Accounting Policies of Gujarat Alkalies & Chemicals Ltd. Company
Mar 31, 2023
1. GENERAL INFORMATION
Gujarat Alkalies and Chemicals Limited (ââthe Companyââ) is a multi-product chemical manufacturing Company, having various products in its basket and is one of the leading manufacturer of Caustic Soda Lye.
The Company having CIN L24110GJ1973PLC002247 is a public limited company incorporated and domiciled in India and has its Registered Office at P. O. Ranoli - 391350, District Vadodara, Gujarat, India. The equity shares of the Company are listed on the BSE Limited and National Stock Exchange of India Limited.
2. SIGNIFICANT ACCOUNTING POLICIES2.1. Statement of Compliance
The standalone financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as notified under Section 133 of The Companies Act, 2013 (the âActâ) read with Companies (Indian Accounting Standards) Rules, 2015 as amended and other relevant provisions of the Act as amended from time to time, 2013.
2.2. Application of New Indian Accounting Standards
All the Indian Accounting Standards issued and notified by the Ministry of Corporate Affairs under the Companies (Indian Accounting Standards) Rules, 2015 (as amended) till the financial statements are authorized have been considered in preparing these financial statements.
The following standards / amendments to standards have been issued and will be effective from 1st April 2023.
Ind AS 1 - Presentation of Financial Statements The amendments require companies to disclose their material accounting policies rather than their significant accounting policies. Accounting policy information, together with other information, is material when it can reasonably be expected to influence decisions of primary users of general purpose financial statements. The Company does not expect this amendment to have any significant impact in its financial statements.
Ind AS 12 - Income Taxes The amendments clarify how companies account for deferred tax on transactions such as leases and decommissioning obligations. The amendments narrowed the scope of the recognition exemption in paragraphs 15 and 24 of Ind AS 12 (recognition
exemption) so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. The Company is evaluating the impact, if any, in its financial statements.
Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors The amendments will help entities to distinguish between accounting policies and accounting estimates. The definition of a change in accounting estimates has been replaced with a definition of accounting estimates. Under the new definition, accounting estimates are âmonetary amounts in financial statements that are subject to measurement uncertaintyâ. Entities develop accounting estimates if accounting policies require items in financial statements to be measured in a way that involves measurement uncertainty. The Company does not expect this amendment to have any significant impact in its financial statements.
2.3. Basis of Preparation of financial statements
The financial statements have been prepared, under the historical cost convention, on the accrual basis of accounting except for certainassets and liabilities which are measured at fair value/amortized cost/ present value at the end of each reporting period as explained in the accounting policies set out below. These accounting policies have been applied consistently over all the periods presented in these financials statements.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
The preparation of the financial statements in conformity with Ind AS requires management to make estimates, judgements and assumptions. These estimates, judgements and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Application of accounting policies that require critical accounting estimates involving complex and subjective judgements and the use of assumptions in these financial statements have been disclosed in notes below. Accounting estimates could change from period to period. Actual results could differ from these estimates. Appropriate changes in
estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and if material, then effects are disclosed in the notes to the financial statements.
2.5. Revenue Recognition2.5. a. Sale of Goods :
The Company derives Revenue primarily from sale of manufactured and traded products being âChemicalsâ.
Revenue from the sale of products is recognised on satisfaction of performance obligation upon transfer of control of promised products to customers in an amount that reflects the consideration the Company expects to receive in exchange of those products.
The performance obligation to transfer each distinct product consists of supplying the product to a named destination, handling charges and packing charges.
The Company accounts for discounts and incentives to customers as a reduction of revenue based on the proportionate allocation of the discounts / incentives to each of the underlying performance obligation that corresponds to the progress by the customer towards earning the discount / incentive. Also, when the level of discount varies with increase in level of revenue transactions, the Company recognizes the liability based on its estimate of the customerâs future purchases. If it is probable that the criteria for the discount will not be met, or if the amount thereof cannot be estimated reliably, then discount is not recognized until the payment is probable and the amount can be estimated reliably. The Company recognizes changes in the estimated amount of obligations for discounts in the period in which the change occurs.
The Company does not expect to have any contracts where the period between the transfer of the promised goods to the customer and payment by the customer exceeds one year. As a consequence, it does not adjust any of the transaction price for the time value of money.
Sale of products excludes amounts of indirect taxes on sales.
2.5. b. Dividend and interest income :
Dividend income from investments is recognised when the shareholderâs right to receive the payment has been established.
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can
be measured reliably. Interest income is accrued on time basis, by reference to the principal outstanding and at the effective interest rate applicable.
2.5. c. Other Operating Income and Other Income :
Revenue with respect to Other Operating Income and Other Income including insurance and other claims are recognised when a reasonable certainty as to its realisation exists.
The Company as a Lessee:
The Companyâs lease asset class primarily consist of leases for immovable properties. The company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if there is an explicit or implicit identified asset in the contract and Customer controls the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the company assesses whether: (1) the contact involves the use of an identified asset (2) the company has substantially all of the economic benefits from use of the asset through the period of the lease and (3) the company has the right to direct the use of the asset.
At the date of commencement of the lease, the company recognizes a right-of-use asset (âROUâ) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The ROU assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses, if any.
ROU assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset.
ROU assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs. The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the company changes its assessment if whether it will exercise an extension or a termination option. Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
2.7. Foreign Currencies2.7. a. Functional Currency :
The functional currency of the Company is the Indian rupee.These financial statements are presented in Indian rupees (rounded off to lakhs)
2.7. b. Transactions and translations :
In preparing the financial statements, transactions in currencies other than the Companyâs functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions.The date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date on which the Company initially recognises the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration^ the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in the statement of profit and loss in the period in which they are incurred.
Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences arising from foreign currency borrowings to the extent regarded as an adjustment to the interest costs. Capitalisation of borrowing costs is suspended and charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted.
2.9. Employee Benefits2.9. a. 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, etc. and the expected cost of bonus, Ex-gratia, Leave Travel Allowance, Reimbursement of Medical Expenses, Personal Accident Policy, Deposit Linked Insurance Policy are recognised, undiscountedin the period in which the employee renders the related services.
2.9. b. Post-Employment Benefits :2.9. b.1. Defined Contribution Plan :
The Companyâs contribution paid/payable during the year to Provident Fund, Superannuation Fund and other welfare funds are considered as defined contribution plans. The Contribution paid/ payable under these plans are recognised in the Statement of Profit and Loss during the period in which the employee renders the services. The above benefits are classified as Defined Contribution Schemes as the Company has no further defined obligations beyond the monthly contributions.
2.9. b.2. Defined Benefit Plans :
The Gratuity Scheme managed by Life Insurance Corporation of India through a Trust is considered as defined benefit plan. The present value of the
obligation is determined based on actuarial valuation being carried out at each reporting date using the Projected Unit Credit Method.
Actuarial gains and losses are recognised immediately in other comprehensive income.
Gains or losses on the curtailment or settlement of any defined benefit plan are recognised when the curtailment or settlement occurs.
Past service cost is recognized immediately to the extent that the benefits are already vested and otherwise it is amortized on straight-line basis over the remaining average period until the benefits become vested.
Interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets.
The defined retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as reduced by plan assets.
2.9. b.3. Long term Employee Benefits :
The obligation for long term employee benefits such as long term compensated absences, long service awards, etc. is recognised in the same manner as in the case of defined benefit plans as mentioned in (b) (ii) above except that the actuarial gains and losses are recognised immediately in the Statement of Profit and Loss.
2.10. Income Taxes
Income tax expense represents the sum of currenttax and deferred tax.
2.10. a. Current Tax :
The tax currently payable is based on taxable profit for the year. Taxable profit differs from âProfit Before Taxâ as reported in the Statement of Profit and Loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible in accordance with applicable tax laws. The Companyâs current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
2.10. b. Deferred Tax :
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences, the carry forward of unused tax losses and the carry forward of unused tax
creditsto the extent that it is probable that taxable profits will be available against which these can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
2.10. c. Current and Deferred Tax for the Year:
Current and deferred tax are recognised in the statement of profit and loss, except when they relate to items that are recognised in Other Comprehensive Income or directly in equity, in which case, the current and deferred tax are also recognised in Other Comprehensive Income or directly in equity respectively.
2.11. Property, Plant and Equipment
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses, if any.
The cost of PPE comprises of its purchase price or its construction cost (net of applicable tax credit, trade discount and rebate if any), Exchange rate variations attributable to the assets and any cost directly attributable to bring the asset into the location and condition necessary for it to be capable of operating in the manner intended by the management and initial estimate of decommissioning costs. Direct costs are capitalized until the asset is ready for use and includes borrowing cost capitalised in accordance with the Companyâs accounting policy.
Depreciation method, Estimated Useful lives and residual value
The Company depreciates property, plant and equipment over their estimated useful lives using the straight line method. The estimated useful lives of the assets are as follows:
|
Asset |
Useful Life |
|
Buildings |
20-60 years |
|
Plant and Equipment |
10-40 Years |
|
Office Equipment |
3 years |
|
Furniture and Fixtures |
5-10 years |
|
Vehicles |
8-10 years |
Depreciation is recognised so as to write off the cost of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straightline method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The useful life as prescribed under Schedule II of the Companies Act, 2013 have been followed except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating condition of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc.:
- Remembraning of Membrane cell elements-4 years
- Recoating of Anode and Cathode membrane cell elements- 8 years
- Leasehold land and equipment is amortised over the duration of the lease.
Advances paid towards the acquisition of property, plant and equipment outstanding at each Balance Sheet date is classified as capital advances under Other Non-Current Assets and the cost of the assets not ready for intended use before such date are disclosed under âCapital work-in-progressâ. Subsequent expenditures relating to property, plant and equipment is capitalised only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in the Statement of Profit and Loss when incurred. The cost and related accumulated depreciation are eliminated from
the financial statements upon sale or retirement of the asset and the resultant gains or losses which are measured as the difference between the net disposal proceeds and the carrying amount of the asset are recognised in the Statement of Profit and Loss when the asset is derecognised. Assets to be disposed off are reported at the lower of the carrying value or the fair value less cost to sell.
Intangible Assets acquired separately:
Intangible assets with finite useful life acquired separately, are recognized only if it is probable that future economic benefits that are attributable to the assets will flow to the enterprise and the cost of assets can be measured reliably. The intangible assets are recorded at cost and are carried at cost less accumulated amortization and accumulated impairment losses, if any. Amortisation is recognised on a straight-line basis over their estimated useful lives from the date they are available for use. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses. Subsequent expendituresare capitalised only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably.
Intangible assets are derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset, and recognised in the Statement of Profit and Loss when the asset is derecognised. RESEARCH AND DEVELOPMENT Expenditure on research is recognised as an expense when it is incurred. Expenditure on development which does not meet the criteria for recognition as an intangible asset is recognised as an expense when it is incurred.
Useful Lives of Intangible Assets :
Estimated Useful lives of the Intangible assets are as follows:
|
Intangible Asset |
Useful Life |
|
Capitalised Development |
5 Years |
|
Computer Software |
8 Years |
2.13. Impairment of Tangible and Intangible Assets
Intangible assetsand property, plant and equipment are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If such assets are considered to be impaired, the impairment is recognized in the Statement of Profit and Loss and is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment loss is reversed in the Statement of Profit and Loss if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years. After a reversal, the depreciation charge is adjusted in future periods to allocate the assetâs revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.
Inventories are stated at the lower of cost and net realisable value after providing for obsolescence, if any. Net realisable value represents the estimated selling price for inventories in the ordinary course of business less all estimated costs of completion and estimated costs necessary to make the sale.
Cost of inventories comprises of cost of purchase (net of recoverable taxes), cost of conversion and other costs including manufacturing overheads incurred in bringing them to their respective present location and condition.Raw materials and other supplies held for use in production of finished products are not written down below cost except in cases where
material prices have declined and it is estimated that the cost of the finished products will exceed their net realizable value.
Inventory cost formula is as under :
|
Inventories |
Basis of Valuation and Cost Formula |
|
Raw material |
Landed cost at weighted average basis |
|
Raw Material (Goods in transit) |
At Cost on Basic Price |
|
Work in Progress |
Raw material, labour and appropriate proportion of manufacturing expenses and overheads as per stage of completion at weighted average. |
|
Finished Goods (Including in Transit) |
Raw material, labour and appropriate proportion of manufacturing expenses and overheads at weighted average. |
|
Stores, spares, packing materials |
Landed Cost Weighted average basis |
|
Scrap |
At lower of cost or Net realizable value |
2.15. Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that 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.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material.If the time value of money is material, Provisions are discounted using pre-tax discount rate and when discounting is used, increase in the provision with the passage of time is recognised as a finance cost in the statement of Profit and Loss account. A contingent liability is (a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-
occurrence of one or more uncertain future events not wholly within the control of the entity or (b) a present obligation that arises from past events but is not recognised because (i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or (ii) the amount of the obligation can not be measured with sufficient reliability.
Contingent liabilities are disclosed in the Financial Statements by way of notes to accounts, unless possibility of an outflow of resources embodying economic benefit is remote.
A contingent asset is a possible asset that arises from the past events and whose existence will be confirmed only by the occurrence or non- occurrence of one or more of uncertain future events not wholly within the control of the entity.
Contingent assets are disclosed in the Financial Statements by way of notes to accounts when an inflow of economic benefits is probable.
The Company determines the classification of its financial assets and liabilities at initial recognition. The classification depends on the Companyâs business model for managing the financial assets and the contractual terms of the cash flows. Initial Recognition and Measurement:
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assetsand financial liabilities that are not at fair value through profit or loss, are added to or deducted from the fair value on initial recognition. Regular way purchase and sale of financial assets are accounted for at trade date.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts future cash receipts or payments through the expected life of the financial instrument, or where appropriate, a shorter period. Subsequent Measurement
2.16. a. Non-derivative financial instruments :2.16. a.1. Cash and Cash equivalents :
The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of cash that are subject to an
insignificant risk of change in value and having original maturities of three months or less from the date of purchase, to be cash equivalents. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage.
2.16. a.2. Financial assets carried at amortised cost :
A financial asset is subsequently measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
2.16. a.3. Financial assets at fair value through Other
Comprehensive Income (FVTOCI) :
A financial asset is subsequently measured at fair value through Other Comprehensive Income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company has made an irrevocable election for its investments which are classified as equity instruments to present the subsequent changes in fair value in Other Comprehensive Income based on its business model.
On derecognition of such Financial assets, cumulative gain or loss previously recognised in Other Comprehensive Income is not reclassified from the equity to statement of Profit and Loss.
2.16. a.4. Financial assets at fair value through profit
or loss (FVTPL) :
A financial asset which is not classified in any of the above categories are subsequently measured at fair value through profit or loss.
2.16. a.5. Investment in Joint Venture :
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The Company accounts for its investment in joint venture at cost.
2.16. a.6. Financial liabilities :
Financial liabilities are subsequently carried at amortized cost using the effective interest method. For trade and other payables maturing within one
year from the Balance Sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments. Interest bearing issued debt are initially measured at fair value and are subsequently measured at amortised cost using the effective interest rate method.
