingent
liability but discloses its existence in the financial statements.
1.1) Terms of borrowings:
Terms of debenture
500 privately placed 9.50% secured redeemable non-convertible
debentures of Rs 10 lakhs each, aggregating to Rs 5,000 lakhs ("9.50%
NCDs") will be redeemed in three instalments commencing at the end of
3rd, 4th and 5th year from the date of allotment i.e. 21st September,
2009 in the ratio of 3:3:4.
1,000 privately placed 10.90 % secured redeemable non-convertible
debentures of Rs 10 lakhs each, aggregating to Rs 10,000 lakhs ("10.90%
NCDs") will be redeemed in 3 years bullet from the date of allotment
i.e. 31st December, 2013
Terms of loan repayment
The term loan from Central Bank of India amounting to Rs 10,000 lakhs
was availed in the financial year 2011-12 and carried interest at the
rate of 11.75% p.a. The loan is repayable in 3 equal annual instalments
from the date of disbursement.
The term loan from Bank of Maharashtra amounting to Rs 5,000 lakhs was
availed in the financial year 2012-13 at the interest rate of Base Rate
0.75% repayable in 12 quarterly instalment starting from January,
2015.
The term loan from Citibank NA amounting to Rs10,000 lakhs was availed
in the financial year 2012-2013 at the interest rate of 10.75% p.a. will
be repayable in 1 year bullet from date of drawdown.
Nature of security for secured borrowings and working capital:
Debentures
(a) The outstanding amount payable on 9.50% NCDs of Rs 5,000 lakhs with
the interest accrued there on but unpaid and all other costs, charges,
expenses and fees payable to the debenture trustees namely Axis Trustee
Services Limited ("ATSL") secured under the Debenture Trust Deed dated
5th March, 2010 have been secured by creation of English mortgage on
pari passu basis in favour of ATSL on the Company''s immovable
properties situated at 1B, 1st Floor, Mahakant Building, Ellisbridge,
Ahmedabad in the State of Gujarat.
The said 9.50% NCDs are further secured by equitable mortgage created
in favour of the ATSL on pari passu basis by depositing with Axis Bank
Limited, New Delhi ("ABL"), ABL acting for itself and as an agent of
ATSL all the documents of title, evidences, title deeds and writings in
respect of immovable properties falling within the battery limit of the
site of the Company''s plant for manufacture of PVC Resin, situate at
Village Golap, District Ratnagiri in the State of Maharashtra together
with all buildings and structures thereon and all plants and machinery
attached to the earth or permanently fastened to anything attached to
the earth.
(b) The outstanding amount payable on 10.90% NCDs of Rs 10,000 lakhs
with the interest accrued there on but unpaid and all other costs,
charges, expenses and fees payable to the debenture trustees namely
Axis Trustee Services Limited ("ATSL") secured under the Debenture
Trust Deed dated 31st March, 2014 and creation of simple mortgage on
pari passu basis in favour of ATSL on immoveable properties of the
Company falling within the battery limit of the site of the Company''s
plant for manufacture of PVC Resin, situate at Village Golap, District
Ratnagiri in the State of Maharashtra together with all buildings and
structures thereon and all plants and machinery attached to the earth
or permanently fastened to anything attached to the earth.
Term Loans:
From Central Bank of India: The outstanding amount payable on term loan
of Rs 10,000 lakhs availed from Central Bank of India with all interest,
liquidated damages, commitment charges, premia on prepayment, costs,
expenses and other moneys and fees payable as applicable are secured by
equitable mortgage created in favour of Central Bank of India, Pimpri,
Pune by depositing all the documents of title, evidences, title deeds
and writings in respect of immovable properties of the Company falling
within the battery limit of Company''s captive power plant situate at
Village Golap, District Ratnagiri in the State of Maharashtra together
with all buildings and structures thereon and all plant and machinery
attached to the earth or permanently fastened to anything attached to
the earth; and
From Bank of Maharashtra: The outstanding amount payable on term loan
of Rs 5,000 lakhs availed from Bank of Maharashtra with all interest,
liquidated damages, commitment charges, premia on prepayment, costs,
expenses and other moneys and fees payable as applicable are secured
by:
Deed of Hypothecation for movable property of the Company viz., plant
and machinery and other movable assets falling within the battery limit
of the PVC manufacturing plant situate at Golap-Ratnagiri, District
Ratnagiri, Maharashtra State.
