Accounting Policies of Orient Ceratech Ltd. Company
Mar 31, 2023
COMPANY INFORMATION
Orient Abrasive Limited (''''the Company'''') is a public limited company domiciled in India and incorporated on 12th November, 1971 under the provisions of the Companies Act vide CIN: L24299MH1971PLC366531 applicable in India. The Company is principally engaged in the business of production and trading of aluminum refractories and monolithics products, mining of bauxite ores and generation of power (including windmill facilities). The Company''s manufacturing facilities are located at Porbandar (Gujarat) along with thermal power generation, bauxite mines located at various sites in Gujarat and windmill facilities in the state of Rajasthan and Karnataka. The registered office of the Company is located at Lawrence & Mayo House, 3 rd Floor, 276, D.N Road, Fort, Mumbai - 400001. The equity shares of the Company are listed on Bombay Stock Exchange (BSE) as well as National Stock Exchange (NSE).
The standalone financial statements (''the financial statementsâ) were authorized for issue in accordance with the resolution ofthe Board of Directors on 22nd May, 2023.
1 BASIS OF PREPARATION. MEASUREMENT AND SIGNIFICANT ACCOUNTING POLICIES1.1 Basis of preparation and measurement:
These financial statements are the separate financial statements of the Company (also called standalone financial statements) prepared in accordance with the Indian Accounting Standards (''Ind AS'') notified under section 133 of the Companies Act, 2013 (âthe Actâ), read together with the Companies (Indian Accounting Standards) Rules, 2015, as applicable.
These financial statements have been prepared and presented under the historical cost convention, on the accrual basis of accounting except for certain financial assets and financial liabilities that are measured at fair values at the end of each reporting period, as stated in the accounting policies set out below. The accounting policies have been applied consistently over all the periods presented in these financial statements.
All assets and liabilities have been classified as current or non current as per the Company''s normal operating cycle and other criteria as set out in the Division II of Schedule III to the Act. The Company considers 12 months as normal operating cycle.
The Company''s financial statements are reported in Indian Rupees, which is also the Company''s functional currency, and all values are rounded to the nearest lakhs except otherwise indicated.
1.2 Significant accounting policies:a. System of accounting
The financial statements of the Company are prepared in accordance with Indian Accounting Standards (Ind AS), under the historical cost convention on the accrual basis as per the provisions of Companies Act, 2013 (''''Actâ), except in case of significant uncertainties.
The Company presents assets and liabilities in the balance sheet based on current/non-current classification. It is held primarily for the purpose of being traded:
It is expected to be settled in the Company''s normal operating cycle;
It is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.
It is held primarily for the purpose of being traded;
There is no unconditional right to defer the settlement ofthe liability for at least twelve months after the reporting period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current only.
The preparation of the financial statements, in conformity with the recognition and measurement principles of Ind AS, requires the management to make estimates and assumptions in the application of accounting policies that affect the reported amounts of assets, liabilities, income, expenses and disclosure of contingent liabilities as at the date of financial statements and the results of operation during the reported period. Although these estimates are based upon management''s best knowledge of current events and actions, actual results could differ from these estimates which are recognised in the period in which they are determined.
The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the financial statements.
Estimates and judgements are regularly revisited. Estimates are based on historical experience and other factors, including futuristic reasonable information that may have a financial impact on the Company.
c. Property, plant and equipment
(i) Property, plant and equipment are stated at historical cost of acquisition including attributable interest and finance costs, if any, till the date of acquisition/installation of the assets less accumulated depreciation and accumulated impairment losses, if any.
(ii) Subsequent expenditure relating to property, plant and equipment is capitalised only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the statement of profit and loss as incurred.
(iii) The cost and related accumulated depreciation are eliminated from the financial statements, either on disposal or when retired from active use and the resultant gain or loss are recognised in the statement of profit and loss.
(iv) Capital work-in-progress, representing expenditure incurred in respect of assets under development and not ready for their intended use, are carried at cost. Cost includes related acquisition expenses, construction cost, related borrowing cost and other direct expenditure.
(v) The Company depreciates property, plant and equipment on written down value method except for building, plant & machinery, laboratory equipment and excavators where depreciation is provided on straight line method over the estimated useful life prescribed in Schedule II of the Act from the date the assets are ready for intended use after considering the residual value.
(vi) Intangible assets mainly represent implementation cost for software and other application software acquired/developed for in-house use. These assets are stated at cost. Cost includes related acquisition expenses, related borrowing costs, if any, and other direct expenditure.
(vii) Items of stores and spares that meet the definition of property, plant and equipment are capitalized at cost and depreciated over their useful life. Otherwise, such items are classified as inventories.
(viii) Losses arising from the retirement of and gains or losses arising from disposal of property, plant and equipment which are carried at cost are recognised in the Statement of Profit and Loss.
(ix) Property, plant and equipment and intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units).
d. Investments and financial assets(i) Investments in subsidiaries
Investments in subsidiaries are recognised at cost and not adjusted to fair value at the end of each reporting period. Cost represents amount paid for acquisition of the said investments.
The Company assesses at the end of each reporting period, if there is any indication that the said investments may be impaired. If so, the Company estimates the recoverable value of the investments and provides for impairment, if any, i.e. the deficit in the recoverable value over cost.
Financial assets are recognised when the Company becomes a party to the contractual provisions of the instrument.
On initial recognition, a financial asset is recognised at fair value, in case of financial assets which are recognised at fair value through profit and loss (FVTPL), its transaction costs are recognised in the statement of profit or loss. In other cases, the transaction costs are attributed to the acquisition value of financial asset. However, trade receivables that do not contain a significant financing component are measured at transaction price.
Financial assets are subsequently classified measured at -
- amortised cost
- fair value through profit and loss (FVTPL)
- fair value through other comprehensive income (FVOCI).
Financial assets are not reclassified subsequent to their recognition except if and in the period the Company changes its business model for managing financial assets.
Financial asset is derecognised only when the Company has transferred the rights to receive cash flows from the financial asset. Where the entity has transferred the asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, financial asset is derecognised.
In accordance with Ind AS 109, the Company applies the expected credit loss (âECLâ) model for measurement and recognition of impairment loss on financial assets and credit risk exposures. The Company follows ''simplified approach'' for recognition of impairment loss allowance on trade receivables. Simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECL at each reporting date, right from its initial recognition. For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition.
(i) Raw materials and stores and spares are valued at weighted average cost including all charges in bringing the materials to the present location.
(ii) Finished and semi-finished goods are valued at the cost plus direct expenses and appropriate value of overheads or net realizable value, whichever is lower.