2.16. a.7. Derecognition of financial instruments :
The Company derecognizes a financial asset when the contractual rights to the cash flows from thefinancial asset expire or it transfers the financial asset and the transfer qualifies for derecognitionunder Ind AS 109. On derecognition of Financial assets (except as mentioned in 2.17.a.3), the difference between the carrying amount and the consideration received is recognised in the statement of Profit and Loss account. A financial liability (or a part of a financial liability) is derecognized from the Companyâs Balance Sheet when the obligation specified in the contract is discharged or cancelled or expires.
2.16. a.8. Offsetting Financial Instruments :
Financial assets and liabilities are offset and the net amount is presented in the Balance Sheet when there is a legally enforceable right to offsetthe recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
2.17. Share capital Ordinary Shares :
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are recognized as a deduction from equity, net of any tax effects.
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:
⢠the principal market for the asset or liability, or
⢠In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, which gives highest priority to quoted prices in active markets and the lowest priority to unobservable inputs.
Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 â Valuation techniques for inputs other than quoted prices included within Level 1 that are observable for the asset or Liability either directly or indirectly.
Level 3 â Valuation techniques for inputs that areunobservable for the asset or liability.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
2.19. Impairment of Financial Assets
The Company recognizes loss allowances using the Expected Credit Loss (ECL) model for thefinancial assets which are not measured at fair value through profit or loss. Loss allowance for tradereceivables with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised as an impairment gain or loss in the statement of profit and loss.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive, discounted at the effective interest rate.
ECL are measured taking into account the time value of money and other reasonable information available as a result of past events, current conditions and forecasts of future economic conditions.
For Trade receivables, the Company uses a
provision matrix to measure lifetime ECL on its portion of trade receivables. The provision matrix is prepared based on historically observed default rates over the expected life of trade receivables and is adjusted for forward looking estimates.
2.20. Earnings per share
Basic earnings per share is computed by dividing the profit or loss attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the period.
Diluted earnings per share is computed by dividing the profit after tax by the weighted average number of equity shares considered for deriving the basic earnings per share and the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares.
2.21. Operating Segments
Operating segments are identified and reported taking into account the different risks and returns, the organization structure and the internal reporting systems.The Company operates in one reportable business segments i.e. âChemicalsâ.
2.22. Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows are segregated intooperating, investing and financing activities.
2.23. Current/non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated as current if it satisfies any of the following conditions:
- Expected to be realised or intended to be sold or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Expected to be realised within twelve months after the reporting period
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is current if it satisfies any of the following conditions:
- Expected to be settled in normal operating cycle
- Held primarily for the purpose of trading
- is due to be settled within twelve months after the reporting period
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The company classifies all other liabilities as noncurrent.
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.
2.24. Non-Current Assets held for Sale
Non-current assets or disposal groups are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification as held for sale, and actions required to complete the plan of sale should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
Non-current assets or disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
Property, plant and equipment and intangible assets are not depreciated or amortized once classified as held for sale.
The Company classifies Non-Current Assets as held for sale if their carrying amounts will be recovered principally through a sale rather than through continuing use of the assets and actions required to complete such sale indicate that it is unlikely that significant changes to the plan to sell will be made or that the decision to sell will be withdrawn. Also, such assets are classified as held for sale only if the management expects to complete the sale within one year from the date of classification.
Non-current assets or disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
Government grants are recognised when there is reasonable assurance that the grant will be received, and the company will comply with conditions attached to the grant.
Government grants relating to income are recognised in profit or loss on a systematic basis over the periods in which the Company recognises as expenses, the related costs for which the grants are intended to compensate. Grant relating to assets are netted off against the acquisition cost of the asset.
2.26. Critical accounting judgements, assumptions and Key sources of estimation uncertainty:
The preparation of the Companyâs financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities at the date of the financial statements. Estimates and assumptions are continuously evaluated and are based on managementâs experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
Key source of judgments, assumptions and estimates in the preparation of the Financial Statements which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are in respect of useful lives of Property, Plant and Equipment, impairment, employee benefit obligations, provisions, provision for income tax, measurement of deferred tax assets and contingent assets & liabilities., Stores & Spares Written off.
2.26. a. Critical judgments in applying accounting policies
The following are the critical judgements, apart from those involving estimations (Refer note2.25.b),that the Management have made in the process of applying the Companyâs accounting policies and that have the significant effect on the amounts recognized in the Financial Statements.
2.26. a.1. Determining whether an arrangement contain
leases and classification of leases
Ind AS 116 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate
the lease, if the use of such option is reasonably certain. The company makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination of the lease and the importance of the underlying asset to operations taking into account the location of the underlying asset and the availability of suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances.
2.26. b. Key sources of estimates and assumptions
Information about estimates and assumptions that have the significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may differ from these estimates.
2.26. b.1. Defined benefit obligation (DBO)
The cost ofthe defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations being carried out at reporting date. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, Salary escalation rate, expected rate of return on asset and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates for the respective countries.
2.26. b.2. Contingent Liabilities and Assets
Contingent liabilities may arise from the ordinary course of business in relation to claims against the Company, including legal, contractor, land access and other claims. By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence, and potential quantum, of contingencies inherently involves the exercise of significant judgment and the use of estimates regarding the outcome of future events.
2.26. b.3. Allowance for impairment of trade receivables
The expected credit loss is mainly based on the ageing of the receivable balances and historical experience. The receivables are assessed on an individual basis assessed for impairment collectively, depending on their significance. Moreover, trade receivables are written off on a case-to-case basis if deemed not to be collectible on the assessment of the underlying facts and circumstances.
2.26. b.4. Impairment of non-financial assets
Evaluation for impairment requires use of judgment, estimates and assumptions.
The evaluation of applicability of indicators of impairment of assets requires assessment of external factors (significant decline in assetâs value, significant changes in the technological, market, economic or legal environment, market interest rates etc.) and internal factors (obsolescence or physical damage of an asset, poor economic performance of the asset etc.) which could result in significant change in recoverable amount of the Property, Plant and Equipment.
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or CGUâs fair value less costs of disposal and its value in use. It is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly
traded subsidiaries or other available fair value indicators.
Significant judgements are involved in determining the provision for income taxes, including amount expected to be paid / recovered for uncertain tax positions.
2.26. b.6. Recognition of Deferred tax assets:
Deferred Tax Assets (DTA) are recognized for the unused tax losses/ credits to the extent that it is probable that taxable profit will be available against which the losses will be utilized. Management judgement is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.
2.26. b.7. Useful lives and residual value of property,
plant and equipment:
The Company reviews the useful life and residual value of property, plant and equipment at the end of each reporting period. This reassessment may result in change in depreciation expense in future periods.
2.26. b.8. Dismantling cost of property, plant and
equipment:
The company estimatesassets retirement obligation on estimate basis for property, plant and equipment. Estimation is done by the management considering size of the asset and its useful life in line with industry practices.
2.26. b.9. Stores and spares inventories:
The Companyâs manufacturing process is continuous and highly mechanic with wide range of different types of plant and machineries. The Company keeps stores and spares as standby to continue the operations without any disruption. Considering wide range of stores and spares and long lead time for procurement of it and based on criticality of spares, the Company believes that net realizable value would be more than cost.
2.26. b.10. Fair value of investments:
The Company has invested in the equity instruments of various companies. The valuation exercise of unquoted equity instruments carried out by the Company with the help of an independent valuer, etc. has estimated fair value at each reporting period based on available historical annual reports and other information in the public domain.
Mar 31, 2022
1. GENERAL INFORMATION
Gujarat Alkalies and Chemicals Limited (ââthe Companyââ) is a multi-product chemical manufacturing Company, having various products in its basket and is one of the leading manufacturer of Caustic Soda Lye.
The Company having CIN L24110GJ1973PLC002247 is a public limited company incorporated and domiciled in India and has its Registered Office at P. O. Ranoli - 391350, District Vadodara, Gujarat, India. The equity shares of the Company are listed on the BSE Limited and National Stock Exchange of India Limited.
2. SIGNIFICANT ACCOUNTING POLICIES2.1. Statement of Compliance
The standalone financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as notified under Section 133 of Companies Act, 2013 (the âActâ) read with Companies (Indian Accounting Standards) Rules, 2015 as amended and other relevant provisions of the Act as amended from time to time.
2.2. Application of New Indian Accounting Standard
All the Indian Accounting Standards issued and notified by the Ministry of Corporate Affairs under the Companies (Indian Accounting Standards) Rules, 2015 (as amended) till the financial statements are authorized have been considered in preparing these financial statements.
The following standards / amendments to standards have been issued and will be effective from 1st April 2022. The Company is evaluating the requirements of these standards, improvements and amendments and has not yet determined the impact on the financial statements.
Indian Accounting Standard (Ind AS) 103 -Business Combinations - Qualifications prescribed for recognition of the identifiable assets acquired and liabilities assumed, as part of applying the acquisition method - should meet the definition of assets and liabilities in the Conceptual Framework for Financial Reporting under Ind AS (Conceptual Framework) issued by the ICAI at the acquisition date.
Modification to the exceptions to recognition principle relating to contingent liabilities and contingent assets acquired in a business combination at the acquisition date.
Indian Accounting Standard (Ind AS) 109 - Financial Instruments - Modification in accounting treatment of certain costs incurred on derecognition of financial liabilities.
Indian Accounting Standard (Ind AS) 16 - Property, Plant and Equipment - Modification in treatment of excess of net sale proceeds of items produced over the cost of testing as part of cost of an item of property, plant, and equipment.
Indian Accounting Standard (Ind AS) 37 - Provisions, Contingent Liabilities and Contingent Assets -Modifications in application of recognition and measurement principles relating to onerous contracts.
2.3. Basis of Preparation of financial statements
The financial statements have been prepared, under the historical cost convention, on the accrual basis of accounting except for certain assets and liabilities which are measured at fair value/amortized cost/ present value at the end of each reporting period as explained in the accounting policies set out below. These accounting policies have been applied consistently over all the periods presented in these financials statements.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
The preparation of the financial statements in conformity with Ind AS requires management to make estimates, judgements and assumptions. These estimates, judgements and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Application of accounting policies that require critical accounting estimates involving complex and subjective judgements and the use of assumptions in these financial statements have been disclosed in notes below. Accounting estimates could change from period to period. Actual results could differ from these estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and if material, then effects are disclosed in the notes to the financial statements.
2.5. Revenue Recognition2.5. a. Sale of Goods :
The Company derives Revenue primarily from sale of manufactured and traded products being âChemicalsâ.
Revenue from the sale of products is recognised on satisfaction of performance obligation upon transfer of control of promised products to customers in an amount that reflects the consideration the Company expects to receive in exchange of those products. The performance obligation to transfer each distinct product consists of supplying the product to a named destination, handling charges and packing charges.
The Company accounts for discounts and incentives to customers as a reduction of revenue based on the proportionate allocation of the discounts / incentives to each of the underlying performance obligation that corresponds to the progress by the customer towards earning the discount / incentive. Also, when the level of discount varies with increase in level of revenue transactions, the Company recognizes the liability based on its estimate of the customerâs future purchases. If it is probable that the criteria for the discount will not be met, or if the amount thereof cannot be estimated reliably, then discount is not recognized until the payment is probable and the amount can be estimated reliably. The Company recognizes changes in the estimated amount of obligations for discounts in the period in which the change occurs.
The Company does not expect to have any contracts where the period between the transfer of the promised goods to the customer and payment by the customer exceeds one year. As a consequence, it does not adjust any of the transaction price for the time value of money.
Sale of products excludes amounts of indirect taxes on sales.
2.5. b. Dividend and interest income :
Dividend income from investments is recognised when the shareholderâs right to receive the payment has been established.
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on time basis, by reference to the principal outstanding and at the effective interest rate applicable.
2.5. c. Other Operating Income and Other Income :
Revenue with respect to Other Operating Income
and Other Income including insurance and other claims are recognised when a reasonable certainty as to its realisation exists.
The Company as a Lessee:
The Companyâs lease asset class primarily consist of leases for immovable properties. The company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if there is an explicit or implicit identified asset in the contract and Customer controls the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the company assesses whether: (1) the contact involves the use of an identified asset (2) the company has substantially all of the economic benefits from use of the asset through the period of the lease and (3) the company has the right to direct the use of the asset.
At the date of commencement of the lease, the company recognizes a right-of-use asset (âROUâ) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The ROU assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses, if any.
ROU assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset.
ROU assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost
to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the company changes its assessment if whether it will exercise an extension or a termination option. Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
2.7. Foreign Currencies2.7. a. Functional Currency :
The functional currency of the Company is the Indian rupee.These financial statements are presented in Indian rupees (rounded off to lakhs)
2.7. b. Transactions and translations :
In preparing the financial statements, transactions in currencies other than the Companyâs functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions.The date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date on which the Company initially recognises the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration^ the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in the statement of profit and loss in the period in which they are incurred.
Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences arising from foreign currency borrowings to the extent regarded as an adjustment to the interest costs. Capitalisation of borrowing costs is suspended and charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted.
2.9. Employee Benefits2.9. a. 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, etc. and the expected cost of bonus, Ex-gratia, Leave Travel Allowance, Reimbursement of Medical Expenses, Personal Accident Policy, Deposit Linked Insurance Policy are recognised, undiscounted in the period in which the employee renders the related services.
2.9. b. Post-Employment Benefits :2.9. b.1. Defined Contribution Plan :
The Companyâs contribution paid/payable during the year to Provident Fund, Superannuation Fund and other welfare funds are considered as defined contribution plans. The Contribution paid/ payable under these plans are recognised in the Statement of Profit and Loss during the period in which the employee renders the services. The above benefits are classified as Defined Contribution Schemes as the Company has no further defined obligations beyond the monthly contributions.
2.9. b.2. Defined Benefit Plans :
The Gratuity Scheme managed by Life Insurance Corporation of India through a Trust is considered as defined benefit plan. The present value of the obligation is determined based on actuarial valuation being carried out at each reporting date using the Projected Unit Credit Method.
Actuarial gains and losses are recognised immediately in other comprehensive income.
Gains or losses on the curtailment or settlement of any defined benefit plan are recognised when the curtailment or settlement occurs.
Past service cost is recognized immediately to the extent that the benefits are already vested and otherwise it is amortized on straight-line basis over the remaining average period until the benefits become vested.
Interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets.
The defined retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation as reduced by plan assets.
2.9. b.3. Long term Employee Benefits :
The obligation for long term employee benefits such as long term compensated absences, long service awards, etc. is recognised in the same manner as in the case of defined benefit plans as mentioned in (b) (ii) above except that the actuarial gains and losses are recognised immediately in the Statement of Profit and Loss.
Income tax expense represents the sum of current tax and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from âProfit Before Taxâ as reported in the Statement of Profit and Loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible in accordance with applicable tax laws. The Companyâs current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences, the carry forward of unused tax losses and the carry forward of unused tax credits to the extent that it is probable that taxable profits will be available against which these can
be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
2.10. c. Current and Deferred Tax for the Year:
Current and deferred tax are recognised in the statement of profit and loss, except when they relate to items that are recognised in Other Comprehensive Income or directly in equity, in which case, the current and deferred tax are also recognised in Other Comprehensive Income or directly in equity respectively.
2.11. Property, Plant and Equipment
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses, if any.