From Citibank N.A.: The outstanding amount payable on term loan of Rs
10,000 lakhs availed from Citibank N.A. with all interest, liquidated
damages, commitment charges, premia on prepayment, costs, expenses and
other moneys and fees payable as applicable are secured by:
Extension of second equitable mortgage, to be created in favour of
Citibank by deposit of title deeds with Axis Bank Ltd., New Delhi
(''''ABL'''') on pari passu basis with other second charge holders, ABL
acting for itself and as an agent of Citibank N.A. which ranks
subsequent and subservient in rank of priority over the frst equitable
mortgages created / to be created by deposit of title deeds in respect
of immoveable properties falling within the battery limit of the site
of the Company''s plant for manufacture of PVC Resin, situate at Village
Golap, District Ratnagiri in the State of Maharashtra together with all
buildings and structures thereon and all plant and machinery attached
to the earth or permanently fastened to anything attached to the earth.
Working capital: The aggregate limits of working capital borrowings of
Rs 1,39,575 lakhs from the Bank of India Consortium together with all
interest, liquidated damages, costs, charges and other moneys payable
under working capital consortium agreement/sanction letters are secured
by:
(i) Hypothecation of inventories and book debts; and
(ii) Extension of second equitable mortgage, created in favour of Bank
of India Consortium on pari passu basis with other second charge holder
by deposit of title deeds with Axis Bank Ltd. (ABL), New Delhi. ABL
acting as an agent for Bank of India Consortium, which ranks subsequent
and subservient in rank of priority over the frst equitable mortgages
created / to be created by deposit of title deeds in respect of
immoveable properties falling within the battery limit of the site of
the Company''s plant for manufacture of PVC Resin, situate at Village
Golap, District Ratnagiri in the State of Maharashtra together with all
buildings and structures thereon and all plant and machinery attached
to the earth or permanently fastened to anything attached to the earth.
Mar 31, 2013
I) Basis of preparation:
The fnancial statements of the Company have been prepared in accordance
with generally accepted accounting principles in India (Indian GAAP).
The Company has prepared these fnancial statements to comply in all
material respects with the accounting standards notifed under the
Companies (Accounting Standards) Rules, 2006, (as amended) and the
relevant provisions of the Companies Act, 1956. The fnancial statements
have been prepared under the historical cost convention on an accrual
basis.The accounting policies adopted in the preparation of fnancial
statements are consistent with those of the previous year.
ii) Use of estimates:
The preparation of fnancial statements in conformity with Indian GAAP
requires the management to make judgements, estimates and assumptions
that affect the reported amounts of revenues, expenses, current assets,
non-current assets, current liabilities and non-current liabilities and
the disclosure of contingent liabilities at the end of the reporting
period. Although these estimates are based on the management''s best
knowledge of current events and actions, uncertainty about these
assumptions and estimates could result in the outcomes requiring a
material adjustment to the carrying amounts of assets or liabilities in
future periods.
iii) Valuation of inventories:
Inventories are valued at lower of cost and net realizable value. Cost
is determined on moving weighted average method. Cost of semi-fnished
and fnished goods comprises of materials, conversion cost, other cost
incurred in bringing the inventories to their present location and
condition and excise duty wherever applicable.
iv) Cash and cash equivalents:
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short term, highly liquid investments that are readily
convertible into known amounts of cash which are subject to an
insignifcant risk of changes in value.
v) Depreciation:
Depreciation is provided on Straight-Line Method at the rates and in
the manner specifed in Schedule
XIV to the Companies Act, 1956.
Amortisation is provided in respect of leasehold land.
vi) Revenue recognition:
Revenue is recognized to the extent it is probable that the economic
benefts will ow to the Company and the revenue can be reliably
measured. Sale of goods is recognized when the signifcant risks and
rewards of ownership of the goods have passed to the buyer.