(iii) Obsolete, slow moving and defective inventories are written off/valued at net realisable value during the year as per policy consistently followed by the Company.
f. Cash and bank balances Cash and equivalents:
Cash and cash equivalents in the balance sheet comprises of balance with banks and cash on hand and short term deposits with an original maturity of three month or less, which are subject to insignificant risks of changes in value.
Other bank balances include deposits with maturity less than twelve months but greater than three months and balances and deposits with banks that are restricted for withdrawal and usage.
A receivable is classified as a trade receivable if it is in respect of the amount due on account of goods sold or services rendered in the normal course of business. Trade receivables are recognised initially at their transaction price and subsequently measured net of any expected credit losses.
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments which are issued for cash are recorded at the proceeds received, net of direct issue costs.
(i) Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument. Financial liabilities are initially measured at the amortised cost unless at initial recognition, they are classified as fair value through profit and loss.
(ii) Financial liabilities are subsequently measured at amortised cost using the Effective Interest Rate (EIR) method. Financial liabilities carried at fair value through profit and loss are measured at fair value with all changes in fair value recognised in the statement of profit and loss.
(iii) Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expires.
A payable is classified as a trade payable if it is in respect of the amount due on account of goods purchased in the normal course of business. These amounts represent liabilities for goods provided to the Company prior to the end of the financial year which are unpaid. These amounts are unsecured and are usually settled as per the payment terms. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period.
(i) Revenue shall be recognised to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.
(ii) Revenue is measured based on transaction price, which is the fair value of the consideration received or receivable, stated net of discounts, return and goods & service tax. Transaction price is recognised based on the price specified in the contract, net ofthe estimated sales incentives/discounts.
(iii) Accumulated experience is used to estimate and provide for the discounts/rights of return, using the expected value method.
(iv) A return liability is recognised to expected return in relation to sales made corresponding assets are recognised for the products expected to be returned.
(v) The Company recognises as an asset, the incremental costs of obtaining a contract with a customer, if the Company expects to recover those costs. The said asset is amortised on a systematic basis consistent with the transfer of goods or services to the customers.
(vi) Export incentives are accounted for on export of goods if the entitlements can be estimated with reasonable accuracy and conditions precedent to claim are reasonably expected to be fulfilled.
(vii) Revenue in respect of other income is recognised on accrual basis. However, where the ultimate collection ofthe same lacks reasonable certainty, revenue recognition is postponed to the extent of uncertainty.
Purchases of goods and fixed assets are accounted for net of Goods and Service Tax (GST) input credits. Custom duty paid on import of materials is dealt with in respective material accounts.
Expenses incurred on mining including removal of overburden of mines are charged to the statement of profit & loss as mining cost on the basis of quantity of minerals mined during the year, overburden of removal and mining being carried out concurrently and relatively within a short period of time. Mining restoration expenses are annually reviewed and provided for.
n. Foreign currency transactions
(i) Items included in the financial statements are measured using the currency of primary economic environment in which the company operates (âthe functional currencyâ). The financial statements are presented in Indian Rupee (INR), which is the company''s functional and presentation currency.
(ii) Foreign currency transactions are initially recorded in the reporting currency at foreign exchange rate on the date ofthe transaction.
(iii) Monetary items of current assets and current liabilities denominated in foreign currencies are reported using the closing rate at the reporting date. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date ofthe transaction.
(iv) The gain or loss on decrease/increase in reporting currency due to fluctuations in foreign exchange rates are recognised in the statement ofprofit or loss.
(i) Contributions to defined contribution schemes such as provident fund, employees'' state insurance, labour welfare fund etc. are charged as an expense based on the amount of contribution required to be made as and when services are rendered by the employees. These benefits are classified as defined contribution schemes as the Company has no further obligations beyond the monthly contributions.
(ii) The Company provides for gratuity which is a defined benefit plan, the liabilities of which are determined based on valuations, as at the reporting date, made by an independent actuary using the projected unit credit method. Re-measurement comprising of actuarial gains and losses, in respect of gratuity are recognised in the other comprehensive income in the period in which they occur. The classification of the Company''s obligation into current and non-current is as per the actuarial valuation report.
(iii) The employees are entitled to accumulate leave subject to certain limits, for future encashment and availment, as per the policy of the Company. The liability towards such unutilised leave as at the end of each balance sheet date is determined based on independent actuarial valuation and recognised in the statement ofprofit and loss.
The Company, as a lessee, recognises a right-of-use asset and a lease liability for its leasing arrangements, if the contract conveys the right to control the use of an identified asset.
The contract conveys the right to control the use of an identified asset, if it involves the use of an identified asset and the Company has substantially all ofthe economic benefits from use of the asset and has right to direct the use ofthe identified asset. The cost of the right-of-use asset shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs incurred. The right-of-use assets is subsequently measured at cost less any accumulated depreciation, accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability. The right-of-use assets is depreciated using the straight-line method from the commencement date over the shorter of lease term or useful life of right-of-use asset.
The Company applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds. Also, the effective interest rate amortisation is included in finance costs. Borrowing costs relating to acquisition, construction or production of a qualifying asset which takes substantial period of time to get ready for its intended use are added to the cost of such asset to the extent they relate to the period till such assets are ready to be put to use. All other borrowing costs are expensed in the statement of profit and loss in the period in which they occur.
r. Impairment of non financial assets
As at each reporting date, the Company assesses whether there is an indication that a non-financial asset may be impaired and also whether there is an indication of reversal of impairment loss recognised in the previous periods. If any indication exists, or when annual impairment testing for an asset is required, the Company determines the recoverable amount and impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, then the previously recognised impairment loss is reversed through the statement of profit and loss.
Income tax expense comprises current tax expense and the deferred tax during the year. Current and deferred taxes 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.
Current income tax is recognised based on the estimated tax liability computed after taking credit for allowances and exemptions in accordance with the Income Tax Act, 1961. Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognized for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. In case of uncertainty of reversal of the deferred tax assets or when it is no longer probable that sufficient taxable profits will be available in the foreseeable future, deferred tax assets, as a matter of prudence, are not recognised.
The carrying amount of deferred tax is reviewed at each reporting date and measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
t. Provisions and contingent liabilities
The Company creates a provision when there is present obligation, legal or constructive, as a result of past events that probably requires an outflow of resources and a reliable estimate can be made of the amount of obligation.
Contingent liabilities are disclosed in respect of possible obligations that arise from past events, whose existence would be confirmed by the occurrence or non-occurrence of one or more uncertain future events. Contingent assets are neither recognised nor disclosed in the financial statements.