The cost of PPE comprises of its purchase price or its construction cost (net of applicable tax credit, trade discount and rebate if any), Exchange rate variations attributable to the assets and any cost directly attributable to bring the asset into the location and condition necessary for it to be capable of operating in the manner intended by the management and initial estimate of decommissioning costs. Direct costs are capitalized until the asset is ready for use and includes borrowing cost capitalised in accordance with the Companyâs accounting policy.
Depreciation method, Estimated Useful lives and residual value
The Company depreciates property, plant and equipment over their estimated useful lives using the straight line method. The estimated useful lives of the assets are as follows:
|
Asset |
Useful Life |
|
Buildings |
20-60 years |
|
Plant and Equipment |
10-40 Years |
|
Office Equipment |
3 years |
|
Furniture and Fixtures |
5-10 years |
|
Vehicles |
8-10 years |
Depreciation is recognised so as to write off the cost of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straightline method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The useful life as prescribed under Schedule II of the Companies Act, 2013 have been followed except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating condition of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc.:
- Remembraning of Membrane cell elements-4 years
- Recoating of Anode and Cathode membrane cell elements- 8 years
- Leasehold land and equipment is amortised over the duration of the lease.
Advances paid towards the acquisition of property, plant and equipment outstanding at each Balance Sheet date is classified as capital advances under Other Non-Current Assets and the cost of the assets not ready for intended use before such date are disclosed under âCapital work-in-progressâ. Subsequent expenditures relating to property, plant and equipment is capitalised only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in the Statement of Profit and Loss when incurred. The cost and related accumulated depreciation are eliminated from
the financial statements upon sale or retirement of the asset and the resultant gains or losses which are measured as the difference between the net disposal proceeds and the carrying amount of the asset are recognised in the Statement of Profit and Loss when the asset is derecognised. Assets to be disposed off are reported at the lower of the carrying value or the fair value less cost to sell.
Intangible Assets acquired separately:
Intangible assets with finite useful life acquired separately, are recognized only if it is probable that future economic benefits that are attributable to the assets will flow to the enterprise and the cost of assets can be measured reliably. The intangible assets are recorded at cost and are carried at cost less accumulated amortization and accumulated impairment losses, if any. Amortisation is recognised on a straight-line basis over their estimated useful lives from the date they are available for use. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses. Subsequent expenditures are capitalised only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably.
Intangible assets are derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset, and recognised in the Statement of Profit and Loss when the asset is derecognised. RESEARCH AND DEVELOPMENT Expenditure on research is recognised as an expense when it is incurred. Expenditure on development which does not meet the criteria for recognition as an intangible asset is recognised as an expense when it is incurred.
Useful Lives of Intangible Assets :
Estimated Useful lives of the Intangible assets are as follows:
|
Intangible Asset |
Useful Life |
|
Capitalised Development |
5 Years |
|
Computer Software |
8 Years |
2.13. Impairment of Tangible and Intangible Assets other than Goodwill
Intangible assets and property, plant and equipment are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If such assets are considered to be impaired, the impairment is recognized in the Statement of Profit and Loss and is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment loss is reversed in the Statement of Profit and Loss if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years.After a reversal, the depreciation charge is adjusted in future periods to allocate the assetâs revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.
Inventories are stated at the lower of cost and net realisable value after providing for obsolescence, if any. Net realisable value represents the estimated selling price for inventories in the ordinary course of business less all estimated costs of completion and estimated costs necessary to make the sale. Cost of inventories comprises of cost of purchase (net of recoverable taxes), cost of conversion and other costs including manufacturing overheads incurred in bringing them to their respective present location and condition.Raw materials and other supplies held for use in production of finished products are not
written down below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realizable value.
Inventory cost formula is as under :
|
Inventories |
Basis of Valuation and Cost Formula |
|
Raw material |
Landed cost at weighted average basis |
|
Raw Material (Goods in transit) |
At Cost on Basic Price |
|
Work in Progress |
Raw material, labour and appropriate proportion of manufacturing expenses and overheads as per stage of completion at weighted average. |
|
Finished Goods (Including in Transit) |
Raw material, labour and appropriate proportion of manufacturing expenses and overheads at weighted average. |
|
Stores, spares, packing materials |
Landed Cost Weighted average basis |
2.15. Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that 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.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material). If the time value of money is material, Provisions are discounted using pre-tax discount rate and when discounting is used, increase in the provision with the passage of time is recognised as a finance cost in the statement of Profit and Loss account. A contingent liability is (a) a possible obligation that arises from past events and whose existence
will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the entity or (b) a present obligation that arises from past events but is not recognised because (i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or (ii) the amount of the obligation can not be measured with sufficient reliability.
Contingent liabilities are disclosed in the Financial Statements by way of notes to accounts, unless possibility of an outflow of resources embodying economic benefit is remote.
A contingent asset is a possible asset that arises from the past events and whose existence will be confirmed only by the occurrence or non- occurrence of one or more of uncertain future events not wholly within the control of the entity.
Contingent assets are disclosed in the Financial Statements by way of notes to accounts when an inflow of economic benefits is probable.
The Company determines the classification of its financial assets and liabilities at initial recognition. The classification depends on the Companyâs business model for managing the financial assets and the contractual terms of the cash flows. Initial Recognition and Measurement:
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities that are not at fair value through profit or loss, are added to or deducted from the fair value on initial recognition. Regular way purchase and sale of financial assets are accounted for at trade date.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts future cash receipts or payments through the expected life of the financial instrument, or where appropriate, a shorter period. Subsequent Measurement
2.16. a. Non-derivative financial instruments :2.16. a.1. Cash and Cash equivalents :
The Company considers all highly liquid financial instruments, which are readily convertible into
known amounts of cash that are subject to an insignificant risk of change in value and having original maturities of three months or less from the date of purchase, to be cash equivalents. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage.
2.16. a.2. Financial assets carried at amortised cost :
A financial asset is subsequently measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
2.16. a.3. Financial assets at fair value through Other
Comprehensive Income (FVTOCI) :
A financial asset is subsequently measured at fair value through Other Comprehensive Income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company has made an irrevocable election for its investments which are classified as equity instruments to present the subsequent changes in fair value in Other Comprehensive Income based on its business model.
On derecognition of such Financial assets, cumulative gain or loss previously recognised in Other Comprehensive Income is not reclassified from the equity to statement of Profit and Loss.
2.16. a.4. Financial assets at fair value through profit
or loss (FVTPL) :
A financial asset which is not classified in any of the above categories are subsequently measured at fair value through profit or loss.
2.16. a.5. Investment in Joint Venture :
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
The Company accounts for its investment in joint venture at cost.
2.16. a.6. Financial liabilities :
Financial liabilities are subsequently carried at amortized cost using the effective interest method. For trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments. Interest bearing issued debt are initially measured at fair value and are subsequently measured at amortised cost using the effective interest rate method.
2.16. a.7. Derecognition of financial instruments :
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under Ind AS 109. On derecognition of Financial assets (except as mentioned in 2.17.a.3), the difference between the carrying amount and the consideration received is recognised in the statement of Profit and Loss account. A financial liability (or a part of a financial liability) is derecognized from the Companyâs Balance Sheet when the obligation specified in the contract is discharged or cancelled or expires.
2.16. a.8. Offsetting Financial Instruments :
Financial assets and liabilities are offset and the net amount is presented in the Balance Sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
2.17. Share capital Ordinary Shares :
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are recognized as a deduction from equity, net of any tax effects.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
⢠In the principal market for the asset or liability, or
⢠In the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, which gives highest priority to quoted prices in active markets and the lowest priority to unobservable inputs.
Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 â Valuation techniques for inputs other than quoted prices included within Level 1 that are observable for the asset or Liability either directly or indirectly.
Level 3 â Valuation techniques for inputs that are unobservable for the asset or liability.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
2.19. Impairment of Financial Assets
The Company recognizes loss allowances using the Expected Credit Loss (ECL) model for the financial assets which are not measured at fair value through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised as an impairment gain or loss in the statement of profit and loss.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the
entity expects to receive, discounted at the effective interest rate.
ECL are measured taking into account the time value of money and other reasonable information available as a result of past events, current conditions and forecasts of future economic conditions.
For Trade receivables, the Company uses a provision matrix to measure lifetime ECL on its portion of trade receivables. The provision matrix is prepared based on historically observed default rates over the expected life of trade receivables and is adjusted for forward looking estimates.
Basic earnings per share is computed by dividing the profit or loss attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the period.
Diluted earnings per share is computed by dividing the profit after tax by the weighted average number of equity shares considered for deriving the basic earnings per share and the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares.
Operating segments are identified and reported taking into account the different risks and returns, the organization structure and the internal reporting systems.The Company operates in one reportable business segments i.e. âChemicalsâ.
Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows are segregated into operating, investing and financing activities.
2.23. Current/non-current classification
The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated as current if it satisfies any of the following conditions:
- Expected to be realised or intended to be sold or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Expected to be realised within twelve months after the reporting period
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is current if it satisfies any of the following conditions:
- Expected to be settled in normal operating cycle
- Held primarily for the purpose of trading
- is due to be settled within twelve months after the reporting period
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
The company classifies all other liabilities as noncurrent.
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.
2.24. Non-Current Assets held for Sale
Non-current assets or disposal groups are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification as held for sale, and actions required to complete the plan of sale should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
Non-current assets or disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
Property, plant and equipment and intangible assets are not depreciated or amortized once classified as held for sale.
The Company classifies Non-Current Assets as held for sale if their carrying amounts will be recovered principally through a sale rather than through continuing use of the assets and actions required to complete such sale indicate that it is
unlikely that significant changes to the plan to sell will be made or that the decision to sell will be withdrawn. Also, such assets are classified as held for sale only if the management expects to complete the sale within one year from the date of classification.
Non-current assets or disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
2.25. Critical accounting judgements, assumptions and Key sources of estimation uncertainty:
The preparation of the Companyâs financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities at the date of the financial statements. Estimates and assumptions are continuously evaluated and are based on managementâs experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
Key source of judgments, assumptions and estimates in the preparation of the Financial Statements which may cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are in respect of useful lives of Property, Plant and Equipment, impairment, employee benefit obligations, provisions, provision for income tax, measurement of deferred tax assets and contingent assets & liabilities, Stores & Spares Written off.
2.25. a. Critical judgments in applying accounting
policies
The following are the critical judgements, apart from those involving estimations (Refer note 2.25.b), that the Management have made in the process of applying the Companyâs accounting policies and that have the significant effect on the amounts recognized in the Financial Statements.
2.25. a.1. Determining whether an arrangement contain
leases and classification of leases
Ind AS 116 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease, if the use of such option is reasonably certain. The company makes an assessment on the expected lease term on a lease-by-lease basis
and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination of the lease and the importance of the underlying asset to operations taking into account the location of the underlying asset and the availability of suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances.
2.25. b. Key sources of estimates and assumptions
Information about estimates and assumptions that have the significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may differ from these estimates.
2.25. b.1. Defined benefit obligation (DBO)
The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations being carried out at reporting date. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, Salary escalation rate, expected rate of return on asset and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
The parameter most subject to change is the discount rate. In determining the appropriate discount rate, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates for the respective countries.
2.25. b.2. Contingent Liabilities and Assets
Contingent liabilities may arise from the ordinary course of business in relation to claims against the Company, including legal, contractor, land access and other claims. By their nature, contingencies will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence, and potential quantum, of contingencies
inherently involves the exercise of significant judgment and the use of estimates regarding the outcome of future events.
2.25. b.3. Allowance for impairment of trade receivables
The expected credit loss is mainly based on the ageing of the receivable balances and historical experience. The receivables are assessed on an individual basis assessed for impairment collectively, depending on their significance. Moreover, trade receivables are written off on a case-to-case basis if deemed not to be collectible on the assessment of the underlying facts and circumstances.
2.25. b.4. Impairment of non-financial assets
Evaluation for impairment requires use of judgment, estimates and assumptions.
The evaluation of applicability of indicators of impairment of assets requires assessment of external factors (significant decline in assetâs value, significant changes in the technological, market, economic or legal environment, market interest rates etc.) and internal factors (obsolescence or physical damage of an asset, poor economic performance of the asset etc.) which could result in significant change in recoverable amount of the Property, Plant and Equipment.
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or CGUâs fair value less costs of disposal and its value in use. It is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value
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Significant judgements are involved in determining the provision for income taxes, including amount expected to be paid / recovered for uncertain tax positions.
2.25. b.6. Recognition of Deferred tax assets:
Deferred Tax Assets (DTA) are recognized for the unused tax losses/ credits to the extent that it is probable that taxable profit will be available against which the losses will be utilized. Management judgement is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.
2.25. b.7. Useful lives and residual value of property,
plant and equipment:
The Company reviews the useful life and residual value of property, plant and equipment at the end of each reporting period. This reassessment may result in change in depreciation expense in future periods.
2.25. b.8. Dismantling cost of property, plant and
equipment:
The company estimates assets retirement obligation on estimate basis for property, plant and equipment. Estimation is done by the management considering size of the asset and its useful life in line with industry practices.
2.25. b.9. Stores and spares inventories:
The Companyâs manufacturing process is continuous and highly mechanic with wide range of different types of plant and machineries. The Company keeps stores and spares as standby to continue the operations without any disruption. Considering wide range of stores and spares and long lead time for procurement of it and based on criticality of spares, the Company believes that net realizable value would be more than cost.
2.25. b.10. Fair value of investments:
The Company has invested in the equity instruments of various companies. The valuation exercise of unquoted equity instruments carried out by the Company with the help of an independent valuer, etc. has estimated fair value at each reporting period based on available historical annual reports and other information in the public domain.
Mar 31, 2018
1. GENERAL INFORMATION
Gujarat Alkalies and Chemicals Limited (the Company) is a multi-product chemical manufacturing Company, having 35 products in its basket and is one of the leading manufacturer of Caustic Soda Lye.
The Company having CIN L24110GJ1973PLC002247 is a public limited company incorporated and domiciled in India and has its Registered Office at P.O. Petrochemicals - 391346, District Vadodara, Gujarat, India. The equity shares of the Company are listed on the BSE Limited and National Stock Exchange of India Limited.
The financial statements are approved for issue by the Companyâs Board of Directors on 24th May, 2018.
2. SIGNIFICANT ACCOUNTING POLICIES
(1) Statement of Compliance
The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as notified under the Companies (Indian Accounting Standards) Rules, 2015.
(2) Basis of Preparation of financial statements
The financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
(3) Use of estimates
The preparation of the financial statements in conformity with Ind AS requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in these financial statements have been disclosed in notes below. Accounting estimates could change from period to period. Actual results could differ from these estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and if material, then effects are disclosed in the notes to the financial statements.
(4) Revenue Recognition
(a) Sale of Goods:
Revenue from the sale of Goods is recognized when the goods are delivered and titles have been passed, at which time all the following conditions are satisfied:
(i) t he Company has transferred to the buyer the significant risks and rewards of ownership of the goods;
(ii) t he Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
(iii) t he amount of revenue can be measured reliably;
(iv) i t is probable that the economic benefits associated with the transaction will flow to the Company; and
(v) t he costs incurred or to be incurred in respect of the transaction can be measured reliably.
Sales are net of discounts, sales tax and value added tax but includes handling charges and packing charges. The Sales figure is grossed up to include Excise duty collected and excluding amount collected on behalf of third party (i.e Goods and Service Tax) on sales.