Where the ability to assess the ultimate collection with reasonable
certainty is lacking at the time of raising any claim, revenue
recognition is postponed to the extent of uncertainty involved. In such
cases revenue is recognized only when it is reasonably certain that the
ultimate collection will be made. Interest income is recognised on a
time proportion basis taking into account the amount outstanding and
the rate applicable.
Dividend from investments is not recognized in the proft and loss
statement until a right to receive payment is established in the
reporting period.
vii) Fixed assets:
Fixed assets are stated at cost of acquisition or construction less
accumulated depreciation. Attributable fnance costs and expenses of
bringing the respective assets to working condition for their intended
Use are capitalised. Borrowing costs that are directly attributable to
the acquisition or production of a qualifying asset are capitalised as
part of the cost of those assets. Other borrowing costs are recognised
as expense in the period in which they are incurred.
viii) Foreign currency transactions:
Initial recognition: A foreign currency transaction is recorded on
initial recognition in the reporting currency by applying to the
foreign currency amount, the exchange rate between the reporting
currency and the foreign currency at the date of the transaction.
Conversion: At the year end, monetary items denominated in foreign
currencies are converted into rupee equivalents at the year-end
exchange rates.
Forward exchange contracts: The Company uses foreign exchange forward
contracts and options to reduce the cost and to hedge its risks
associated with foreign currency fuctuations to underlying
transactions, for forecasted transactions. The difference between the
forward rate and the exchange rate at the inception of the forward
contract for underlying transaction is recognised as income or expense
over the life of the contract. In respect of hedged contracts, or
forecasted transactions, the attributable gain or loss is taken to
proft and loss account on accrual and / or on settlement as the case
may be.
Exchange differences: All exchange differences arising on
settlement/conversion on foreign currency transactions are included in
the proft and loss statement.
In accordance with MCA notifcation on accounting standard 11 (AS 11),
in respect of long term foreign currency loan taken for acquisition of
assets, the exchange difference arising on reporting of said loan is
adjusted to the cost of the respective assets.
ix) Valuation of investments:
Investments that are readily realizable and intended to be held for not
more than a year from the date on which such investment is made are
classifed as current investments. All other investments are classifed
as long-term investments.
Current investments are carried at lower of cost and fair value
determined on an individual investment basis. Long-term investments are
carried at cost. However, provision for diminution in value is made to
recognize a decline other than temporary in the value of such
investments.
x) Employee benefts:
I. Short term employee benefts
All employee benefts payable wholly within twelve months of rendering
the services are classifed as short term employee benefts. Benefts such
as salaries, wages, expected cost of bonus and short term compensated
absences, etc. is recognized in the period in which the employee
renders the related service.
II. Post-employment benefts
a) Defned contribution plans
The Company''s superannuation scheme, state governed provident fund and
employee state insurance scheme are defned contribution plans. The
contribution paid/payable under the scheme is recognized during the
period in which the employee renders the related service.
b) Defned beneft plans
The employees'' gratuity fund scheme is the Company''s defned benef t
plan. The present value of the obligation under such defned beneft
plans is determined based on actuarial valuation using the Projected
Unit Credit Method, which recognizes each period of service as giving
rise to additional unit of employee beneft entitlement and measures
each unit separately to build up the fnal obligation. The obligation is
measured at the present value of the estimated future cash fows. The
discount rates used for determining the present value of the obligation
under defned beneft plans, is based on the market yields on Government
securities as at the balance sheet date, having maturity periods
approximating to the terms of related obligations. Actuarial gains and
losses are recognized immediately in the proft & loss statement. The
fair value of the plan''s assets is reduced from the gross obligation
under the defned beneft plans, to recognize the obligation on net
basis. Gain or a loss on the curtailment or settlement of the defned
beneft plan is recognized, when the curtailment or settlement occurs.
Past service cost is recognized as expense on a straight-line basis
over the average period until the benefts become vested. III. Long
term employee benefts
The obligation of long term compensated absences are recognized in the
same manner as in the case of defned beneft plans as mentioned in note
II (b) above. Accumulated leaves that are expected to be utilized
within the next 12 months are treated as short term employee benefts.
xi) Segment accounting:
The Company''s operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operate.