(I) Basic earnings per share is computed by dividing the net profit or loss for the period attributable to the equity shareholders of the Company by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares that have changed the number of equity shares outstanding, without a corresponding change in resources.
(ii) For the purpose of calculating diluted earning per share, the net profit or loss for the period attributable to the equity
shareholders and the weighted average number of equity shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
Financial assets and liabilities are offset and the net amount reported 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. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
w. Events after the reporting period
Adjusting events are events that provide further evidence of conditions that existed at the end of the reporting period. The financial statements are adjusted for such events before authorisation for issue. Non-adjusting events are events that are indicative of conditions that arose after end of the reporting period. Non-adjusting events after the reporting date are not accounted, but disclosed.
x. Cash dividend to equity holders of the Company
The Company recognises a liability to make cash or non-cash distributions to equity holders of the Company when the distribution is authorised and the distribution is no longer at the discretion of the Company. As per the corporate laws in India, a distribution is authorised when it is approved by the shareholders. A corresponding amount is recognised directly in equity.
y. Segment reporting Business Segment
The chief operational decision maker (CODM) monitors the operating results of its business segment separately for the purpose of making decision about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the financial statements, Operating segment have been identified on the basis of nature of products and other quantitative criteria specified in the Ind AS 108. The analysis of geographical segments is based on the areas in which major operating divisions of the Company operate.
The Company generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties at current market prices.
Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs.
The Company prepares segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements ofthe Company as a whole.
z. Recent pronouncements, the Ministry of Corporate Affairs has vide notification dated 31st March, 2023 notified Companies (Indian Accounting Standards) Amendment Rules, 2023 (the ''Rules'') which amends certain accounting standards, and are effective 1 April 2023. The Rules predominantly amends Ind AS 1, Presentation of financial statements and Ind AS 12, Income taxes, whereas the other amendments notified by these rules are primarily in the nature of clarifications. The impact of the amendment on the Financial Statements is expected to be insignificant on the basis ofthe preliminary evaluation.
Mar 31, 2018
1. Corporate Information:
Orient Abrasives Limited (the Company) is a public company domiciled in India and is incorporated under the provisions of the Companies Act applicable in India. Its shares are listed on National Stock Exchange (NSE) as well as Bombay Stock Exchange (BSE) in India. The registered office of the Company is located at GIDC Industrial Area, Porbandar 360577, Guajrat, India.
The Company is principally engaged in the business of production and trading of aluminum refractories and monolithics products, mining of baxuite ores and generation of power (including windmill facilities). The Company''s manufacturing facilities are located at Porbandar (Gujarat) alongwith thermal power generation, bauxite mines located at various sites in Gujarat and windmill facilities in the state of Rajasthan amd Karnataka.
The financial statements were authorised for issue in accordance with a resolution of the directors on 22nd May 2018.
2. Significant accounting policies:
2.1 Basis of preparation:
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015.
For all accounting periods up to and including the year ended March 31, 2017, the Company prepared its financial statements in accordance with accounting standards notified under the section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP). These financial statements for the year ended March 31, 2018 are the first such statements, the Company has prepared in accordance with Ind AS. Refer to note 40 for information on first time adoption of Ind AS from April 1, 2016 by the Company.
The financial statements have been prepared and presented under the historical cost convention, except for certain financial assets and liabilities measured at fair value at the end of each reporting period, as explained in the accounting policies below. The accounting policies adopted in the preparation of financial statements are consistent for all the period presented, including preparation of the opening Ind AS Balance Sheet as at April 01, 2016 being the beginning of the earliest period for which the Company has presented full comparative information under Ind AS. These financial statements are presented in INR and all values are rounded to the nearest lakhs (INR 00,000), except when otherwise indicated.â
2.2 Summary of significant accounting policies:
a. Current versus non-current classification
The Company presents assets and liabilities in the balance sheet based on current / non-current classification. An asset is treated as current when it is:-
Expected to be realized or intended to be sold or consumed in normal operating cycle
- Held primarily for the purpose of trading
- Expected to be realized within twelve months after the reporting period, or
- Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is current when:
- It is expected to be settled in normal operating cycle
- It is held primarily for the purpose of trading
- It is due to be settled within twelve months after the reporting period, or
- There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period The Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
b. Property, plant and equipment
Capital work in progress is stated at cost, net of impairment loss, if any. Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met, directly attributable cost of bringing the asset to its working condition for the intended use and the present value of the expected cost for the decommissioning of an asset after its use, if the recognition criteria for a provision are met. Any trade discounts and rebates are deducted in arriving at the purchase price. Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of
plant and equipment are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred.
Items of stores and spares that meet the definition of property, plant and equipment are capitalized at cost and depreciated over their useful life. Otherwise, such items are classified as inventories.
Gains or losses arising from derecognition of property, plant and equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized. The company identifies and determines cost of each component/ part of the asset separately, if the component/ part has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset.
An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognized.
Capital work in progress includes the cost of property, plant and equipment that are not ready for intended use at the balance sheet date. The Company has elected to continue with the carrying value for all of its property, plant and equipment as recognized in its Indian GAAP financial statements as deemed cost at the transition date, viz., 1 April, 2016.
c) Depreciation on property, plant and equipment
Depreciation on property plant and equipment is provided on a straight-line basis using useful lives of the assets as prescribed under Part C of Schedule II of the Companies Act 2013 except for the assets mentioned below for which useful lives estimated by the management based on technical assessment made by technical expert:
- Leasehold land is amortized on a straight line basis over the period of lease.
- Building - 15 / 30 / 60 years
- Plant and equipment - 5 / 15 / 25 years
- Thermal power plant and windmill - 25 years
The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used.
The identified components are depreciated over their useful lives. The remaining components are depreciated over the life of the principal assets.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.
d. Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses.
Intangible assets comprise of computer software which is amortized over a period of 6 years.
Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the statement of profit and loss unless such expenditure forms part of carrying value of another asset.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit or loss when the asset is derecognized.
The company has elected to continue with the carrying value for all of its intangible asset as recognized in its Indian GAAP financial statements as deemed cost at the transition date, viz., 1 April, 2016
e. Foreign currencies
The Companyâs financial statements are presented in INR. The Company determines the functional currency and items included in the financial statements are measured using that functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at their respective functional currency spot rates at the date the transaction first qualifies for recognition. However, for practical reasons, the Company uses an average rate if the average approximates the actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognized in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.
f. Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement. For arrangements entered into prior to 1 April 2016, the Company has determined whether the arrangement contain lease on the basis of facts and circumstances existing on the date of transition.