(b) Dividend and Interest Income:
Dividend income from investments is recognized when the shareholderâs right to receive the payment has been established.
I nterest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on time basis, by reference to the principal outstanding and at the effective interest rate applicable.
(c) Other Operating Income and Other Income:
Revenue with respect to Other Operating Income and Other Income including insurance and other claims are recognized when a reasonable certainty as to its realization exists.
(5) Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
When acquired, finance leases are capitalized at fair value or present value of Minimum Lease payments at the inception of the lease, whichever is lower. Lease payments under operating leases are recognized as an expense on a straight line basis in net profit in the Statement of Profit and Loss over the lease term.
(6) Foreign Currencies
(a) Functional Currency:
The functional currency of the Company is the Indian rupee. These financial statements are presented in Indian rupees (rounded off to lakhs).
(b) Transactions and Translations:
I n preparing the financial statements, transactions in currencies other than the Companyâs functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognized in profit or loss in the period in which they arise except for exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings.
(7) Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
(8) Employee Benefits
(a) 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, etc. and the expected cost of bonus, Ex-gratia, Leave Travel Allowance, Reimbursement of Medical Expenses, Personal Accident Policy, Deposit Linked Insurance Policy are recognized in the period in which the employee renders the related services.
(b) Post-Employment Benefits:
(i) Defined Contribution Plan:
The Companyâs contribution paid / payable during the year to Provident Fund, Superannuation Fund and other welfare funds are considered as defined contribution plans. The Contribution paid / payable under these plans are recognized in the Statement of Profit and Loss during the period in which the employee renders the services.
(ii) Defined Benefit Plans:
The Gratuity Scheme managed by Life Insurance Corporation of India through a Trust is considered as defined benefit plan. The present value of the obligation is determined based on actuarial valuation using the Projected Unit Credit Method.
Actuarial gains and losses are recognized immediately in the Statement of Profit and Loss and Other Comprehensive Income.
The fair value of the plan assets is reduced from the gross obligation under the defined benefit plan to recognise 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.
(iii) Long term Employee Benefits:
The obligation for long term employee benefits such as long term compensated absences, long service awards, etc. is recognized in the same manner as in the case of defined benefit plans as mentioned in (b) (ii) above except that the actuarial gains and losses are recognized immediately in the Statement of Profit and Loss.
(9) Income Taxes
Income tax expense represents the sum of the tax currently payable and deferred tax.
(a) Current Tax:
The tax currently payable is based on taxable profit for the year. Taxable profit differs from âProfit Before Taxâ as reported in the Statement of Profit and Loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Companyâs current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
(b) Deferred Tax:
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
(c) Current and Deferred Tax for the Year:
Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in Other Comprehensive Income or directly in equity, in which case, the current and deferred tax are also recognized in Other Comprehensive Income or directly in equity respectively.
(10) Property, Plant and Equipment
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less depreciation.
Property, plant and equipment are stated at cost, less accumulated depreciation and impairment, if any. Costs directly attributable to acquisition are capitalized until the property, plant and equipment are ready for use, as intended by management. The Company depreciates property, plant and equipment over their estimated useful lives using the straight line method. The estimated useful lives of the assets are as follows:
Asset Useful Life
Buildings 20-60 years
Plant and Equipment 10-40 years
Office Equipment 3 years
Furniture and Fixtures 5-10 years Vehicles 8-10 years
Depreciation is recognized so as to write off the cost of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The useful life as prescribed under Schedule II of the Companies Act have been followed except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating condition of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc.:
(i) Remembraning of Membrance cell elements-4 years;
(ii) Recoating of Anode and Cathode membrane cell elements-8 years;
(iii) Leasehold land and equipment is amortized over the duration of the lease.
Advances paid towards the acquisition of property, plant and equipment outstanding at each Balance Sheet date is classified as capital advances under Other Non Current Assets and the cost of the assets not put to use before such date are disclosed under âCapital work-in-progressâ. Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in net profit in the Statement of Profit and Loss when incurred. The cost and related accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset and the resultant gains or losses are recognized in the Statement of Profit and Loss. Assets to be disposed off are reported at the lower of the carrying value or the fair value less cost to sell.
(11) Intangible Assets
Intangible Assets acquired separately:
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over their estimated useful lives from the date they are available for use. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.
Useful Lives of Intangible Assets:
Estimated Useful lives of the Intangible assets are as follows:
Intangible Asset Useful Life
Capitalized Development 5 Years
(12) Impairment of Tangible and Intangible Assets other than Goodwill
Intangible assets and property, plant and equipment are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit to which the asset belongs.
I f such assets are considered to be impaired, the impairment is recognized in the Statement of Profit and Loss and is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment loss is reversed in the Statement of Profit and Loss if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years.
(13) Inventories
Inventories are stated at the lower of cost and net realizable value after providing for obsolescence. Costs of inventories are determined on weighted average basis. Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. Cost of inventories comprises of cost of purchase, cost of conversion and other costs including manufacturing overheads incurred in bringing them to their respective present location and condition.
(14) Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
(15) Financial Instruments
The Company determines the classification of its financial assets and liabilities at initial recognition. The classification depends on the Companyâs business model for managing the financial assets and the contractual terms of the cash flows.
Initial Recognition:
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities that are not at fair value through profit or loss, are added to the fair value on initial recognition. Regular way purchase and sale of financial assets are accounted for at trade date.
Subsequent Measurement
(a) Non-derivative financial instruments:
(i) Cash and Cash equivalents:
The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of cash that are subject to an insignificant risk of change in value and having original maturities of three months or less from the date of purchase, to be cash equivalents. Cash and cash equivalents consists of balances with banks which are unrestricted for withdrawal and usage.
(ii) Financial assets carried at amortized cost:
A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(iii) Financial assets at fair value through Other Comprehensive Income (FVTOCI):
A financial asset is subsequently measured at fair value through Other Comprehensive Income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company has made an irrevocable election for its investments which are classified as equity instruments to present the subsequent changes in fair value in Other Comprehensive Income based on its business model.
(iv) Financial assets at fair value through profit or loss (FVTPL):
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss.
(v) Investment in Joint Venture:
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
The Company accounts for its investment in joint venture at cost.
(vi) Financial Liabilities:
Financial liabilities are subsequently carried at amortized cost using the effective interest
method. For trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
(b) Share capital:
Ordinary Shares:
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are recognized as a deduction from equity, net of any tax effects.
Derecognition of Financial Instruments:
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under Ind AS 109. A financial liability (or a part of a financial liability) is derecognized from the Companyâs Balance Sheet when the obligation specified in the contract is discharged or cancelled or expires.
Mar 31, 2017
1. GENERAL INFORMATION
Gujarat Alkalies and Chemicals Limited (the Company) is a multi-product chemical manufacturing Company, having 36 products in its basket and is one of the leading manufacturer of Caustic Soda Lye.
The Company having CIN L24110GJ1973PLC002247 is a public limited company incorporated and domiciled in India and has its Registered Office at P.O.: Petrochemicals
- 391 346, District Vadodara, Gujarat, India. The equity shares of the Company are listed on the BSE Limited and National Stock Exchange of India Limited.
The financial statements are approved for issue by the Company''s Board of Directors on 26th May, 2017.
2. SIGNIFICANT ACCOUNTING POLICIES
(1) Statement of Compliance
The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as notified under the Companies (Indian Accounting Standards) Rules, 2015.
Up to the year ended March 31, 2016, the Company prepared its financial statements in accordance with the requirements of the Standards notified under the Companies (Accounting Standards) Rules, 2014. These are the Company''s first Ind AS adopted financial statements. The date of transition to Ind AS is April 1, 2015. Refer Note 2(19) for the details of first-time adoption exemptions availed by the Company. In accordance with Ind AS 101 First-time Adoption of Indian Accounting Standard, the Company has presented a reconciliation from the presentation of financial statements under Accounting Standards notified under the Companies (Accounting Standards) Rules, 2014 ("Previous GAAPâ) to Ind AS of Shareholders'' equity as at March 31, 2016 and April 1, 2015 and of the comprehensive net income for the year ended March 31, 2016 and April 1, 2015.
(2) Basis of Preparation of financial statements
The financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
(3) Use of estimates
The preparation of the financial statements in conformity with Ind AS requires management to make estimates, judgmentsâ and assumptions. These estimates, judgmentsâ and assumptions affect the application of accounting policies and the reported amounts of assists and liabilities, the disclosures of contingent assists and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Application of accounting policies that require critical accounting estimates involving complex and subjective judgmentsâ and the use of assumptions in these financial statements have been disclosed in notes below. Accounting estimates could change from period to period. Actual results could differ from these estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and if material, then effects are disclosed in the notes to the financial statements.
(4) Revenue Recognition
(a) Sale of Goods :
Revenue from the sale of Goods is recognized when the goods are delivered and titles have been passed, at which time all the following conditions are satisfied:
(i) the Company has transferred to the buyer the significant risks and rewards of ownership of the goods;
(ii) the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
(iii) the amount of revenue can be measured reliably;
(iv) it is probable that the economic benefits associated with the transaction will flow to the Company; and
(v) the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Sales are net of discounts, sales tax and value added tax but includes handling charges and packing charges. The Sales figure is grossed up to include Excise duty collected on sales.
(b) Dividend and interest income :
Dividend income from investments is recognized when the shareholder''s right to receive the payment has been established.
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on time basis, by reference to the principal outstanding and at the effective interest rate applicable.
(c) Other Operating Income and Other Income :
Revenue with respect to Other Operating Income and Other Income including insurance and other claims are recognized when a reasonable certainty as to its realization exists.
(5) Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
When acquired, finance leases are capitalized at fair value or present value of Minimum Lease payments at the inception of the lease, whichever is lower. Lease payments under operating leases are recognized as an expense on a straight line basis in net profit in the Statement of Profit and Loss over the lease term.
(6) Foreign Currencies
(a) Functional Currency :
The functional currency of the Company is the Indian rupee. These financial statements are presented in Indian rupees (rounded off to lakhs).
(b) Transactions and translations :
In preparing the financial statements, transactions in currencies other than the Company''s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognized in profit or loss in the period in which they arise except for exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings.
(7) Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
(8) Employee Benefits
(a) 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 etc. and the expected cost of Bonus, Ex-gratia, Leave Travel Allowance, Reimbursement of Medical Expenses, Personal Accident Policy, Deposit Linked Insurance Policy are recognized in the period in which the employee renders the related services.
(b) Post-Employment Benefits :
(i) Defined Contribution Plan :
The Company''s contribution paid / payable during the year to Provident Fund, Superannuation Fund and other welfare funds are considered as defined contribution plans. The Contribution paid / payable under these plans are recognized in the Statement of Profit and Loss during the period in which the employee renders the services.
(ii) Defined Benefit Plans :
The Gratuity Scheme managed by Life Insurance Corporation of India through a Trust is considered as defined benefit plan. The present value of the obligation is determined based on actuarial valuation using the Projected Unit Credit Method.
Actuarial gains and losses are recognized immediately in the Statement of Profit and Loss and Other Comprehensive Income.
The fair value of the plan assets is reduced from the gross obligation under the defined benefit plan 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.
(iii) Long term Employee Benefits :
The obligation for long term employee benefits such as long term compensated absences, long service awards, etc. is recognized in the same manner as in the case of defined benefit plans as mentioned in (b) (ii) above except that the actuarial gains and losses are recognized immediately in the Statement of Profit and Loss.
(9) Income Taxes
Income tax expense represents the sum of the tax currently payable and deferred tax.
(a) Current Tax :
The tax currently payable is based on taxable profit for the year. Taxable profit differs from Profit Before
Tax'' as reported in the Statement of Profit and Loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company''s current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
(b) Deferred Tax :
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
(c) Current and Deferred Tax for the Year :
Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in Other Comprehensive Income or directly in equity, in which case, the current and deferred tax are also recognized in Other Comprehensive Income or directly in equity respectively.
(10) Property, Plant and Equipment
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less depreciation.
Property, plant and equipment are stated at cost, less accumulated depreciation and impairment, if any. Costs directly attributable to acquisition are capitalized until the property, plant and equipment are ready for use, as intended by management. The Company depreciates property, plant and equipment over their estimated useful lives using the straight line method. The estimated useful lives of the assets are as follows:
Asset Useful Life
Buildings 20-60 years
Plant and Equipment 10-40 years
Furniture and Fixtures 5-10 years Vehicles 8-10 years
Depreciation is recognized so as to write off the cost of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The useful life as prescribed under Schedule II of the Companies Act have been followed except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating condition of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc.:
(i) Remembraning of Membrane cell elements-4 years
(ii) Recoating of Anode and Cathode membrane cell elements-8 years
(iii) Leasehold land and equipment is amortized over the duration of the lease.
Advances paid towards the acquisition of property, plant and equipment outstanding at each Balance Sheet date is classified as capital advances under Other Non-Current Assets and the cost of the assets not put to use before such date are disclosed under Capital work-in-progress''. Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Company and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in net profit in the Statement of Profit and Loss when incurred. The cost and related accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset and the resultant gains or losses are recognized in the Statement of Profit and Loss. Assets to be disposed off are reported at the lower of the carrying value or the fair value less cost to sell.
For transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment recognized as of April 1, 2015 (transition date) measured as per the previous GAAP and considered that carrying value as its deemed cost as of the transition date.
(11) Intangible Assets
Intangible Assets acquired separately :
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over their estimated useful lives from the date they are available for use. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.
Useful Lives of Intangible Assets :
Estimated Useful lives of the Intangible assets are as follows:
Intangible Asset Useful Life
Capitalized Development 5 Years
(12) Impairment of Tangible and Intangible Assets other than Goodwill
Intangible assets and property, plant and equipment are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the cash generating unit to which the asset belongs.
If such assets are considered to be impaired, the impairment is recognized in the Statement of Profit and Loss and is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment loss is reversed in the Statement of Profit and Loss if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years.
(13) Inventories
Inventories are stated at the lower of cost and net realizable value after providing for obsolescence. Costs of inventories are determined on weighted average basis. Net realizable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. Cost of inventories comprises of cost of purchase, cost of conversion and other costs including manufacturing overheads incurred in bringing them to their respective present location and condition.
(14) Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
(15) Financial Instruments
The Company determines the classification of its financial assets and liabilities at initial recognition. The classification depends on the Company''s business model for managing the financial assets and the contractual terms of the cash flows.
Initial Recognition :
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities that are not at fair value through profit or loss, are added to the fair value on initial recognition. Regular way purchase and sale of financial assets are accounted for at trade date.
Subsequent Measurement :
(a) Non-derivative financial instruments :
(i) Cash and Cash equivalents :
The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of cash that are subject to an insignificant risk of change in value and having original maturities of three months or less from the date of purchase, to be cash equivalents. Cash and cash equivalents consists of balances with banks which are unrestricted for withdrawal and usage.
(ii) Financial assets carried at amortized cost:
A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(iii) Financial assets at fair value through Other Comprehensive Income (FVTOCI) :
A financial asset is subsequently measured at fair value through Other Comprehensive
Income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company has made an irrevocable election for its investments which are classified as equity instruments to present the subsequent changes in fair value in Other Comprehensive Income based on its business model.
(iv) Financial assets at fair value through profit or loss (FVTPL) :
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss.