Allocation of common costs
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Unallocable items
Unallocable items include general corporate income and expense items
which are not allocated to any business segment.
Segment accounting policies
The Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the fnancial
statements of the Company as a whole.
xii) Accounting for leases:
Assets given on lease where signif '' cant portion of risk and rewards
incidental to the ownership is retained are classifed as ''Operating
lease. Lease rentals are recognised on straight line basis over the
lease term.
xiii) Earnings per share:
Basic earnings per share is calculated by dividing the net proft or
loss for the period attributable to equity Shareholders by the weighted
average number of equity shares outstanding during the period. For the
purpose of calculating diluted earnings per share, the net proft or
loss for the period attributable to equity shareholders and the
weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
xiv) Taxes on income:
Tax on income for the current period is determined on the basis of
taxable income after considering the various deductions available under
the Income Tax act, 1961.
Deferred tax is recognized on timing differences between the accounting
income and the taxable income for the year. The tax effect is
calculated on the accumulated timing differences at the end of the
accounting period based on prevailing enacted or substantively enacted
regulations.
Deferred tax liabilities are recognized for all timing differences.
Deferred tax assets are recognized for deductible timing differences
only to the extent there is reasonable certainty that suffcient future
taxable income will be available against which such deferred tax assets
can be realized. At each reporting date the Company reassesses the
unrecognized deferred tax assets and reviews the deferred tax assets
recognized.
xv) Intangible assets:
Intangible assets are amortised over the useful life of the asset.
Research and Development costs are expensed out as and when incurred,
except for development costs which relate to the design and testing of
new or improved material, products or processes which are recognized as
an asset, when it is expected that such assets will generate future
economic benefts.
xvi) Impairment policy:
The Company assesses at each balance sheet date whether there is any
indication that an asset or cash generating unit (CGU) may be impaired.
If any such indication exists, the Company estimates the recoverable
amount of the asset. The recoverable amount is the higher of an asset''s
or CGU''s net selling price or its value in use. Where the carrying
amount of an asset or CGU exceeds its recoverable amount, the asset is
considered to be impaired and is written down to its recoverable
amount.
xvii) Provisions:
A provision is recognized when the Company has a present obligation as
a result of past event, it is probable that an outfow of resources
embodying economic benefts will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
Provisions are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
reporting date. These estimates are reviewed at each reporting date and
adjusted to refect the current best estimates.
xviii) Contingent liability:
A contingent liability is a possible obligation that arises from past
events whose existence will be confrmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognised
because it is not probable that an outfow of resources will be required
to settle the obligation. A contingent liability also arises in
extremely rare cases where there is a liability that cannot be
recognised because it cannot be measured reliably. The Company does not
recognise a contingent liability but discloses its existence in the
fnancial statements.
Mar 31, 2012
I) Basis of preparation:
The financial statements of the Company are prepared in accordance with
generally accepted accounting principles in India (Indian GAAP). The
Company has prepared these financial statements to comply in all
material respects with the accounting standards notified under the
Companies (Accounting Standards) Rules, 2006, (as amended) and the
relevant provisions of the Companies Act, 1956. The financial statements
are prepared on an accrual basis and under the historical cost
convention.
The accounting policies adopted in the preparation of financial
statements are consistent with those of the previous year except for
accounting for exchange fluctuation on foreign currency loans taken for
purchase of fixed assets and employee Benefits on account of leave
encashment. (Refer note 1.8)
ii) Presentation and disclosure of financial statements:
During the year ended 31 March 2012, the revised Schedule VI notified
under the Companies Act 1956, has become applicable to the Company, for
preparation and presentation of its financial statements. The adoption
of revised Schedule VI did not have any impact on recognition and
measurement principles followed for preparation of financial statements.