Where the Company is lessee: Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the statement of profit and loss on a straight-line basis over the lease term.
g. Inventories Inventories are valued as follows:
- Raw materials, stores and spares: At lower of cost and net realizable value. Materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average basis.
- Finished goods and work in progress: At lower of cost and net realizable value. Cost includes direct materials and labor and a proportion of manufacturing overheads based on the normal operating capacity. Cost is determined on weighted average basis.
- Bauxite Ore: At lower of cost and net realizable value. Cost includes excavation cost and other direct costs to bring the inventories to their present location and condition. Cost is determined on weighted average basis.
- Waste: At net realizable value
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
Obsolete, slow moving and defective inventories are written off/valued at net realizable value during the year as per policy consistently followed by the Company.
h. Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government.
Based on the Educational Material on Ind AS 18 issued by the ICAI, the Company has assumed that recovery of excise duty flows to the Company on its own account. This is for the reason that it is a liability of the manufacturer which forms part of the cost of production, irrespective of whether the goods are sold or not. Since the recovery of excise duty flows to the Company on its own account, revenue includes excise duty.
However, sales tax / value added tax (VAT) / goods and services tax (GST) is not received by the Company on its own account. Rather, it is tax collected on value added to the commodity by the seller on behalf of the government. Accordingly, it is excluded from revenue.
The specific recognition criteria described below must also be met before revenue is recognized.
Sale of goods
Revenue from the sale of goods/bauxite ore is recognized when the significant risks and rewards of ownership of the goods/bauxite ore have passed to the buyer, usually on delivery of the goods/bauxite ore. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates.
Power generation income
Revenue from sale of power is recognized on accrual basis in accordance with the provisions of the agreements with the respective state governments/organization.
Interest income
For all debt instruments measured either at amortized cost interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortized cost of a financial liability. Interest income is included in other income in the statement of profit and loss.
i. Government grants
Government grants are recognized where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognized as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognized as income in equal amounts over the expected useful life of the related asset.
When the Company receives grants of non-monetary assets, the asset and the grant are recorded at fair value amounts and released to profit or loss over the expected useful life in a pattern of consumption of the benefit of the underlying asset i.e. by equal annual installments.
j. Taxes
The tax expenses comprise of current income tax and deferred tax:
Current income tax
Current income tax (including Minimum Alternative Tax (MAT)) is measured at the amount expected to be paid to the taxation authorities in accordance with Income Tax Act, 1961 enacted in India. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date.
Current income tax relating to items recognized outside profit or loss is recognized outside profit or loss (either in other comprehensive income or in equity). Current tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized.
The Company is entitled to a tax holiday under section 80-IA the Income-tax Act, 1961 in respect of certain income, no deferred tax (asset or liability) is recognized in respect of timing differences which reverse during the tax holiday period, to the extent the Companyâs gross total income is subject to the deduction during the tax holiday period. Deferred tax in respect of timing differences which reverse after the tax holiday period is recognized in the year in which the timing differences originate. For recognition of deferred taxes, the timing differences which originate first are considered to reverse first.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity.
Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax for the year. The deferred tax asset is recognized for MAT credit available only to the extent that it is probable that the concerned company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward. In the year in which the company recognizes MAT credit as an asset, it is created by way of credit to the statement of profit and loss and shown as part of deferred tax asset. The company reviews the âMAT credit entitlementâ asset at each reporting date and writes down the asset to the extent that it is no longer probable that it will pay normal tax during the specified period.
k. Retirement and other employee benefits
Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation, other than the contribution payable to the provident fund. The Company recognizes contribution payable to the provident fund scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
The Company operates a defined benefit gratuity plan in India, which requires contributions to be made to a separately administered fund. The Company has taken an insurance policy under the Group Gratuity Scheme with the Life Insurance Corporation of India (LIC).
The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method.
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Company recognizes the following changes in the net defined benefit obligation as an expense in the statement of profit and loss:
- Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements; and
- Net interest expense or income
Accumulated leave, which is expected to be utilized within the next twelve months, is treated as short term employee benefits. The Company measures the expected cost of such absence as the additional amount that is expected to pay as a result of the unused estimate that has accumulated at the reporting date.
The company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. The company presents the leave as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date. Where company has the unconditional legal and contractual right to defer the settlement for a period beyond 12 months, the same is presented as non-current liability. Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred.
l. Financial instruments
A financial instrument is any contract which give rise to a financial asset of one entity and financial liability or equity instrument of another entity.
Financial assets: Initial recognition and measurement
Financial assets are recognized initially at fair value plus, in the case of financial assets not recorded ar fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of financial assets.
Subsequent measurement:
For the purpose of subsequent measurement, financial assets are classified in the below categories:
i. Financial assets at amortized cost
ii. Financial assets at fair value through profit or loss (FVTPL)
i. Financial assets at amortized cost
A financial asset is measured at the amortized cost if both the following conditions are met:a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, andb) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate (EIR) method. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the profit or loss. The losses arising from impairment are recognized in the profit or loss. This category generally applies to trade and other receivables.
ii. Financial assets at fair value through profit or loss
Financial assets are measured at fair value through profit or loss unless it is measured at amortized cost or at fair value through other comprehensive income on initial recognition. The transaction costs directly attributable to the acquisition of financial assets and liabilities at fair value through profit or loss are immediately recognized in statement of profit and loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e. removed from the Company''s balance sheet) when:- The rights to receive cash flows from the asset have expired, or- The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a âpass-throughâ arrangement- and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
On derecognisition of a financial asset in its entirety, the difference between the carrying amounts measured at the date of derecognisition and consideration received is recognized in the statement of profit and loss.
Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, or as payables, as appropriate. The companyâs financial liabilities include trade and other payables, loans and borrowings. All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The subsequent measurement of financial liabilities depends on their classification, which is described below.
ii. Financial liabilities at amortized cost
Financial liabilities are subsequently carried at amortized cost using the effective interest (âEIRâ) method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of profit and loss. This category generally applies to borrowings. 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.
De-recognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statement of profit or loss.
Fair value measurement
The Company measures financial instruments at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
- Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities
- Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
- Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosure, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics, and risks of the assets or liabilities and the level of the fair value hierarchy as explained above. 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 method used to determine fair value includes discounted cash flow, available quoted market prices and quotes. All method of assessing fair value results from general approximation of value and the same may differ from the actual realized value.
Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
m. Impairment
Financial assets
The company assesses at each date of balance sheet whether a financial asset or a group of financial assets is impaired. In accordance with Ind-AS 109 Financial instruments, the Company applies expected credit loss (ECL) model for the -financial assets which are not fair valued through pro-t or loss. Loss allowance for trade receivables with no significant financing component is measured using simplified approach, where impairment loss allowance is recognized based on lifetime ECL at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets, ECL is 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. Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument, The 12 month ECL is a portion of the lifetime ECL which results from default events on a -facial instrument that are possible within 12 months after the reporting date.
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 (i.e., all cash shortfalls), discounted at the original EIR. When estimating the cash flows, an entity is required to consider:
- All contractual terms of the financial instrument (including prepayment, extension, call and similar options) over the expected life of the financial instrument. However, in rare cases when the expected life of the financial instrument cannot be estimated reliably, then the entity is required to use the remaining contractual term of the financial instrument;
- Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms
As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forward-looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analyzed.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/expense in the statement of profit and loss. This amount is reflected under the head âother expenses'' in the statement of profit and loss and presented in the balance sheet as an allowance that reduces the gross carrying amount.
The balance sheet presentation for various financial instruments is described below:
- Financial assets measured as at amortized cost, contractual revenue receivables: ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the group does not reduce impairment allowance from the gross carrying amount.
The Company does not have any purchased or originated credit-impaired (POCI) financial assets, i.e., financial assets which are credit impaired on purchase/ origination.
Non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or cash-generating units (CGU) fair value less costs of disposal and its value in use. Recoverable amount 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. When 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.
n. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
o. Provisions and contingent liabilities
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
p. Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the financial statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts, if any, as they are considered an integral part of the Companyâs cash management.
The Company applied for the first time certain amendments to the standards, which are effective for annual periods beginning on or after April 1, 2017. The nature and the impact of each amendment is described in the statement of cash flows.
q. Segment reporting
Identification of segments
Business Segment
The chief operational decision maker (CODM) monitors the operating results of its business segment separately for the purpose of making decision about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the financial statements, Operating segment have been identified on the basis of nature of products and other quantitative criteria specified in the Ind AS 108. The analysis of geographical segments is based on the areas in which major operating divisions of the Company operate.
Intersegment Transfers
The Company generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties at current market prices.
Allocation of common costs
Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs.
Segment Policies
The Company prepares segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole. r. Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. For the purpose of calculating diluted earnings per share, net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
s. Significant accounting judgmentâs, estimates and assumptions
The preparation of the Company''s financial statements requires management to make judgmentâs, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
Judgments
In the process of applying the Companyâs accounting policies, management has made the following judgmentâs, which have the most significant effect on the amounts recognized in the financial statements:
Evaluation of arrangements containing a lease
The Company has assessed applicability of Appendix C of Ind AS - 17 âLeaseâ with respect to its power purchase agreement (PPA) for its power generation plants. In assessing the applicability, the Company have exercised judgment in relation to the provisions of the Electricity Act, 2003, terms of its Power Purchase Agreement, etc. Based on such assessment, it has concluded that Appendix C of Ind AS 17 is not applicable.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
Taxes
Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgment 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. Based on the assessment by the management, it is not probable that the Company will have sufficient taxable profit in future against which, the Company will be able to set off the MAT. Accordingly, the Company has not recognized deferred tax assets in the form of MAT credit entitlement. Refer note 25.
Provision for cost of mines restoration
In determining the fair value of the provision, assumptions and estimates are made in relation to discount rates, the expected cost of mines restoration and the expected timing of those costs. Refer note 14 for the carrying amount of the provision.
Impairment of non-financial assets
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at armâs length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a DCF model. Based on management''s assessment, there has been no indication of impairment in non-financial assets.
Terms and repayment of the loans: (a) Term loans from banks :
The loan is secured by first charge on all property, plant and equipment and current assets of company, both present & future these facilities are secured by equitable mortgage of the following properties: - (i) City Survey ward No. 03, Old survey no. 3480/2 Opp. Collector Bungalow, Lal Palace, Main Road, Porbandar (ii) City Survey ward No. 03, Old survey no. 3481 Lal Palace area, B/h Jadav Pan off. Juri Baug, Main Road, Porbandar. (iii) City Survey ward No. 03, Survey No. 1662 Paiki East Part & West Part Opp. Chopati Cricket Ground, S.T. Depot, New Foundation road Porbandar. (iv) GIDC Plot No. 400. GIDC Main Road GIDC Area Dharampur, Porbandar. These facilities further secured by entire current assets of the company including hypothecation of raw material, semi-finished goods and finished goods including goods in transit, books debts and other current assets of the company. The Term loan is repayable in 57 monthly equal installment starting from January 2018 and carrying interest @ 1year MCLR 3.75% above MCLR which is presently ranging between 11.70% to 11.85%.
(b) Working capital loans from bank :
The loan is secured by first charge on all current and fixed assets of company, both present & future, including stocks of raw materials, stores, spares, stocks in process & finished goods etc. lying in company premises, god owns, elsewhere including those in transit and all present and future book-debts / receivables of the company. These facilities are further secured by equitable mortgage of the following properties:- (i) City Survey ward No. 03, Old survey no. 3480/2 Opp. Collector Bungalow, Lal Palace, Main Road, Porbandar (ii) City Survey ward No. 03, Old survey no. 3481 Lal Palace area, B/h Jadav Pan off. Juri Baug, Main Road, Porbandar. (iii) City Survey ward No. 03, Survey No. 1662 Paiki East Part & West Part Opp. Chopati Cricket Ground, S.T. Depot, New Foundation road Porbandar. (iv) GIDC Plot No. 400. GIDC Main Road GIDC Area Dharampur, Porbandar. The working capital loan is repayable on demand and carries interest @ 9.20% - 10.55% p.a.
The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.
The Company is liable to pay Minimum Alternate Tax (MAT) on income for financial year 2017-18 and accordingly the Company has made provision of INR 439 lakhs (2016-17: INR 247 lakhs). Tax provision in the financial results have been made as per Minimum Alternative Tax (MAT) as per provisions of section 115JB of the Income Tax Act, 1961, after considering Company''s eligibility to avail benefit under section 80IA of the Income Tax Act 1961 on profit generated from Wind Mill business activities. The Company has also recognized MAT credit of Rs. 699.94 lacs during year ended March 31, 2018. The amount also include Rs. 388.12 lacs recognized relating to earlier years, based on change in managementâs estimate to realise the MAT credit. The company has recognized MAT credit in the books of INR 699.94 lakhs for the current year (2016-17: Nil) and Rs.699.94 lakhs till date.