(v) Investment in Joint Venture :
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
The Company accounts for its investment in joint venture at cost.
(vi) Financial liabilities :
Financial liabilities are subsequently carried at amortized cost using the effective interest method. For trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
(b) Share capital :
Ordinary Shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are recognized as a deduction from equity, net of any tax effects.
Derecognition of financial instruments :
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under Ind AS 109. A financial liability (or a part of a financial liability) is derecognized from the Company''s Balance Sheet when the obligation specified in the contract is discharged or cancelled or expires.
(16) Fair value of financial instruments
In determining the fair value of its financial instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each reporting date. The methods used to determine fair value include available quoted market prices and valuation reports from independent valuers. All methods of assessing fair value result in general approximation of value and such value may never actually be realized.
(17) Impairment of Financial Assets
The Company recognizes loss allowances using the Expected Credit Loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized is recognized as an impairment gain or loss in profit or loss.
(18) Earnings per share
Basic earnings per share are computed by dividing the profit or loss attributable to equity shareholders of the Company by the weighted average number of equity shares outstanding during the period. The Company did not have any potentially dilutive securities in any of the period presented.
(19) First-time adoption-mandatory exceptions and optional exemptions
Overall Principle :
The Company has prepared the opening Balance Sheet as per Ind AS as of April 1, 2015 (the transition date) by recognizing all assets and liabilities whose recognition is required by Ind AS, not recognizing items of assets or liabilities which are not permitted by Ind AS, by reclassifying items from previous GAAP to Ind AS as required under Ind AS, and applying Ind AS in measurement of recognized assets and liabilities. However, this principle is subject to the certain exceptions and certain optional exemptions availed by the Company as detailed below.
Classification of Debt Instruments :
The Company has determined the classification of debt instruments in terms of whether they meet the amortized cost criteria or the FVTOCI criteria based on the facts and circumstances that existed as of the transition date.
Impairment of financial assets :
The Company has applied the impairment requirements of Ind AS 109 retrospectively; however, as permitted by Ind AS 101, it has used reasonable and supportable information that is available without undue cost or effort to determine the credit risk at the date that financial instruments were initially recognized in order to compare it with the credit risk at the transition date. Further, the Company has not undertaken an exhaustive search for information when determining, at the date of transition to Ind AS, whether there have been significant increases in credit risk since initial recognition, as permitted by Ind AS 101.
Deemed cost for property, plant and equipment and intangible assets :
The Company has elected to continue with the carrying value of all of its plant and equipment and intangible assets recognized as of April 1, 2015 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.
Equity investments at FVTOCI :
The Company has designated investment in equity instruments as at FVTOCI on the basis of facts and circumstances that existed at the transition date.
(20) Recent accounting pronouncements
(i) Standards issued but not yet effective :
In March, 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendment to Ind AS 7, Statement of cash flows''. This amendment is in accordance with the recent amendment made by International Accounting Standards Board (IaSb) to IAS 7. Statement of Cash flows'' and IFRS 2. This amendment is applicable to the Company from April 1, 2017.
(ii) Amendment of Ind AS 7 :
The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement.
The Company is evaluating the requirements of the amendment and the effect on the financial statements is being evaluated.
(21) Critical judgmentsâ in applying accounting policies The following are the critical judgmentsâ, apart from those involving estimations that the management have made in the process of applying the Company''s accounting policies and that have the most significant effect on the amounts recognized in the financial statements. Actual results may differ from these estimates. These estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to the accounting estimates in the period
in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Useful lives and residual value of property, plant and equipment :
The Company reviews the useful life and residual value of property, plant and equipment at the end of each reporting period. This reassessment may result in change in depreciation expense in future periods.
Allowance for expected credit losses :
Note-12 describes the use of practical expedient by computing the expected credit loss allowance for trade receivables based on provision matrix. The expected credit allowance is based on the aging of the days receivables which are past due and the rates derived based on past history of defaults in the provision matrix.
Dismantling cost of property, plant and equipment :
Note-3 describes assets retirement obligation on estimate basis for property, plant and equipment. The management estimates dismantling cost considering size of the asset and its useful life in line with industry practices.
Stores and spares inventories :
The Company''s manufacturing process is continuous and highly mechanic with wide range of different types of plant and machineries. The Company keeps stores and spares as standby to continue the operations without any disruption. Considering wide range of stores and spares and long lead time for procurement of it and based on criticality of spares, the Company believes that net realizable value would be more than cost.
Fair value of investments :
The Company has invested in the equity instruments of various companies. However, the percentage of shareholding of the Company in such investee companies is very low and hence, it has not been provided with future projections including projected profit and loss account by those investee companies. Hence, the valuation exercise carried out by the Company with the help of an independent valuer has estimated fair value at each reporting period based on available historical annual reports and other information in the public domain.
Income taxes :
Significant judgmentsâ are involved in determining the provision for income taxes, including amount expected to be paid/recovered for uncertain tax positions.
Contingent liability judgment :
Note-42 describes claims against the Company not acknowledged as debt. It includes certain penalties and charges payable to Government agency although as per the contracts, the Management, based on past experience, believes that the penalties and charges are negotiable and not certain and accordingly it is not considered as an obligation as at balance-sheet date and disclosed as contingent liabilities.
Mar 31, 2016
1 - SIGNIFICANT ACCOUNTING POLICIES
(1) Accounting Convention
The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply 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 provisions of the Companies Act, 2013 (âthe 2013 Actâ) as applicable. The financial statements have been prepared on accrual basis under the historical cost convention. Except where otherwise stated, the accounting policies are consistently applied.
All the assets and liabilities have been classified as current or non-current as per the Companyâs normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013.
Current assets / liabilities include the current portion of noncurrent financial assets / liabilities respectively. All other assets / liabilities are classified as noncurrent.
(2) Use of estimates
The preparation of financial statements in conformity with Indian GAAP requires management to make assumptions, critical judgments and estimates, which it believes are reasonable under the circumstances, that affect the reported amounts of assets, liabilities and contingent liabilities on the date of financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Difference between the actual results and estimates are recognized in the period in which the results are known or materialize.
(3) Revenue Recognition
(A) Sales
Revenue from sale of goods is recognized on accrual basis when the significant risks and rewards of ownership of goods are transferred to the customers, which generally coincides with the delivery of goods to customers. Sales are net of discounts, sales tax and value added tax but includes handling charges and packing charges. Excise duty collected on sales are shown by way of deduction from sales.
(B) Revenue with respect to Other Operating Income and Other Income is recognized when a reasonable certainty as to its realization exists. Income is accounted for on accrual basis, except in case of following:
(i) Insurance and other claims are accounted when received.
(ii) Compensation (Net) from the Multilateral Fund towards the phasing out of CTC product under Montreal Protocol is accounted when received.
(iii) Receipts against monetization of Certified Emission Reduction (CER) under Kyoto Protocol for Clean Development Mechanism are accounted as and when received.
(C) Other Income
i. Dividend income is accounted for when the right to receive it is established.
ii. Interest income is recognized using the time-proportion method, based on rates implicit in the transaction.
(4) Fixed Assets and Depreciation
(a) Fixed Assets
(i) Tangible Assets are stated at cost of acquisition or construction less accumulated depreciation. In case of capital expenditure, such costs of acquisition or construction are capitalized upto the date the asset is ready for its intended use. Interest, commitment and other charges on borrowings directly attributable to acquisition of qualifying fixed assets up to date the asset is ready for its intended use are considered as cost of fixed asset. Further, in respect of grass root projects, initial and pre-operative expenditure incurred prior to date the asset is ready for its intended use are also considered as cost of relevant projects.
(ii) Cost of major civil works required as plant and machinery supports is considered as Plant and Machinery.
(iii) In respect of plant & machinery acquired on lease, lease rent payable on such assets prior to completion of the project is capitalized.
(iv) Other Capital Expenditure :
When heavy expenditure for sustaining plant efficiency is required to be incurred and the benefit from this expenditure is to extend for a number of years, such heavy expenditure, is treated as âOther Capital Expenditureâ and shown as âTangible Assetsâ and carried forward for amortization over useful life of facilities, after facilities is ready for its intended use/completion of the job.
(v) The Companyâs Contribution or Expenditure incurred in securing requirements of Utilities and Services without acquiring ownership rights on the assets so created are written off over an appropriate period.
(b) Accounting for Finance Lease
(i) The Company is capitalizing the assets acquired under finance lease at fair value/ contracted price and charging depreciation on it in accordance with Accounting Standard -19 âLeasesâ.
(ii) The lease rents paid/payable on these assets have been bifurcated into interest and principal and accordingly interest has been charged to revenue and principal has been reduced from the liability of lessor.
(iii) On completion of the finance lease, the value of the said leased asset is considered as an asset of the Company, at the Gross / Net value appearing in Balance Sheet on the date of the completion of the lease.
(iv) The Residual value payable on the termination of finance lease is accounted as Revenue Expenditure.
(c) Leasehold Land / Right of Use of Land
Cost of leasehold Land and right of use of land are amortized over the period of lease.
(d) Depreciation
Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value.
Depreciation on tangible fixed assets has been provided on the straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013 except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc.:
(i) Remembraning of Membrane cell elements - 4 years.
(ii) Recoating of Anode & Cathode of membrane cell elements - 8 years.
(iii) Leasehold land is amortized over the duration of the lease.
Depreciation on additions during the year is charged from the date of the asset is ready for its intended use.
Depreciation on assets disposed off / discarded during the year is charged upto the date of disposal / discarded.
(e) Impairment of Assets
Impairment loss, if any, is provided to the extent, the carrying amount of assets exceeds lower of their recoverable amount or value in use. Company assesses impairment of asset at each Balance Sheet date.
(5) Investments
Long-term investments (excluding investment properties), are carried individually at cost less provision for diminution, other than temporary, in the value of such investments. Current investments are carried individually, at the lower of cost and fair value. Cost of investments include acquisition charges such as brokerage, fees and duties.
(6) Foreign Exchange Transactions
(i) Transactions in foreign currency are recorded at the exchange rates prevailing at the time of transaction. Any difference arising on actual payment / realization is accounted under exchange variation account.
(ii) Other current assets & liabilities at the end of the year are being valued at the exchange rate prevailing on the date of Balance Sheet and difference arising is accounted as exchange difference and charged/credited to Statement of profit and loss.
(iii) Exchange difference on long-term foreign currency monetary items:
The exchange differences arising on settlement / restatement of long-term foreign currency monetary items are capitalized / recapitalized as part of the depreciable fixed assets to which the monetary item relates and depreciated over the remaining useful life of such assets.
(7) Inventories
Inventories are valued at the lower of cost (weighted average basis) and the net realizable value. Cost incurred in bringing inventories to its existing location and condition are determined on following basis:
(a) Cost of Raw materials, packing materials, stores & spares and process materials includes all cost incurred in bringing the goods to its present condition and location, including other levies, transit insurance and receiving charges.
(b) Work-in-progress and finished goods (including finished goods in transit and Consignment Stocks) include appropriate proportion of overheads and where applicable, excise duty.
(c) By-products are valued at net realizable value.
(d) Consumable stores categorized separately are charged to Statement of Profit and Loss at the time of purchase.
(e) Stores and spares issued to consuming departments and which are in the process of utilization and / or remaining with them at the yearend are included in the inventory at the weighted average cost.
(8) CENVAT and Value Added Tax Credit
(i) CENVAT and VAT Credit available on the material (inputs) is adjusted against purchases.
(ii) Cenvat and VAT Credit available on capital goods is adjusted against the cost of the capital assets.
(iii) The CENVAT and VAT credit available on purchase of raw materials, other eligible inputs and capital goods is utilized against excise duty and VAT payable on clearance / sale of goods produced. The unutilized CENVAT and VAT credit is shown under the head âLoans and Advancesâ.
(iv) CENVAT and VAT benefits are accounted on accrual basis.
(9) Taxation
(i) Current tax is determined as the amount of tax payable in respect of taxable income for the period. Deferred tax is recognized, subject to the consideration of prudence, on timing differences, being the difference between taxable income and accounting income that originate in one period and is capable of reversal in one or more subsequent periods.
(ii) Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognized as an asset in the Balance Sheet when it is highly probable that future economic benefit associated with it will flow to the Company.
(iii) Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. However, if there are unabsorbed depreciation and carry forward of losses and items relating to capital losses, deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that there will be sufficient future taxable income available to realize the assets.
(10) Employee Benefits
a. 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 etc. and the expected cost of bonus, Ex-gratia, Leave Travel Allowance, Reimbursement of Medical Expenses, Personal Accident Policy, Deposit Linked Insurance Policy are recognized in the period in which the employee renders the related services.
b. Post-Employment Benefits
(i) Defined Contribution Plan : The Companyâs contribution paid/ payable during the year to Provident Fund, Superannuation Fund and other welfare funds are considered as defined contribution plans. The Contribution paid/ payable under these plans are recognized during the period in which the employee renders the services.
(ii) Defined Benefit Plans : The Gratuity scheme managed by Trust is considered as defined benefit plan. The present value of the obligation is determined based on actuarial valuation using the Projected Unit Credit Method.
Actuarial gains and losses are recognized immediately in the Statement of Profit & Loss. The fair value of the plan assets is reduced from the gross obligation under the defined benefit plan 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.
c. Long term Employee Benefits
The obligation for long term employee benefits such as long term compensated absences, long service awards etc. is recognized in the same manner as in the case of defined benefit plans as mentioned in
(b) (ii) above.
(11) Research and Development
The capital expenditure in respect of Research and Development activities is charged to Statement of Profit and Loss in the year in which it is incurred.
(12) Prior Period Adjustments / Exceptional items
All identifiable items of Income and Expenditure pertaining to prior period are accounted as âPrior Period Itemsâ. âExceptional itemsâ are accounted depending on the nature of transaction.
(13) Borrowing Cost
Borrowing Costs attributable to the acquisition and construction of qualified assets are capitalized as part of the cost of such asset up to the date when all the activities necessary to prepare that asset for its intended use are completed. Other borrowing costs are treated as revenue expenditure.
(14) Provision and Contingencies
A provision is recognized when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed in the Notes. Contingent assets are not recognized in the financial statements.
(ii) Rights, preferences and restrictions attached to shares:
The Company has one class of equity shares having a par value of Rs.10/- each. Each Shareholder is eligible for one vote per one share held. The dividend proposed by the Board of Directors is subject to the approval of the Shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity Shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.
Mar 31, 2015
(1) Accounting Convention
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply 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 provisions of the
Companies Act, 2013 ("the 2013 Act") as applicable. The financial
statements have been prepared on accrual basis under the historical
cost convention. Except where otherwise stated, the accounting policies
are consistently applied.
All the assets and liabilities have been classified as current or
non-current as per the Company's normal operating cycle and other
criteria set out in the Schedule III to the Companies Act, 2013.
Current assets / liabilities include the current portion of noncurrent
financial assets / liabilities respectively. All other assets /
liabilities are classified as noncurrent.
(2) Use of estimates
The preparation of financial statements in conformity with Indian GAAP
requires management to make assumptions, critical judgements and
estimates, which it believes are reasonable under the circumstances,
that affect the reported amounts of assets, liabilities and contingent
liabilities on the date of financial statements and the reported
amounts of revenue and expenses during the period. Actual results could
differ from those estimates. Difference between the actual results and
estimates are recognized in the period in which the results are known
or materialize.