However, it has significantly impacted the presentation and disclosures
made in the financial statements. The Company has also reclassified the
previous year figures in accordance with the requirements applicable in
the current year.
iii) Use of estimates:
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgements, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities at the end of
the reporting period. Although these estimates are based on the
management's best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
iv) Fixed Assets:
a) Fixed Assets are stated at cost of acquisition or construction less
accumulated depreciation. Attributable finance costs and expenses of
bringing the respective assets to working condition for their intended
use are capitalised.
b) Impairment: The carrying amount of cash generating units /assets is
reviewed at Balance Sheet date to determine whether there is any
indication of impairment. If any such indication exists, the
recoverable amount is estimated as the higher of net selling price and
value in use. Impairment loss is recognised whenever carrying amount
exceeds the recoverable amount.
c) Borrowing costs that are directly attributable to the acquisition or
production of a qualifying asset are capitalised as part of the cost of
those assets. Other borrowing costs are recognised as expense in the
period in which they are incurred.
v) Depreciation:
a) Depreciation is provided on Straight-Line Method at the rates and in
the manner specified in Schedule XIV to the Companies Act, 1956.
b) Amortisation is provided in respect of leasehold land.
vi) Valuation of Investments:
Investments classified as long term Investments are stated at cost.
Provision for diminution, if any, in the value of long-term investments
is made to recognise a de- cline other than temporary in the fair value
of investments. The fair value of a long term investment is ascertained
with reference to its market value, investee's assets and results and
the expected cash flows from the investment as well as the strategic
importance to the Company.
Current investments are valued at lower of cost and fair value.
vii) Valuation of Inventories:
Inventories are valued at lower of cost and net realisable value. Cost
is determined on weighted average method. Cost of semi-finished and
finished goods comprises of materials, conversion cost and excise duty
wherever applicable.
viii) Foreign Currency Transactions:
a) Transactions in foreign currencies are recorded at the exchange rate
prevailing on the date of the transaction. Monetary Assets &
Liabilities denominated in foreign currency are translated at the
year-end rate. The exchange difference between the rate prevailing on
the date of transaction and on the date of settlement as also on
translation of Monetary Assets and Liabilities at the end of the year
is recognised as income or expense, as the case may be. In accordance
with MCA notification on Accounting Standard 11 (AS 11), in respect of
long term foreign currency loan taken for acquisition of assets, the
exchange difference arising on reporting of said loan is adjusted to
the cost of the assets. (Refer note 1.2 below).
b) The Company uses foreign exchange forward contracts and options to
reduce the cost or to hedge its risks associated with foreign currency
fluctuations to underlying transactions for certain firm commitments or
forecasted transactions. The difference between the forward rate and
the exchange rate at the inception of the forward contract for
underlying transaction is recognised as income or expense over the life
of the contract. In respect
ix) Revenue Recognition:
Sale of goods is recognised on dispatches to customers, which coincide
with the transfer of significant risks and rewards associated with
ownership, inclusive of excise duty and net of discount.
Dividend income is accounted for when the right to receive is
established.
Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the rate applicable.
x) Employee Benefits:
a) Defined Contribution Plan:
Contributions are made to approved Superannuation Fund and Provident
Fund.
b) Defined Benefit Plan:
Company's liability towards gratuity is determined using the projected
unit credit method which considers each period of service as giving
rise to an additional unit of Benefit entitlement and measures each unit
separately to build up the final obligation. Past Service Gratuity
Liability is computed with reference to the service put in by each
employee till the date of valuation as also the projected terminal
salary at the time of exit. Actuarial gain or losses are recognised
immediately in the Statement of profit and Loss as income or expense.
Obligation is measured at the present value of estimated future Cash
Flow using a discount rate that is determined by reference to market
yields at the Balance Sheet date on government bonds where the currency
and terms of the government bonds are consistent with the currency and
estimated terms of the Defined Benefit obligation.
c) Compensated Absences:
Liability on account of Leave encashment to employees was considered as
short term compensation expense provided on actual basis upto 31st
March 2011. The same has been considered on actuarial basis from 1st
April 2011.
xi) Income taxes:
Tax expense comprises current and deferred tax. Current income tax is
measured as the amount expected to be paid to the tax authorities in
accordance with the Income tax Act, 1961 enacted in India and tax laws
prevailing in the respective tax jurisdictions where the Company
operates. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date.
Current income tax relating to items recognized directly in equity is
recognized in equity and not in the Statement of profit and Loss.