Mar 31, 2016
Significant accounting policies and notes to accounts to the financial statements for the year ended March 31, 2016
1. Corporate information
Orient Abrasives Limited (âThe Companyâ) is engaged in the production and selling of Alumina Refractories and Monolithics products, Mining of bauxite ores and generation of power (including windmill facilities). The Company''s manufacturing facilities are located at Porbandar (Gujarat) along with thermal power generation; bauxite mines located at various sites in Gujarat and windmill facilities in the state of Rajasthan and Karnataka.
2. Basis of preparation
The financial statements of the company have been prepared in accordance with the generally accepted accounting principles in India (Indian GAAP). The company has prepared these financial statements to comply in all material respects with the accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014. The financial statements have been prepared on an accrual basis and under the historical cost convention.
The accounting policies adopted in the preparation of financial statements are consistent with those of previous year, except for the change in accounting policy explained below.
2.1 Summary of significant accounting policies
a. Change in accounting policy
The company has adopted component accounting as required under Schedule II to the Companies Act, 2013, from 1 April 2015. The company was previously not identifying components of tangible assets separately for depreciation purposes; rather, a single useful life/ depreciation rate was used to depreciate each item of tangible assets.
Due to application of Schedule II to the Companies Act, 2013, the company has changed the manner of depreciation for its tangible assets. Now, the company identifies and determines cost of each component/ part of the asset separately, if the component/ part has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset. These components are depreciated separately over their useful lives; the remaining components are depreciated over the life of the principal asset. The company has used transitional provisions of Schedule II to adjust the impact of component accounting arising on its first application. If a component has zero remaining useful life on the date of component accounting becoming effective, i.e., 1 April 2015, its carrying amount, after retaining any residual value, is charged to the statement of profit and loss. The carrying amount of other components, i.e., components whose remaining useful life is not nil on 1 April 2015, is depreciated over their remaining useful lives.
Had the company continued to use the earlier policy of depreciating tangible assets, depreciation for the current period would have been lower by Rs. 47.64 lacs. Profit and value of the tangible assets for the current period would correspondingly have been higher by Rs. 47.64 lacs (net of tax impact of Rs. 38.11 lacs).
b. Use of estimates
The preparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although these estimates are based on the managementâs best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.
c. Tangible Fixed Assets
Fixed Assets including capital work in progress are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met, directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving at the purchase price. Subsequent expenditure related to an item of fixed assets is added to it''s book value if it increases the future economic benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on existing fixed asset, including day to day repairs and maintenance expenditure and cost of replacing parts, are charged to the statement of profit and loss for the period during which such expenses are incurred.
Items of stores and spares that meet the definition of fixed asset are capitalized at cost and depreciated over their useful life. Otherwise, such items are classified as inventories.
The company identifies and determines cost of each component/ part of the asset separately, if the component/ part has a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset.
Gains or losses arising from derecognition/sale proceeds of fixed assets are measured as the difference between net disposal proceed and the carrying amount of the asset and are recognized in the statement of profit and loss when the asset is derecognized.
d. Depreciation on Tangible Fixed Asset
Leasehold land is amortized on a straight line basis over the period of lease.
Depreciation on fixed asset is calculated on a straight-line basis using the rates arrived at, based on the useful lives as prescribed under Part C of Schedule II of the Companies Act, 2013, which coincides with managementâs estimate of useful life, on all assets except for certain category of plant & machineries such as Thermal Power Plant and Windmills, which are depreciated based on managementâs estimate of the useful life of 25 years.
The identified components of fixed assets are depreciated separately over their useful lives; the remaining components are depreciated over the life of the principal asset.
For the assets added during the financial year under review, depreciation is charged on pro-rata basis from the date of commissioning. The residual value, useful life and method of depreciation of fixed asset are reviewed at each year end and adjusted prospectively, if appropriate.
e. Intangible Asset
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets carried at cost less accumulated amortization and accumulated impairment losses, if any.
As at year end, intangible assets in the nature of software applications is under development.
f. Impairment
The company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, the company estimates the assetâs recoverable amount. An assetâs recoverable amount is the higher of an assetâs or cash-generating unitâs (CGU) net selling price and its value in use. The recoverable amount 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 net selling price, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.
After impairment depreciation is provided on the reviewed carrying amount of the asset over it''s remaining useful life.
g. Leases
Where the Company is lessee
Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item, are classified as operating leases. Operating lease payments are recognized as an expense in the statement of Profit and Loss on a straight-line basis over the lease term.
h. Government grants and subsidies
Grants and subsidies from the government are recognized when there is reasonable assurance that (i) the company will comply with the conditions attached to them, and (ii) the grant/subsidy will be received.
When the grant or subsidy relates to revenue, it is recognized as income on a systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs, which they are intended to compensate. Where the grant relates to an asset, it is recognized as deferred income and released to income in equal amounts over the expected useful life of the related asset. Where the company receives non-monetary grants, the asset is accounted for on the basis of its acquisition cost. In case a non-monetary asset is given free of cost, it is recognized at a nominal value. Government grants of the nature of promotersâ contribution are credited to capital reserve and treated as a part of the shareholdersâ funds
j. Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized.
(i) Sale of goods
Revenue from sale of goods / bauxite ore is recognized when all the significant risks and rewards of ownership of the goods / bauxite ore have been passed to the buyer, usually on delivery of the good / bauxite ore. The Company collects sales taxes and value added taxes (VAT) on behalf of the government and, therefore, these are not economic benefits flowing to the Company. Hence, they are excluded from revenue. Excise duty deducted from revenue (gross) is the amount that is included in the revenue (gross) and not the entire amount of liability arising during the year.
(ii) Power generation income
Revenue from sale of power is recognized on accrual basis in accordance with the provisions of the agreements with the respective state governments/organization.
(iii) Interest
Revenue is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable. Interest income is included under the head âother incomeâ in the statement of profit & loss.
k. Borrowing Cost
Borrowing costs include interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur.
l. Foreign currency transactions
(i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
(ii) Conversion
Foreign currency monetary items are retranslated using the exchange rate prevailing at the reporting date. Non-monetary items which are measured in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction.
(iii) Exchange Differences
Exchange differences arising on the settlement of monetary items or on reporting Company''s monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise.
(iv) Forward exchange contracts entered into to hedge foreign currency risk of an asset / liability
The premium or discount arising at the inception of forward exchange contracts is amortized and recognized as expense or income over the life of the contract. Exchange differences on such contracts are recognized in the statement of profit and loss in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for that year.
m. Derivative instruments
The Company uses derivative contracts such as Option Contracts to hedge foreign currency borrowings. The outstanding derivative contracts at the balance sheet date are valued by marking them to market and losses, if any, are recognized in the Statement of Profit and Loss.