(3) Revenue Recognition
(A) Sales
Revenue from sale of goods is recognized on accrual basis when the
significant risks and rewards of ownership of goods are transferred to
the customers, which generally coincides with the delivery of goods to
customers. Sales are net of discounts, Sales Tax and Value Added Tax
but includes handling charges and packing charges. Excise Duty
collected on sales are shown by way of deduction from sales.
(B) Revenue with respect to Other Operating Income and Other Income is
recognized when a reasonable certainty as to its realization exists.
Income is accounted for on accrual basis, except in case of following:
(i) Insurance and other claims are accounted when received.
(ii) Compensation (Net) from the Multilateral Fund towards the phasing
out of CTC product under Montreal Protocol is accounted when received.
(iii) Receipts against monetisation of Certified Emission Reduction
(CER) under Kyoto Protocol for Clean Development Mechanism are
accounted as and when received.
(C) Other Income
i. Dividend income is accounted for when the right to receive it is
established.
ii. Interest income is recognized using the time- proportion method,
based on rates implicit in the transaction.
(4) Fixed Assets and Depreciation
(a) Fixed Assets
(i) Tangible Assets are stated at cost of acquisition or construction
less accumulated depreciation. In case of capital expenditure, such
costs of acquisition or construction are capitalised upto the date the
asset is ready for its intended use. Interest, commitment and other
charges on borrowings directly attributable to acquisition of
qualifying fixed assets up to date the asset is ready for its intended
use are considered as cost of fixed asset.
Further, in respect of grass root projects, initial and pre-operative
expenditure incurred prior to date the asset is ready for its intended
use are also considered as cost of relevant projects.
(ii) Cost of major civil works required as plant and machinery supports
is considered as Plant and Machinery.
(iii) In respect of plant & machinery acquired on lease, lease rent
payable on such assets prior to completion of the project is
capitalised.
(iv) Other Capital Expenditure :
When heavy expenditure for sustaining plant efficiency is required to
be incurred and the benefit from this expenditure is to extend for a
number of years, such heavy expenditure, is treated as "Other Capital
Expenditure" and shown as "Tangible Assets" and carried forward for
amortisation over useful life of facilities, after facilities is ready
for its intended use/completion of the job.
(v) The Company's Contribution or Expenditure incurred in securing
requirements of Utilities and Services without acquiring ownership
rights on the assets so created are written off over an appropriate
period.
(b) Accounting for Finance Lease
(i) The Company is capitalising the assets acquired under finance lease
at fair value/ contracted price and charging depreciation on it in
accordance with Accounting Standard -19 "Leases".
(ii) The lease rents paid/payable on these assets have been bifurcated
into interest and principal and accordingly interest has been charged
to revenue and principal has been reduced from the liability of lessor.
(iii) On completion of the finance lease, the value of the said leased
asset is considered as an asset of the Company, at the Gross / Net
value appearing in Balance Sheet on the date of the completion of the
lease.
(iv) The Residual value payable on the termination of finance lease is
accounted as Revenue Expenditure.
(c) Leasehold Land / Right of Use of Land
Cost of leasehold Land and right of use of land are amortised over the
period of lease.
(d) Depreciation
Depreciable amount for assets is the cost of an asset, or other amount
substituted for cost, less its estimated residual value.
Depreciation on tangible fixed assets has been provided on the
straight-line method as per the useful life prescribed in Schedule II
to the Companies Act, 2013 except in respect of the following
categories of assets, in whose case the life of the assets has been
assessed as under based on technical advice, taking into account the
nature of the asset, the estimated usage of the asset, the operating
conditions of the asset, past history of replacement, anticipated
technological changes, manufacturers warranties and maintenance
support, etc.:
(i) Remembraning of Membrane cell elements - 4 years.
(ii) Recoating of Anode & Cathode of membrane cell elements - 8 years.
(iii) Leasehold land is amortised over the duration of the lease.
Depreciation on additions during the year is charged from the date of
the asset is ready for its intended use.
Depreciation on assets disposed off / discarded during the year is
charged upto the date of disposal / discarded.
(e) Impairment of Assets
Impairment loss, if any, is provided to the extent, the carrying amount
of assets exceeds lower of their recoverable amount or value in use.
Company assesses impairment of asset at each Balance Sheet date.
(5) Investments
Long-term investments (excluding investment properties), are carried
individually at cost less provision for diminution, other than
temporary, in the value of such investments. Current investments are
carried individually, at the lower of cost and fair value. Cost of
investments include acquisition charges such as brokerage, fees and
duties.
(6) Foreign Exchange Transactions
(i) Transactions in foreign currency are recorded at the exchange rates
prevailing at the time of transaction. Any difference arising on actual
payment / realisation is accounted under exchange variation account.
(ii) Other current assets & liabilities at the end of the year are
being valued at the exchange rate prevailing on the date of Balance
Sheet and difference arising is accounted as exchange difference and
charged/credited to Statement of Profit and Loss.
(iii) Exchange difference on long-term foreign currency monetary items:
The exchange differences arising on settlement / restatement of
long-term foreign currency monetary items are capitalised /
decapitalised as part of the depreciable fixed assets to which the
monetary item relates and depreciated over the remaining useful life of
such assets.
(7) Inventories
Inventories are valued at the lower of cost (weighted average basis)
and the net realisable value. Cost incurred in bringing inventories to
its existing location and condition are determined on following basis:
(a) Cost of Raw materials, packing materials, stores & spares and
process materials includes all cost incurred in bringing the goods to
its present condition and location, including other levies, transit
insurance and receiving charges.
(b) Work-in-progress and finished goods (including finished goods in
transit and Consignment Stocks) include appropriate proportion of
overheads and where applicable, Excise Duty.
(c) By-products are valued at net realisable value.
(d) Consumable stores categorised separately are charged to Statement
of Profit and Loss at the time of purchase.
(e) Stores and spares issued to consuming departments and which are in
the process of utilisation and / or remaining with them at the year end
are included in the inventory at the weighted average cost.
(8) CENVAT and Value Added Tax Credit
(i) CENVAT and VAT Credit available on the material (inputs) is
adjusted against purchases.
(ii) Cenvat and VAT Credit available on capital goods is adjusted
against the cost of the capital assets.
(iii) The CENVAT and VAT credit available on purchase of raw materials,
other eligible inputs and capital goods is utilised against Excise Duty
and VAT payable on clearance / sale of goods produced. The unutilised
CENVAT and VAT credit is shown under the head "Loans and Advances".
(iv) CENVAT and VAT benefits are accounted on accrual basis.
(9) Taxation
(i) Current tax is determined as the amount of tax payable in respect
of taxable income for the period. Deferred tax is recognised, subject
to the consideration of prudence, on timing differences, being the
difference between taxable income and accounting income that originate
in one period and is capable of reversal in one or more subsequent
periods.
(ii) Minimum Alternate Tax (MAT) paid in accordance with the tax laws,
which gives future economic benefits in the form of adjustment to
future income tax liability, is considered as an asset if there is
convincing evidence that the Company will pay normal Income Tax.
Accordingly, MAT is recognised as an asset in the Balance Sheet when it
is highly probable that future economic benefit associated with it will
flow to the Company.
(iii) Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is a reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised. However, if
there are unabsorbed depreciation and carry forward of losses and items
relating to capital losses, deferred tax assets are recognised only if
there is virtual certainty supported by convincing evidence that there
will be sufficient future taxable income available to realise the
assets.
(10) Employee Benefits
a. 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 etc. and the expected cost of bonus, Ex-gratia,
Leave Travel Allowance, Reimbursement of Medical Expenses, Personal
Accident Policy, Deposit Linked Insurance Policy are recognised in the
period in which the employee renders the related services.
b. Post-Employment Benefits
(i) Defined Contribution Plan : The Company's contribution paid/
payable during the year to Provident Fund, Superannuation Fund and
other welfare funds are considered as defined contribution plans. The
Contribution paid/ payable under these plans are recognised during the
period in which the employee renders the services.
(ii) Defined Benefit Plans : The Gratuity scheme managed by Trust is
considered as defined benefit plan. The present value of the obligation
is determined based on actuarial valuation using the Projected Unit
Credit Method.
Actuarial gains and losses are recognised immediately in the Statement
of Profit & Loss. The fair value of the plan assets is reduced from
the gross obligation under the defined benefit plan to recognise the
obligation on net basis.
Gains or losses on the curtailment or settlement of any defined benefit
plan are recognised when the curtailment or settlement occurs.
c. Long term Employee Benefits
The obligation for long term employee benefits such as long term
compensated absences, long service awards etc. is recognised in the
same manner as in the case of defined benefit plans as mentioned in (b)
(ii) above.
(11) Research and Development
The capital expenditure in respect of Research and Development
activities is charged to Statement of Profit and Loss in the year in
which it is incurred.
(12) Prior Period Adjustments / Exceptional items
All identifiable items of Income and Expenditure pertaining to prior
period are accounted as "Prior Period Items". "Exceptional items" are
accounted depending on the nature of transaction.
(13) Borrowing Cost
Borrowing Costs attributable to the acquisition and construction of
qualified assets are capitalised as part of the cost of such asset upto
the date when all the activities necessary to prepare that asset for
its intended use are completed. Other borrowing costs are treated as
revenue expenditure.
(14) Provision and Contingencies
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on the best estimate required to settle the obligation at the
Balance Sheet date. These are reviewed at each Balance Sheet date and
adjusted to reflect the current best estimates. Contingent liabilities
are disclosed in the Notes. Contingent assets are not recognised in the
financial statements.
Mar 31, 2013
(1) Accounting Convention
The Financial Statements are prepared based on historical cost
convention of accounting and in accordance with the prevalent
Accounting Standards and the provisions of the Companies Act, 1956 as
amended, except to the extent disclosed in the Notes on Accounts.
(2) Revenue Recognition
(A) Sales
Revenue is recognised with respect to Sales (net of discount) on
accrual basis, including handling charges and packing charges but
exclude Excise Duty and Sales Tax / Value Added Tax on accrual basis.
(B) Revenue is recognised with respect to Other Operating Income and
Other Income on accrual basis with disclosed exceptions on receipt
basis as under:
(a) Other Operating Income
(i) Insurance and other claims treated as Other Operating Income.
However, insurance claims are adjusted towards replacement cost on
selective basis.
(ii) Compensation (Net) received from the Multilateral Fund towards the
phasing out of CTC product under Montreal Protocol.
(iii) Receipt against monetisation of Certified Emission Reduction
(CER) under Kyoto Protocol for Clean Development Mechanism.
(b) Other Income
(i) Dividend Income
(3) Tangible Assets, Tangible Assets under lease, Capital Work in
Progress, Expenditure on New Projects, Depreciation and Amortisation
(a) Tangible Assets, Tangible Assets under lease, Capital Work in
Progress and Expenditure on New Projects:
(i) Tangible Assets are stated at cost of acquisition or construction
less accumulated depreciation. In case of capital expenditure, such
costs of acquisition or construction are capitalised upto the date the
assets are put to use. Interest, commitment and other charges on
borrowings, as also expenditure directly attributable to specific
project upto its commissioning are accumulated as cost of relevant
projects.
Further, in respect of grass root projects, initial and pre-operative
expenditure incurred prior to commissioning of the projects are also
considered as cost of relevant projects.
(ii) Capital Assets/Expenditure on new projects under erection /
installation are reflected in Balance Sheet as "Capital
Work-in-Progress".
(iii) Cost of major civil works required as plant and machinery
supports is considered as Plant and Machinery.
(iv) In respect of plant & machinery acquired on lease, lease rent
payable on such assets prior to completion of the project is
capitalised.
(v) Advances to suppliers, contractors and others for new projects are
included in long term loans and advances.
(b) Accounting for Finance Lease :
(i) The Company is capitalising the assets acquired under finance lease
at fair value/contracted price and charging depreciation on it in
accordance with Accounting Standard -19 "Leases".
(ii) The lease rents paid/payable on these assets have been bifurcated
into interest and principal and accordingly interest has been charged
to revenue and principal has been reduced from the liability of lessor.
(iii) On completion of the finance lease, the value of the said leased
asset is considered as an asset of the Company, at the Gross / Net
value appearing in Balance Sheet on the date of the completion of the
lease.
(iv) The Residual value payable on the termination of finance lease is
accounted as Revenue Expenditure.
(c) Leasehold Land / Right of Use of Land :
Cost of leasehold Land and right of use of land are amortised over the
period of lease.
(d) Depreciation :
Depreciation on tangible assets including leased assets acquired under
finance lease is provided on "Straight Line Method" at the rates
prescribed in Schedule XIV of the Companies Act, 1956, as amended.
Depreciation on additions to tangible assets (except those of
Rs.5,000/- and below) is charged on prorata basis. Depreciation on
assets disposed off/discarded during the year is charged upto the date
of disposal/discard. Further, as regard to additions/deductions to the
tangible assets arising from exchange variations, depreciation thereof
is considered and covered during the period of residual life of the
relevant assets.
(4) Investments
All Current and Non-current investments are stated at cost less
permanent diminution, if any.
(5) Foreign Exchange Transactions
(i) Transactions in foreign currency are recorded at the exchange rates
prevailing or approximately close to the exchange rate prevailing at
the time of transaction. Any difference arising on actual payment /
realisation is accounted under exchange variation account.
(ii) The liability in respect of the loans repayable in foreign
currencies has been translated into rupees taking into consideration
the exchange rates prevailing on the date of the Balance Sheet. The
increase / decrease in the liability, if material, arising on
realignment of foreign currencies where the loans are utilised for
procurement of tangible assets is adjusted to the cost of such assets
at the year end.
(iii) Other current assets & liabilities at the end of the year are
being valued at the exchange rate prevailing on the date of Balance
Sheet and difference arising is accounted as exchange difference and
charged/credited to Statement of Profit and Loss.
(6) Inventories
(a) Raw Materials (including Natural Gas), Packing Materials, Stores &
Spares and process stock are valued at weighted average cost.
(b) Finished Goods (including Consignment Stocks) are valued at lower
of average cost for the year or average sale price for the year or
average sale price of last month of financial year.
(c) By-products are valued at lower of average net realisable value for
the year or average net realisable value of last month of Financial
Year.
(d) Sale of Finished Goods in transit is valued at actual sales invoice
value.
(e) Stock-in-Trade is valued at lower of the landed cost or realisable
value.
(f) Consumable stores categorised separately are charged to Statement
of Profit and Loss at the time of purchase.
(g) Stores and spares issued to consuming departments and which are in
the process of utilisation and / or remaining with them at the year end
are included in the inventory at the weighted average cost.
(7) CENVAT and Value Added Tax Credit
(i) CENVAT and VAT Credit available on the material (inputs) is
adjusted against purchases.
(ii) Cenvat Credit and VAT available on capital goods is adjusted
against the cost of the capital assets.
(iii) The CENVAT and VAT credit available on purchase of raw materials,
other eligible inputs and capital goods is utilised against Excise Duty
and VAT payable on clearance / sale of goods produced. The unutilised
CENVAT and VAT credit is shown under the head "Loans and Advances".
(iv) CENVAT and VAT benefits are accounted on accrual basis.
(8) Taxation
(i) Current tax is determined as the amount of tax payable in respect
of taxable income for the period. Deferred tax is recognised, subject
to the consideration of prudence, on timing differences, being the
difference between taxable income and accounting income that originate
in one period and is capable of reversal in one or more subsequent
periods.