Deferred income tax reflects the impact of timing differences between
taxable income and accounting income originating during the current
year and reversal of timing differences for the earlier years. Deferred
tax is measured using the tax rates and the tax laws enacted or
substantively enacted at the reporting date. Deferred income tax
relating to items recognized directly in equity is recognized in equity
and not in the Statement of profit and Loss.
Deferred tax liabilities are recognized for all taxable timing
differences. Deferred tax assets are recognized for deductible timing
differences only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. In situations where the Company
has unabsorbed depreciation or carry forward tax losses, all deferred
tax assets are recognized only if there is virtual certainty supported
by convincing evidence that they can be realized against future taxable
profits.
The carrying amount of deferred tax assets are reviewed at each
reporting date. The Company writes-down the carrying amount of deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available. 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 tax assets and deferred taxes relate to the same
taxable entity and the same taxation authority.
xii) Provisions:
A provision is recognized when the Company has a present obligation as
a result of past event, it is probable that an outflow of resources
embodying economic Benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation.
Provisions are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
reporting date. These estimates are reviewed at each reporting date and
adjusted to reflect the current best estimates.
xiii) Contingent liabilities:
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be required
to settle the obligation. A contingent liability also arises in
extremely rare cases where there is a liability that cannot be
recognized because it cannot be measured reliably. The Company does not
recognize a contingent liability but discloses its existence in the
financial statements.
xiv) Cash and cash equivalents:
Cash and cash equivalents for the purposes of Cash Flow Statement
comprise cash at bank and short-term investments with an original
maturity of three months or less.
xv) Accounting for leases:
Assets given on lease where significant portion of risks and rewards
incidental to the ownership is retained are classified as ÃOperating
lease.' Lease rentals are recognised on straight line basis over the
lease term.
xvi) Identification of segments:
The Company's operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operate.
Allocation of common costs:
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Unallocable items:
Unallocable items include general corporate income and expense items
which are not allocated to any business segment.
Segment accounting policies:
The Company prepares its segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as a whole.
xvii) Earning Per Share:
Basic earning per share is calculated by dividing the net profit or
loss for the period attributable to equity Shareholders by the weighted
average number of equity shares outstanding during the period.
For the purpose of calculating diluted earning per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
Mar 31, 2011
I) Accounting Convention :
The financial statements are prepared under the historical cost
convention, having due regard to fundamental accounting assumptions of
going concern, consistency and accrual, in compliance with the
accounting standards referred to in Section 211(3C) of the Companies
Act, 1956.
ii) Fixed Assets :
a) Fixed Assets are stated at cost of acquisition or construction less
accumulated depreciation. Attributable finance costs and expenses of
bringing the respective assets to working condition for their intended
use are capitalised.
b) Impairment: The carrying amount of cash generating units /assets is
reviewed at balance sheet date to determine whether there is any
indication of impairment. If any such indication exists, the
recoverable amount is estimated as the higher of net selling price and
value in use. Impairment loss is recognised whenever carrying amount
exceeds the recoverable amount.
c) Borrowing costs that are directly attributable to the acquisition or
production of a qualifying asset are capitalised as part of the cost of
those assets. Other borrowing costs are recognised as expense in the
period in which they are incurred.
iii) Depreciation:
a) Depreciation is provided on Straight-Line Method at the rates and in
the manner specified in Schedule XIV to the Companies Act, 1956.
b) Amortisation is provided in respect of leasehold land.
iv) Valuation of Investments:
Investments classified as long term Investments are stated at cost.
Provision for diminution, if any, in the value of long-term investments
is made to recognise a decline other than temporary in the fair value
of investments. The fair value of a long term investment is ascertained
with reference to its market value, investees assets and results and
the expected cash flows from the investment as well as the strategic
importance to the
Company.