The option premium payable is recognized on an accrual basis during the tenure of the borrowing. n. Retirement and other employee benefits
(i) Retirement benefits in the form of provident fund is a defined contribution scheme. The company has no obligation, other than the contribution payable to the provident fund. The company recognizes contribution payable to the provident fund scheme as an expenditure, when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognized as an asset to the extent that the pre payment will lead to, for example, a reduction in future payment or a cash refund.
(ii) Gratuity liability is defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit (PUC) method made at the end of each financial year. The Company has taken an insurance policy under the Group Gratuity Scheme with the Life Insurance Corporation of India (LIC) to cover the gratuity liability of the employees and amount paid/payable in respect of the present value of liability for the past services is charged to statement of profit and loss account every year. The difference, if any, between the actuarial valuation of the gratuity of the employee at the year end and the balances of the fund of LIC is provided for as liability in the books. Actuarial Gain/losses are immediately taken to the statement of profit and loss and are not deferred.
(iii) Accumulated leave, which is expected to be utilized within the next twelve months, is treated as short term employee benefits. The Company measures the expected cost of such absence as the additional amount that is expected to pay as a result of the unused estimate that has accumulated at the reporting date. The company treats accumulated leave expected to be carried forward beyond twelve months as long term compensated absences which are provided for based on actuarial valuation as at the end of the period. The actuarial valuation is done as per projected unit credit method.
(iv) The company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the year-end. The company presents the leave as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date. Where company has the unconditional legal and contractual right to defer the settlement for a period beyond 12 months, the same is presented as non-current liability.
(v) Actuarial gains/losses are immediately taken to the statement of profit and loss and are not deferred.
Income taxes
Tax expense comprises of current and deferred taxes. Current income tax is measured at the amount expected to be paid to the income tax authorities in accordance with Income Tax Act, 1961 enacted in India. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date. Deferred income taxes reflect the impact of timing differences between taxable income and accounting income originating during the current year and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax liabilities are recognized for all taxable timing differences. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. If the Company has unabsorbed depreciation or carry forward tax losses, entire deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realized against future taxable profits.
The Company is entitled to a tax holiday under the Income-tax Act, 1961 in respect of certain income, no deferred tax (asset or liability) is recognized in respect of timing differences which reverse during the tax holiday period, to the extent the Companyâs gross total income is subject to the deduction during the tax holiday period. Deferred tax in respect of timing differences which reverse after the tax holiday period is recognized in the year in which the timing differences originate. For recognition of deferred taxes, the timing differences which originate first are considered to reverse first.
The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes-down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.
Minimum Alternate Tax (MAT) paid during a year is charged to the statement of profit and loss as current tax. MAT credit is recognized as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period i.e. for the period for which MAT credit is allowed to be carried forward. In the year in which the company recognizes MAT credit as an asset in accordance with the Guidance Note on Accounting for Credit Available in respect of Minimum Alternative Tax under the Income-tax Act, 1961, the said asset is created by way of credit to the statement of profit and loss and shown as âMAT Credit Entitlement.â The company reviews the âMAT credit entitlementâ asset at each reporting date and writes down the asset to the extent the company does not have convincing evidence that it will pay normal tax during the specified period.
p. Segment Reporting Policies Identification of segments :
Business Segment:
The Companyâs operating businesses are organized and managed separately according to the nature of products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The analysis of geographical segments is based on the areas in which major operating divisions of the Company operate.
Intersegment Transfers :
The Company generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties at current market prices.
Allocation of common costs :
Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs.
Segment Policies :
The Company prepares segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Company as a whole.
q. Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.
r. Provisions
A provision is recognized when an enterprise has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the reporting date. These are reviewed at each reporting date and adjusted to reflect the current best estimates.
s. Cash and Cash equivalent
Cash and cash equivalents comprise cash at bank, cash/cheques in hand and short-term investments with an original maturity of three months or less for the purposes of cash-flow statement
t. Contingent liability
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
Mar 31, 2015
(a) CHANGE IN ACCOUNTING POLICY
Depreciation on fixed assets
Till the year ended 31 March 2014, Schedule XIV to the Companies Act,
1956, prescribed requirements concerning depreciation of fixed assets.
From the current year, Schedule XIV to the Companies Act, 1956 has been
replaced by Schedule II to the Companies Act, 2013. The applicability
of Schedule II has resulted in the following changes related to
depreciation of fixed assets. Unless stated otherwise, the impact
mentioned for the current year is likely to hold good for future years
also.
Useful lives/ depreciation rates
Till the year ended 31 March 2014, depreciation rates prescribed under
Schedule XIV were treated as minimum rates and the company was not
allowed to charge depreciation at lower rates even if such lower rates
were justified by the estimated useful life of the asset. Schedule II
to the Companies Act 2013 prescribes useful lives for fixed assets
which, in many cases, are different from lives prescribed under the
erstwhile Schedule XIV. However, Schedule II allows companies to use
higher/ lower useful lives and residual values if such useful lives and
residual values can be technically supported and justification for
difference is disclosed in the financial statements.
Considering the applicability of Schedule II, the management has
re-estimated useful lives and residual values of all its fixed assets.
The management believes that depreciation rates currently used fairly
reflect its estimate of the useful lives and residual values of fixed
assets, though these rates in certain cases are different from lives
prescribed under Schedule II. The impact on this change in accounting
policy has been described in note 2.1(c) -"Depreciation on tangible
fixed assets" below
(b) USE OF ESTIMATES
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management's best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
(c) TANGIBLE FIXED ASSETS
Fixed assets are stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any. The cost comprises purchase
price, borrowing costs if capitalization criteria are met and directly
attributable cost of bringing the asset to its working condition for
the intended use. Any trade discounts and rebates are deducted in
arriving at the purchase price.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
(d) DEPRECIATION ON TANGIBLE FIXED ASSETS
Leasehold land is amortized on a straight line basis over the period of
lease, i.e., 20-99 years.
Depreciation on all other fixed assets, except power generating
equipments, are calculated on a straight-line basis using the rates
arrived at based on the useful lives estimated by the management.
Depreciation in respect of power generating equipments are provided on
straight line method as per rates which are higher of rates prescribed
by Central Electricity Regulatory commission (CERC) vide notification
dated January 19, 2009 and rates prescribed by Schedule II to the
Companies Act, 2013.
The company has used the following rates to provide depreciation on its
fixed assets.