(ii) Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is a reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised.
(9) Other Capital Expenditure
When heavy expenditure for sustaining plant efficiency is required to
be incurred and the benefit from this expenditure is to extend for a
number of years, such heavy expenditure, on a selective basis, is
treated as "Other Capital Expenditure" and shown as "Tangible
Assets" and carried forward for amortisation over a reasonable period
of time, after facilities have been put to use/completion of the job.
(10) Expenditure by way of contributions
The Company''s Contribution or Expenditure incurred in securing
requirements of Utilities and Services without acquiring ownership
rights on the assets so created are considered as "Tangible Assets"
and are written off over an appropriate period.
(11) Employee Benefits
(a) 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 etc. and the expected cost of bonus, Ex-gratia,
Leave Travel Allowance, Reimbursement of Medical Expenses, Personal
Accident Policy, Deposit Linked Insurance Policy are recognised in the
period in which the employee renders the related services.
(b) Post-Employment Benefits :
(i) Defined Contribution Plan : The Company''s contribution paid
/payable during the year to Provident Fund, Superannuation Fund and
other welfare funds are considered as defined contribution plans. The
Contribution paid/ payable under these plans are recognised during the
period in which the employee renders the services.
(ii) Defined Benefit Plans : The Gratuity scheme managed by Trust is
considered as defined benefit plan. The present value of the obligation
is determined based on actuarial valuation using the Projected Unit
Credit Method.
Actuarial gains and losses are recognised immediately in the Statement
of Profit & Loss.
The fair value of the plan assets is reduced from the gross obligation
under the defined benefit plan to recognise the obligation on net
basis.
Gains or losses on the curtailment or settlement of any defined benefit
plan are recognised when the curtailment or settlement occurs.
(c) Long term Employee Benefits :
The obligation for long term employee benefits such as long term
compensated absences, long service awards etc. is recognised in the
same manner as in the case of defined benefit plans as mentioned in (b)
(ii) above.
(12) Research and Development
The capital expenditure in respect of Research and Development
activities is charged to Statement of Profit and Loss in the year in
which it is incurred.
(13) Prior Period Adjustments / Exceptional Items
All identifiable items of Income and Expenditure pertaining to prior
period are accounted as "Prior Period item" or as "Exceptional
item" as the case may be.
(14) Borrowing Cost
Borrowing Costs attributable to the acquisition and construction of
assets are capitalised as part of the cost of such asset upto the date
when such asset is ready for its intended use. Other borrowing costs
are treated as revenue expenditure.
(15) Impairment of Assets
Impairment loss, if any, is provided to the extent, the carrying amount
of assets exceeds their recoverable amount.
Mar 31, 2012
(1) Accounting Convention
The Financial Statements are prepared based on Historical cost
convention of accounting and in accordance with the prevalent
Accounting Standards and the provisions of the Companies Act, 1956 as
amended, except to the extent disclosed in the Notes on Accounts.
(2) Revenue Recognition
(A) Sales
Revenue is recognised with respect to Sales (net of discount) on
accrual basis, including handling charges and packing charges but
exclude Excise Duty and Sales Tax / Value Added Tax on accrual basis.
(B) Revenue is recognised with respect to Other Operating Income and
Other Income on accrual basis with disclosed exceptions on receipt
basis as under. :
(a) Other Operating Income
(i) Insurance and other claims treated as Other Operating Income.
However, insurance claims are adjusted towards replacement cost on
selective basis.
(ii) Compensation (Net) received from the Multilateral Fund towards the
phasing out of CTC product under Montreal Protocol.
(iii) Receipt against monetisation of Certified Emission Reduction
(CER) under Kyoto Protocol for Clean Development Mechanism.
(b) Other Income
(i) Dividend Income
(3) Tangible Assets, Tangible Assets under lease, Capital Work in
Progress, Expenditure on New Projects, Depreciation and Amortisation
(a) Tangible Assets, Tangible Assets under lease, Capital Work in
Progress and Expenditure on New Projects:
(i) Tangible Assets are stated at cost of acquisition or construction
less accumulated depreciation. In case of capital expenditure, such
costs of acquisition or construction are capitalised upto the date the
assets are put to use. Interest, commitment and other charges on
borrowings, as also expenditure directly attributable to specific
project upto its commissioning are accumulated as cost of relevant
projects.
Further, in respect of grass root projects, initial and pre-operative
expenditure incurred prior to commissioning of the projects are also
considered as cost of relevant projects.
(ii) Capital Assets/Expenditure on new projects under erection /
installation are reflected in Balance Sheet as "Capital
Work-in-Progress".
(iii) Cost of major civil works required as plant and machinery
supports is considered as Plant and Machinery.
(iv) In respect of plant & machinery acquired on lease, lease rent
payable on such assets prior to completion of the project is
capitalised.
(v) Advances to suppliers, contractors and others for new projects are
included in long term loans and advances.
(b) Accounting for Finance Lease :
(i) The Company is capitalising the assets acquired under finance lease
at fair value/contracted price and charging depreciation on it in
accordance with Accounting Standard -19 "Leases".
(ii) The lease rents paid/payable on these assets have been bifurcated
into interest and principal and accordingly interest has been charged
to revenue and principal has been reduced from the liability of lessor.
(iii) On completion of the finance lease, the value of the said leased
asset is considered as an asset of the Company, at the Gross / Net
value appearing in Balance Sheet on the date of the completion of the
lease.
(iv) The Residual value payable on the termination of finance lease is
accounted as Revenue Expenditure.
(c) Leasehold Land / Right of Use of Land :
Cost of leasehold land and right of use of land are amortised over the
period of lease.
(d) Depreciation :
Depreciation on tangible assets including leased assets acquired under
finance lease is provided on "Straight Line Method" at the rates
prescribed in Schedule XIV of the Companies Act, 1956, as amended.
Depreciation on additions to tangible assets (except those of
Rs.5,000/- and below) is charged on prorata basis. Depreciation on
assets disposed off/discarded during the year is charged upto the date
of disposal/discard. Further, as regard to additions/deductions to the
tangible assets arising from exchange variations, depreciation thereof
is considered and covered during the period of residual life of the
relevant assets.
(4) Investments
All Current and Non-current investments are stated at cost less
permanent diminution, if any.
(5) Foreign Exchange Transactions
(i) Transactions in foreign currency are recorded at the exchange rates
prevailing or approximately close to the exchange rate prevailing at
the time of transaction. Any difference arising on actual payment /
realisation is accounted under exchange variation account.
(ii) The liability in respect of the loans repayable in foreign
currencies has been translated into rupees taking into consideration
the exchange rates prevailing on the date of the Balance Sheet. The
increase / decrease in the liability, if material, arising on
realignment of foreign currencies where the loans are utilised for
procurement of tangible assets is adjusted to the cost of such assets
at the year end.
(iii) Other current assets & liabilities at the end of the year are
being valued at the exchange rate prevailing on the date of Balance
Sheet and difference arising is accounted as exchange difference and
charged/ credited to Statement of Profit and Loss.
(6) Inventories
(a) Valuation of inventories at both Baroda and Dahej plants has been
worked out separately.
(b) (i) Raw Materials, Packing Materials and Stores & Spares are valued
at daily weighted average cost.
(ii) Raw Materials of imported goods, Salt, Furnace Oil, Aluminium
Ingots and Alumina Trihydrate Powder are valued at monthly weighted
average cost.
(iii) Natural Gas is valued at fortnightly weighted average cost.
(iv) The valuation of inventories includes taxes, duties [(net of
Excise Duty and Value Added Tax) / counter veiling duty to the extent
to which CENVAT credit availed] and other direct costs attributable to
the cost of inventory.
(c) Finished Goods are valued at lower of average cost for the year or
average sale price for the year or average sale price of last month of
Financial Year.
(d) Finished Goods lying with Consignment Stockists are valued at lower
of yearly average cost or average sale price for the year or average
sale price of last month of financial year plus transport charges and
excise duty paid.
(e) By-products are valued at lower of average net realisable value for
the year or average net realisable value of last month of Financial
Year.
(f) Sale of Finished Goods in transit is valued at actual sales invoice
value.
(g) Process stocks are valued at weighted average cost.
(h) Stock-in-Trade is valued at lower of the landed cost or realisable
value.
(i) Consumable stores categorised separately are charged to Statement
of Profit and Loss at the time of purchase.
(j) Stores and spares issued to consuming departments and which are in
the process of utilisation and / or remaining with them at the year end
are included in the inventory at the weighted average cost.
(7) CENVAT and Value Added Tax Credit
(i) CENVAT and VAT Credit available on the material (inputs) is
adjusted against purchases.
(ii) Cenvat Credit and VAT available on capital goods is adjusted
against the cost of the capital assets.
(iii) The CENVAT and VAT credit available on purchase of raw materials,
other eligible inputs and capital goods is utilised against Excise Duty
and VAT payable on clearance / sale of goods produced. The unutilised
CENVAT and VAT credit is shown under the head "Loans and Advances".
(iv) CENVAT and VAT benefits are accounted on accrual basis.
(8) Taxation
(i) Current tax is determined as the amount of tax payable in respect
of taxable income for the period.
Deferred tax is recognised, subject to the consideration of prudence,
on timing differences, being the difference between taxable income and
accounting income that originate in one period and is capable of
reversal in one or more subsequent periods.
(ii) Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is a reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised.
(9) Other Capital Expenditure
When heavy expenditure for sustaining plant efficiency is required to
be incurred and the benefit from this expenditure is to extend for a
number of years, such heavy expenditure, on a selective basis, is
treated as "Other Capital Expenditure" and shown as "Tangible
Assets" and carried forward for amortisation over a reasonable period
of time, after facilities have been put to use/completion of the job.
(10) Expenditure by way of contributions
The Company's Contribution or Expenditure incurred in securing
requirements of Utilities and Services without acquiring ownership
rights on the assets so created are considered as "Tangible Assets"
and are written off over an appropriate period.
(11) Excise Duty
The Excise Duty in respect of closing stock of finished goods is
included as part of the inventory cost.
(12) Employee Benefits
(a) 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 etc. and the expected cost of bonus, Ex-gratia,
Leave Travel Allowance, Reimbursement of Medical Expenses, Personal
Accident Policy, Deposit Linked Insurance Policy are recognised in the
period in which the employee renders the related services.
(b) Post-Employment Benefits :
(i) Defined Contribution Plan : The Company's contribution paid /
payable during the year to Provident Fund, Superannuation Fund and
other welfare funds are considered as defined contribution plans. The
Contribution paid/ payable under these plans are recognised during the
period in which the employee renders the services.
(ii) Defined Benefit Plans : The Gratuity scheme managed by Trust is
considered as defined benefit plan. The present value of the obligation
is determined based on actuarial valuation using the Projected Unit
Credit Method.
Actuarial gains and losses are recognised immediately in the Statement
of Profit & Loss.
The fair value of the plan assets is reduced from the gross obligation
under the defined benefit plan to recognise the obligation on net
basis.
Gains or losses on the curtailment or settlement of any defined benefit
plan are recognised when the curtailment or settlement occurs.
(c) Long term Employee Benefits :
The obligation for long term employee benefits such as long term
compensated absences, long service awards etc. is recognised in the
same manner as in the case of defined benefit plans as mentioned in (b)
(ii) above.
(13) Research and Development
The capital expenditure in respect of Research and Development
activities is charged to Statement of Profit and Loss in the year in
which it is incurred.
(14) Prior Period Adjustments
All identifiable items of Income and Expenditure pertaining to prior
period are accounted as "Prior Period item" or as "Exceptional
item" as the case may be.
(15) Borrowing Cost
Borrowing Costs attributable to the acquisition and construction of
assets are capitalised as part of the cost of such asset upto the date
when such asset is ready for its intended use. Other borrowing costs
are treated as revenue expenditure.
(16) Impairment of Assets
Impairment loss, if any, is provided to the extent, the carrying amount
of assets exceeds their recoverable amount.
Mar 31, 2011
(1) Accounting Convention
The Financial Statements are prepared based on Historical cost
convention of accounting and in accordance with the prevalent
Accounting Standards and the provisions of the Companies Act, 1956 as
amended, except to the extent disclosed in the Notes on Accounts.
(2) Revenue Recognition
Revenue is recognised with respect to Sales (net of discount) and Other
Income on accrual basis with disclosed exceptions on receipt basis as
under. :
(a) Sales
Sales (net of discount) include handling charges and packing charges
but exclude excise duty and Sales Tax / Value Added Tax.
(b) Other Income
(i) Insurance and other claims treated as Other Income. However,
insurance claims are adjusted towards replacement cost on selective
basis.
(ii) Dividend income.
(iii) Compensation (Net) received from the Multilateral Fund towards
the phasing out of CTC product under Montreal Protocol.
(iv) Receipt against monetisation of Certified Emission Reduction (CER)
under Kyoto Protocol for Clean Development Mechanism.
(v) Income arising from Derivative transactions is recognised in the
books of accounts as and when the settlements take place in accordance
with the terms of the respective contracts over the tenor thereof. The
open positions are marked to market on the Balance Sheet date and
losses, if any, are provided for, while gains, if any, are not
recognised.
(3) Fixed Assets, Leased Assets, Capital Work in Progress, Expenditure
on New Projects and Depreciation
(a) Fixed Assets, Leased Assets, Capital Work in Progress and
Expenditure on New Projects:
(i) Fixed Assets are stated at cost of acquisition or construction less
accumulated depreciation. In case of capital expenditure, such costs of
acquisition or construction are capitalised upto the date the assets
are put to use. Interest, commitment and other charges on borrowings,
as also expenditure directly attributable to specific project upto its
commissioning are accumulated as cost of relevant projects. Further,
in respect of grass root projects, initial and pre-operative
expenditure incurred prior to commissioning of the projects are also
considered as cost of relevant projects.
(ii) Capital Assets under erection/installation are reflected in
Balance Sheet as "Capital Work-in-Progress". "Expenditure on New
Projects" includes advances to suppliers, contractors and others.
(iii) Cost of major civil works required as plant and machinery
supports is considered as Plant and Machinery. (iv) In respect of
plant & machinery acquired on lease, lease rent payable on such assets
prior to completion of the project is capitalised.
(b) Accounting for Finance Lease :
(i) The Company is capitalising the assets acquired under finance lease
at fair value/contracted price and charging depreciation on it in
accordance with Accounting Standard -19 "Leases".
(ii) The lease rents paid/payable on these assets have been bifurcated
into interest and principal and accordingly interest has been charged
to revenue and principal has been reduced from the liability of lessor.
(iii) On completion of the finance lease, the value of the said leased
asset is considered as an asset of the Company, at the Gross / Net
value appearing in Balance Sheet on the date of the completion of the
lease.
(iv) The Residual value payable on the termination of finance lease is
accounted as Revenue Expenditure.
(c) Leasehold Land / Right of Use of Land.
Cost of leasehold Land and right of use of land are amortised over the
period of lease.
(d) Depreciation
Depreciation on fixed assets including leased assets acquired under
finance lease is provided on "Straight Line Method" at the rates
prescribed in Schedule XIV of the Companies Act, 1956, as amended.