Current investments are valued at lower of cost and fair value.
v) Valuation of Inventories:
Inventories are valued at lower of cost and net realisable value. Cost
is determined on weighted average method. Cost of semi-finished and
finished goods comprises of materials, conversion cost and excise duty
wherever applicable.
vi) Foreign Currency Transactions:
a) Transactions in foreign currencies are recorded at the exchange rate
prevailing on the date of the transaction. Monetary Assets &
Liabilities denominated in foreign currency are translated at the
year-end rate. The exchange difference between the rate prevailing on
the date of transaction and on the date of settlement as also on
translation of Monetary Assets and Liabilities at the end of the year
including exchange difference related to purchase of fixed assets is
recognised as income or expense, as the case may be. b) The company
uses foreign exchange forward contracts and options to reduce the cost
or to hedge its risks associated with foreign currency fluctuations to
underlying transactions, for certain firm commitments or forecasted
transactions. The difference between the forward rate and the exchange
rate at the inception of the forward contract for underlying
transaction is recognised as income or expense over the life of the
contract. In respect of hedge contracts, for firm commitment or
forecasted transactions, the attributable gain or loss is taken to
profit and loss account on accrual and / or on settlement as the case
maybe. Loss if any, in respect of outstanding derivatives at the
balance sheet date is assessed by the management based on the principle
of prudence and charged to profit and loss account of that period.
vii) Revenue Recognition:
Sale of goods is recognised on dispatches to customers, which coincide
with the transfer of significant risks and rewards associated with
ownership, inclusive of excise duty and net of discount.
Dividend income is accounted for when the right to receive is
established.
Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the rate applicable.
viii) Employee Benefits:
a) Defined Contribution Plan: Contributions are made to approved
Superannuation and Provident Fund.
b) Defined Benefit Plan: Companys liability towards gratuity is
determined using the projected unit credit method which considers each
period of service as giving rise to an additional unit of benefit
entitlement and measures each unit separately to build up the final
obligation. Past Service Gratuity Liability is computed with reference
to the service put in by each employee till the date of valuation as
also the projected terminal salary at the time of exit. Actuarial gain
or losses are recognised immediately in the Statement of Profit and
Loss as income or expense. Obligation is measured at the present value
of estimated future Cash Flow using a discount rate that is determined
by reference to market yields at the Balance Sheet date on government
bonds where the currency and terms of the government bonds are
consistent with the currency and estimated terms of the defined benefit
obligation.
c) Short Term Compensated Absences: Liability on account of encashment
of leave to employee is considered as short term compensated expense
provided on actual.
ix) Taxation:
Current tax is determined as the amount of tax payable in respect of
taxable income for the year. The deferred tax for timing difference
between the book and tax profit for the year is accounted for using tax
rates and tax laws that have been enacted or substantially enacted at
the Balance Sheet date (except to the extent reversing in the tax
holiday period). Deferred Tax assets arising from the timing
differences are recognised to the extent that there is virtual
certainty that sufficient future taxable income will be available.
x) Provisions and contingent liabilities:
a) Provisions in respect of present obligations arising out of past
events are made in the accounts when reliable estimates can be made of
the amount of the obligation.
b) Contingent liabilities are disclosed by way of note to the financial
statements after careful evaluation by the management of the facts and
legal aspects of the matter involved.
xi) Accounting for leases:
Assets given on lease where significant portion of risks and rewards
incidental to the ownership are retained are classified as Operating
lease. Lease rentals are recognised on straight line basis over the
lease term.
Mar 31, 2010
I) Accounting Convention:
The financial statements are prepared under the historical cost
convention, having due regard to fundamental accounting assumptions of
going concern, consistency and accrual, in compliance with the
accounting standards referred to in Section 211(3C) of the Companies
Act, 1956. ii) Fixed Assets:
a) Fixed Assets are stated at cost of acquisition or construction less
accumulated depreciation. Attributable finance costs and expenses of
bringing the respective assets to working condition for their intended
use are capitalised.
b) Impairment: The carrying amount of cash generating units/assets is
reviewed at balance sheet date to determine whether there is any
indication of impairment. If any such indication exists, the
recoverable amount is estimated as the higher of net selling price and
value in use. Impairment loss is recognised whenever carrying amount
exceeds the recoverable amount.
c) Borrowing costs that are directly attributable to the acquisition or
production of a qualifying asset are capitalised as part of the cost of
those assets. Other borrowing costs are recognised as expense in the
period in which they are incurred.
iii) Depreciation:
a) Depreciation is provided on Straight-Line Method at the rates and in
the manner specified in Schedule XIV to the Companies Act, 1956.
b) Amortisation is provided in respect of leasehold land. iv)
Valuation of Investments:
Investments classified as long term Investments are stated at cost.