Depreciation on additions to Fixed Assets (except those of Rs5,000/- and
below) is charged on prorata basis. Depreciation on assets disposed
off/discarded during the year is charged upto the date of
disposal/discard. Further, as regard to additions/deductions to the
fixed assets arising from exchange variations, depreciation thereof is
considered and covered during the period of residual life of the
relevant assets.
(4) Investments
All investments are stated at cost less permanent diminution, if any.
(5) Foreign Exchange Transactions
(i) Transactions in foreign currency are recorded at the exchange rates
prevailing or approximately close to the exchange rate prevailing at
the time of transaction. Any difference arising on actual payment /
realisation is accounted under exchange variation account.
(ii) The liability in respect of the loans repayable in foreign
currencies has been translated into rupees taking into consideration
the exchange rates prevailing on the date of the Balance Sheet. The
increase / decrease in the liability, if material, arising on
realignment of foreign currencies where the loans are utilised for
procurement of fixed assets is adjusted to the cost of such assets at
the year end.
(iii) Other current assets & liabilities at the end of the year are
being valued at the exchange rate prevailing on the date of Balance
Sheet and difference arising is accounted as exchange difference and
charged/credited to profit and loss account.
(6) Inventories
(a) Valuation of inventories at both Baroda and Dahej plants has been
worked out separately.
(b) (i) Raw Materials, Packing Materials and Stores & Spares are valued
at daily weighted average cost.
(ii) Raw Materials of imported goods, Salt, Furnace Oil, Aluminium
Ingots and Alumina Trihydrate Powder are valued at monthly weighted
average cost.
(iii) Natural Gas is valued at fortnightly weighted average cost.
(iv) The valuation of inventories includes taxes, duties ((net of
excise duty and Value Added Tax) / counter veiling duty to the extent
to which CENVAT credit availed) and other direct costs attributable to
the cost of inventory.
(c) Finished Goods are valued at lower of average cost for the year or
average sale price for the year or average sale price of last month of
financial year.
(d) Finished Goods lying with Consignment Stocklists are valued at lower
of yearly average cost or average sale price for the year or average
sale price of last month of financial year plus transport charges and
excise duty paid.
(e) By-products are valued at lower of average net realisable value for
the year or average net realisable value of last month of financial
year.
(f) Sale of Finished Goods in transit is valued at actual sales invoice
value.
(g) Process stocks are valued at weighted average cost.
(h) Stock of items traded is valued at lower of the landed cost or
realisable value.
(i) Consumable stores categorised separately are charged to Profit and
Loss Account at the time of purchase. (j) Stores and spares issued to
consuming departments and which are in the process of utilisation and /
or remaining with them at the year end are included in the inventory at
the weighted average cost.
(7) CENVAT and Value Added Tax Credit
(i) CENVAT and VAT Credit available on the material (inputs) is
adjusted against purchases.
(ii) Cenvat Credit and VAT available on capital goods is adjusted
against the cost of the capital assets.
(iii) The CENVAT and VAT credit available on purchase of raw materials,
other eligible inputs and capital goods is utilised against excise duty
and VAT payable on clearance / sale of goods produced. The unutilised
CENVAT and VAT credit is shown under the head "Loans and Advances".
(iv) CENVAT and VAT benefits are accounted on accrual basis.
(8) Taxation
(i) Current tax is determined as the amount of tax payable in respect
of taxable income for the period. Deferred tax is recognised, subject
to the consideration of prudence, on timing differences, being the
difference between taxable income and accounting income that originate
in one period and is capable of reversal in one or more subsequent
periods.
(ii) Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is a reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised.
(9) Other Capital Expenditure
When heavy expenditure for sustaining plant efficiency is required to
be incurred and the benefit from this expenditure is to extend for a
number of years, such heavy expenditure, on a selective basis, is
treated as "Other Capital Expenditure" and shown in the schedule of
Fixed Assets and carried forward for amortisation over a reasonable
period of time, after facilities have been put to use/completion of the
job.
(10) Expenditure by way of contributions
The Company's Contribution or Expenditure incurred in securing
requirements of Utilities and Services without acquiring ownership
rights on the assets so created are considered as Fixed Assets and are
written off over an appropriate period.
(11) Excise Duty
The excise duty in respect of closing stock of finished goods is
included as part of the inventory cost.
(12) Employee Benefits
(a) 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 etc. and the expected cost of bonus, Ex-gratia,
Leave Travel Allowance, Reimbursement of Medical Expenses, Personal
Accident Policy, Deposit Linked Insurance Policy are recognised in the
period in which the employee renders the related services.
(b) Post-Employment Benefits :
(i) Defined Contribution Plan : The Company's contribution paid/
payable during the year to Provident Fund, Superannuation Fund and
other welfare funds are considered as defined contribution plans. The
Contribution paid/ payable under these plans are recognised during the
period in which the employee renders the services.
(ii) Defined Benefit Plans : The Gratuity scheme managed by Trust is
considered as defined benefit plan. The present value of the obligation
is determined based on actuarial valuation using the Projected Unit
Credit Method.
Actuarial gains and losses are recognised immediately in the Profit &
Loss Account.
The fair value of the plan assets is reduced from the gross obligation
under the defined benefit plan to recognise the obligation on net
basis.
Gains or losses on the curtailment or settlement of any defined benefit
plan are recognised when the curtailment or settlement occurs.
(c) Long term Employee Benefits :
The obligation for long term employee benefits such as long term
compensated absenses, long service award etc. is recognised in the same
manner as in the case of defined benefit plans as mentioned in (b) (ii)
above.
(13) Research and Development
The capital expenditure in respect of Research and Development
activities is charged to Profit and Loss Account in the year in which
it is incurred.
(14) Prior Period Adjustments
All identifiable items of Income and Expenditure pertaining to prior
period are accounted through "Prior Period Adjustment Account".
(15) Borrowing Cost
Borrowing Costs attributable to the acquisition and construction of
assets are capitalised as part of the cost of such asset upto the date
when such asset is ready for its intended use. Other borrowing costs
are treated as revenue expenditure.
(16) Impairment of Assets
Impairment loss, if any, is provided to the extent, the carrying amount
of assets exceeds their recoverable amount.
Mar 31, 2010
(1) Accounting Convention
The Financial Statements are prepared based on Historical cost
convention of accounting and in accordance with the prevalent
Accounting Standards and the provisions of the Companies Act, 1956 as
amended, except to the extent disclosed in the Notes on Accounts.
(2) Revenue Recognition
Revenue is recognised with respect to Sales (net of discount) and Other
Income on accrual basis with disclosed exceptions on receipt basis as
under. :
(a) Sales
Sales (net of discount) include handling charges and packing charges
but exclude excise duty and Sates Tax / Value Added Tax.
(b) Other Income
(i) Insurance and other claims treated as Other Income. However,
insurance claims are adjusted towards replacement cost on selective
basis.
(ii) Dividend income.
(iii) Compensation (Net) received from the Multilateral Fund towards
the phasing out of CTC product under Montreal
Protocol.
(iv) Receipt against monetisation of Certified Emission Reduction (CER)
under Kyoto Protocol for Clean Development Mechanism.
(v) Income arising from Derivative transactions is recognised in the
books of accounts as and when the settlements take place in accordance
with the terms of the respective contracts over the tenor thereof. The
open positions are marked to market on the Balance Sheet date and
losses, if any, are provided for while gains, if any, are not
recognised.
(3) Fixed Assets, Leased Assets, Capital Work In Progress, Expenditure
on New Projects and Depreciation
(a) Fixed Assets, Leased Assets, Capital Work in Progress and
Expenditure on New Projects:
(i) Fixed Assets are stated at cost of acquisition or construction less
accumulated depreciation. In case of capital expenditure, such costs of
acquisition or construction are capitalised upto the date the assets
are put to use. Interest, commitment and other charges on borrowings,
as also expenditure directly attributable to specific project upto its
commissioning are accumulated as cost of relevant projects.
Further, in respect of grass root projects, initial and pre-operative
expenditure incurred prior to commissioning of the projects are also
considered as cost of relevant projects.
(ii) Capital Assets under erection/installation are reflected in
Balance Sheet as "Capital Work-in-Progress". "Expenditure on New
Projects" includes advances to suppliers, contractors and others.
(iii) Cost of major civil works required as plant and machinery
supports is considered as Plant and Machinery,
(iv) In respect of plant & machinery acquired on lease, lease rent
payable on such assets prior to completion of the project is
capitalised.
(b) Accounting for Finance Lease :
(i) The Company is capitalising the assets acquired under finance lease
at fair value/contracted price and charging depreciation on it in
accordance with Accounting Standard -19 "Leases".
(ii) The lease rents paid/payable on these assets have been bifurcated
into interest and principal and accordingly interest has been charged
to revenue and principal has been reduced from the liability of lessor.
(iii) On completion of the finance lease, the value of the said leased
asset is considered as an asset of the Company, at the Gross / Net
value appearing in Balance Sheet on the date of the completion of the
lease.
(iv) The Residual value payable on the termination of finance lease is
accounted as Revenue Expenditure.
(c) Leasehold Land / Right of Use of Land.
Cost of leasehold Land and right of use of land are amortised over the
period of lease.
(d) Depreciation
Depreciation on fixed assets including leased assets acquired under
finance lease is provided on "Straight Line Method" at the rates
prescribed in Schedule XIV of the Companies Act, 1956, as amended.
Depreciation on additions to Fixed Assets (except those of 75,000/- and
below) is charged on prorata basis. Depreciation on assets disposed
off/discarded during the year is charged upto the date of
disposal/discard. Further, as regard to additions/deductions to the
fixed assets arising from exchange variations, depreciation thereof is
considered and covered during the period of residual life of the
relevant assets,
(4) Investments
All investments are stated at cost less permanent diminution, if any.
(5) Foreign Exchange Transactions
(i) Transactions in foreign currency are recorded at the exchange rates
prevailing or approximately close to the exchange rate prevailing at
the time of transaction. Any difference arising on actual payment /
realisation is accounted under exchange variation account.
(ii) The liability in respect of the loans repayable in foreign
currencies has been translated into rupees taking into consideration
the exchange rates prevailing on the date of the Balance Sheet. The
increase / decrease in the liability, if material, arising on
realignment of foreign currencies where the loans are utilised for
procurement of fixed assets is adjusted to the cost of such assets at
the year end.
(iii) Other current assets & liabilities at the end of the year are
being valued at the exchange rate prevailing on the date of Balance
Sheet and difference arising is accounted as exchange difference and
charged/credited to profit and loss account.
(6) Inventories
(a) Valuation of inventories at both Baroda and Dahej plants has been
worked out separately.
(b) (i) Raw Materials, Packing Materials and Stores & Spares are valued
at daily weighted average cost.
(ii) Raw Materials of imported goods, Salt, Furnace Oil, Aluminium
Ingots and Alumina Trihydrate Powder are valued at monthly weighted
average cost.
(iii) Natural Gas is valued at fortnightly weighted average cost.
(iv) The valuation of inventories includes taxes, duties ((net of
excise duty and Value Added Tax) / counter veiling duty to the extent
to which CENVAT credit availed) and other direct costs attributable to
the cost of inventory.
(c) Finished Goods are valued at lower of average cost for the year or
average sale price for the year or average sale price of last month of
financial year.
(d) Finished Goods lying with Consignment Stockists are valued at lower
of yearly average cost or average sale price for the year or average
sale price of last month of financial year plus transport charges and
excise duty paid.
(e) By-products are valued at lower of average net realisable value for
the year or average net realisable value of last month of financial
year.
(f) Sale of Finished Goods in transit is valued at actual sales invoice
value.
(g) Process stocks are valued at weighted average cost.
(h) Stock of items traded is valued at tower of the landed cost or
realisable value.
(i) Consumable stores categorised separately are charged to Profit and
Loss Account at the time of purchase. fj) Stores and spares issued to
consuming departments and which are in the process of utilisation and /
or remaining with them at the year end are included in the inventory at
the weighted average cost.
(7) CENVAT and Value Added Tax Credit
(i) CENVAT and VAT Credit available on the material (inputs) is
adjusted against purchases.
(ii) Cenvat Credit and VAT available on capital goods is adjusted
against the cost of the capital assets.
(iii) The CENVAT and VAT credit available on purchase of raw materials,
other eligible inputs and capital goods is utilised against excise duty
and VAT payable on clearance / sale of goods produced. The unutilised
CENVAT and VAT credit is shown under the head "Loans and Advances",
(iv) CENVAT and VAT benefits are accounted on accrual basis.
(8) Taxation
(i) Current tax is determined as the amount of tax payable in respect
of taxable income for the period. Deferred tax is recognised, subject
to the consideration of prudence, on timing differences, being the
difference between taxable income and accounting income that originate
in one period and is capable of reversal in one or more subsequent
periods.
(ii) Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognised only to the extent that there is a reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realised.
(9) Other Capital Expenditure
When heavy expenditure for sustaining plant efficiency is required to
be incurred and the benefit from this expenditure is to extend for a
number of years, such heavy expenditure, on a selective basis, is
treated as "Other Capital Expenditure" and shown in the schedule of
Fixed Assets and carried forward for amortisation over a reasonable
period of time, after facilities have been put to use/completion of the
job.
(10) Expenditure by way of contributions
The Companys Contribution or Expenditure incurred in securing
requirements of Utilities and Services without acquiring ownership
rights on the assets so created are considered as Fixed Assets and are
written off over an appropriate period.
(11) Excise Duty
The excise duty in respect of closing stock of finished goods is
included as part of the inventory cost.
(12) Employee Benefits
(a) 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, short term compensated absences, etc. and the
expected cost of bonus, Ex-gratia, Leave Travel Allowance,
Reimbursement of Medical Expenses, Personal Accident Policy, Deposit
Linked Insurance Policy are recognised in the period in which the
employee renders the related services.
(b) Post-Employment Benefits :
(i) Defined Contribution Plan : The Companys contribution paid/
payable during the year to Provident Fund. Superannuation Fund and
other welfare funds are considered as defined contribution plans. The
Contribution paid/ payable under these plans are recognised during the
period in which the employee renders the services.
(ii) Defined Benefit Plans : The Gratuity scheme managed by Trust is
considered as defined benefit ptan. The present value of the obligation
is determined based on actuarial valuation using the Projected Unit
Credit Method. Actuarial gains and losses are recognised immediately
in the Profit & Loss Account.
The fair value of the plan assets is reduced from the gross obligation
under the defined benefit plan to recognise the obligation on net
basis.
Gains or losses on the curtailment or settlement of any defined benefit
plan are recognised when the curtailment or settlement occurs.
(c) Long term Employee Benefits :
The obligation for long term employee benefits such as long service
award is recognised in the same manner as in the case of defined
benefit plans as mentioned in (b) (ii) above.
(13) Research and Development
The capital expenditure in respect of Research and Development
activities is charged to Profit and Loss Account in the year in which
it is incurred.
(14) Prior Period Adjustments
All identifiable items of Income and Expenditure pertaining to prior
period are accounted through "Prior Period Adjustment Account",
(15) Borrowing Cost
Borrowing Costs attributable to the acquisition and construction of
assets are capitalised as part of the cost of such asset upto the date
when such asset is ready for its intended use. Other borrowing costs
are treated as revenue expenditure.
(16) Impairment of Assets
Impairment loss, if any, is provided to the extent, the carrying amount
of assets exceeds their recoverable amount.
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