Provision for diminution, if any, in the value of long-term investments
is made to recognise a decline other than temporary in the fair value
of investments. The fair value of a long term investment is ascertained
with reference to its market value, investees assets and results and
the expected cash flows from the investment as well as the strategic
importance to the Company.
Current investments are valued at lower of cost and fair value. v)
Valuation of Inventories:
Inventories are valued at lower of cost and net realisable value. Cost
is determined on weighted average method. Cost of semi-finished and
finished goods comprises of materials, conversion cost and excise duty
wherever applicable.
vii) Revenue Recognition:
Sale of goods is recognised on dispatches to customers, which coincide
with the transfer of significant risks and rewards associated with
ownership, inclusive of excise duty and net of discount.
Dividend income is accounted for when the right to receive is
established. Interest income is recognised on a time proportion basis
taking into account the amount outstanding and the rate applicable.
viii) Employee Benefits:
a) Defined Contribution Plan:
Contributions are made to approved Superannuation and Provident Funds.
b) Defined Benefit Plan:
Companys liability towards gratuity is determined using the projected
unit credit method which considers each period of service as giving
rise to an additional unit of benefit entitlement and measures each
unit separately to build up the final obligation. Past Service Gratuity
Liability is computed with reference to the service put in by each
employee till the date of valuation as also the projected terminal
salary at the time of exit. Actuarial gains or losses
are recognised immediately in the Statement ot Profit and Loss Account
as income or expense. Obligation is measured at the present value of
estimated future Cash Flow using a discount rate that is determined by
reference to market yields at the Balance Sheet date on government
bonds where the currency and terms of the government bonds are
consistent with the currency and estimated terms of the defined benefit
obligation. c) Short Term Compensated Absences:
Liability on account of encashment of leave to employee is considered
as short term compensated expense provided on actual. ix) Taxation:
Current tax is determined as the amount of tax payable in respect of
taxable income for the year. The deferred tax for timing difference
between the book and tax profit for the year is accounted for using tax
rates and tax laws that have been enacted or substantially enacted at
the Balance Sheet date (except to the extent reversing in the tax
holiday period). Deferred Tax assets arising from the timing
differences are recognised to the extent that there is virtual
certainty that sufficient future taxable income will be available. x)
Provisions and contingent liabilities:
a) Provisions in respect of present obligations arising out of past
events are made in the accounts when reliable estimates can be made of
the amount of the obligation.
b) Contingent liabilities are disclosed by way of note to the financial
statements after careful evaluation by the management of the facts and
legal aspects of the matter involved.
xi) Accounting for leases:
Assets given on lease where significant portion of risks and rewards
incidental to the ownership are retained are classified as Operating
Lease. Lease rentals are recognised on straight line basis over the
lease term. 2) Contingent Liabilities:
i) Guarantees given by the Company, Rs. 1923.31 lakhs (Rs. 1124.67
lakhs)
ii) Claims against the Company not acknowledged as debt:
a) Liabilities in respect of income tax matters for which the Company
has succeeded in appeal but Income Tax Department has gone in further
appeal and exclusive of the effect of similar matters in respect of
pending assessments, Rs. 30.37 lakhs (Rs. 30.37 lakhs).
b) Liabilities in respect of income tax matters for which the Company
has gone
in further appeal and exclusive of the effect of similar matters in
respect of pending assessments, Rs. 887.75 lakhs (Rs. 716.90 lakhs).
c) Excise/Customs/Service Tax in respect of which either show cause
notice is received or the Company/Department is in appeal, Rs. 2478.44
lakhs (Rs. 2360.59 lakhs).
d) Amounts claimed by banks in respect of derivative transactions which
are under dispute not acknowledged as debt Rs. 29474.16 lakhs (Nil).
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Finolex Industries Ltd. Corporate Announcements
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