Useful lives estimated by the management (years) based on Schedule II
to the Companies Act, 2013
Factory buildings 30 years
Plant and machineries (including thermal power plant) 15 years
Furniture and fixtures 10 years
Office equipment 5 years
Vehicles 8 and 10 years
Due to such change, the depreciation expense for the current year is
lower by Rs. 189.19 lacs and Rs. 27.13 lacs has been adjusted from General
Reserves. The reasons for considering different life and rates and
value with regard to items under schedule II of Companies Act, 2013 are
on the basis of technical evaluation done by technical people
estimating the life of such assets.
Residual value of assets is considered as 5%.
(e) IMPAIRMENT
The company assesses at each reporting date whether there is an
indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the company
estimates the asset's recoverable amount. An asset's recoverable amount
is the higher of an asset's or cash-generating unit's (CGU) net selling
price and its value in use. The recoverable amount 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 net
selling price, recent market transactions are taken into account, if
available. If no such transactions can be identified, an appropriate
valuation model is used.
(f) LEASES
Where the Company is lessee
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of Profit and Loss on a straight-line basis over the
lease term.
(g) INVESTMENTS
Investments that are readily realizable and intended to be held for not
more than a year from the date on which such investments are made, are
classified as current investments. All other investments are classified
as long- term investments. Current investments are carried at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments.
On disposal of an investment, the difference between its carrying
amount and net disposal proceeds is charged or credited to the
statement of profit and loss.
(h) INVENTORIES
Inventories are valued as follows:
Raw materials, goods purchased for resale, stores and spare parts
Lower of cost and net realizable value. Materials and other items held
for use in the production of inventories are not written down below
cost if the finished products in which they will be incorporated are
expected to be sold at or above cost. Cost is determined on weighted
average basis.
Work-in-progress and finished goods
Lower of cost and net realizable value. Cost includes direct materials
and labour and a proportion of manufacturing overheads based on normal
operating capacity. Cost of finished goods includes excise duty,
wherever applicable. Cost is determined on a weighted average basis.
Waste
Net realizable value
(i) REVENUE RECOGNITION
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognized.
(i) SALE OF GOODS
Revenue from sale of goods is recognized when all the significant risks
and rewards of ownership of the goods have been passed to the buyer,
usually on delivery of the goods. The Company collects sales taxes and
value added taxes (VAT) on behalf of the government and, therefore,
these are not economic benefits flowing to the Company. Hence, they are
excluded from revenue. Excise duty deducted from revenue (gross) is the
amount that is included in the revenue (gross) and not the entire
amount of liability arising during the year.
(ii) POWER GENERATION INCOME
Revenue from sale of Power is recognized on accrual basis in accordance
with the provisions of the agreements with the respective state
governments/organization.
(iii) INTEREST
Revenue is recognized on a time proportion basis taking into account
the amount outstanding and the rate applicable. Interest income is
included under the head 'other income' in the statement of profit &
loss.
(j) BORROWING COST
Borrowing costs include interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
(k) FOREIGN CURRENCY TRANSACTIONS
(i) INITIAL RECOGNITION
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(ii) CONVERSION
Foreign currency monetary items are retranslated using the exchange
rate prevailing at the reporting date. Non-monetary items which are
measured in terms of historical cost denominated in a foreign currency
are reported using the exchange rate at the date of the transaction;
and non-monetary items which are carried at fair value or other similar
valuation denominated in a foreign currency are translated using the
exchange rates that existed when the values were determined.
(iii) EXCHANGE DIFFERENCES
Exchange differences arising on the settlement of monetary items or on
reporting Company's monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognized as income or as expenses
in the year in which they arise.
(iv) FORWARD EXCHANGE CONTRACTS ENTERED INTO TO HEDGE FOREIGN CURRENCY
RISK OF AN ASSET / LIABILITY
The premium or discount arising at the inception of forward exchange
contracts is amortized and recognised as expense or income over the
life of the contract. Exchange differences on such contracts are
recognized in the statement of profit and loss in the year in which the
exchange rates change. Any profit or loss arising on cancellation or
renewal of forward exchange contract is recognized as income or as
expense for that year.
(l) DERIVATIVE INSTRUMENTS
In accordance with the ICAI announcement, derivative contracts, other
than foreign currency forward contracts covered under AS 11, are marked
to market basis, and the net loss, if any, after considering the
offsetting effect of gain on the underlying hedged item, is charged to
the statement of profit and loss. Net gain, if any, after considering
the offsetting effect of loss on the underlying hedged item, is
ignored.
(m) RETIREMENT AND OTHER EMPLOYEE BENEFITS
(i) Retirement benefit in the form of provident fund is a defined
contribution scheme. The company has no obligation, other than the
contribution payable to the provident fund. The company recognizes
contribution payable to the provident fund scheme as an expenditure,
when an employee renders the related service. If the contribution
payable to the scheme for service received before the balance sheet
date exceeds the contribution already paid, the deficit payable to the
scheme is recognized as a liability after deducting the contribution
already paid. If the contribution already paid exceeds the contribution
due for services received before the balance sheet date, then excess is
recognized as an asset to the extent that the pre payment will lead to,
for example, a reduction in future payment or a cash refund.
(ii) Gratuity liability is defined benefit obligation and is provided
for on the basis of an actuarial valuation on projected unit credit
(PUC) method made at the end of each financial year.
(iii) Short term compensated absences are measured at the expected cost
of such absences that is expected to be paid as a result of the unused
entitlement that has accumulated at the reporting date.
(iv) The company treats accumulated leave expected to be carried
forward beyond twelve months, as long-term employee benefit for
measurement purposes. Such long-term compensated absences are provided
for based on the actuarial valuation using the projected unit credit
method at the year-end. The company presents the leave as a current
liability in the balance sheet, to the extent it does not have an
unconditional right to defer its settlement for 12 months after the
reporting date. Where company has the unconditional legal and
contractual right to defer the settlement for a period beyond 12
months, the same is presented as non-current liability.
(v) Actuarial gains/losses are immediately taken to the statement of
profit and loss and are not deferred.
(n) INCOME TAXES
Tax expense comprises of current and deferred taxes. Current income tax
is measured at the amount expected to be paid to the income tax
authorities in accordance with Income Tax Act, 1961. Deferred income
taxes reflect the impact of current year timing differences between
taxable income and accounting income for the year and reversal of
timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognized only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. If the Company
has unabsorbed depreciation or carry forward tax losses, entire
deferred tax assets are recognized only if there is virtual certainty
supported by convincing evidence that such deferred tax assets can be
realized against future taxable profits.
In the situations where the Company is entitled to a tax holiday under
the Income-tax Act, 1961 enacted in India or tax laws prevailing in the
respective tax jurisdictions where it operates, no deferred tax (asset
or liability) is recognized in respect of timing differences which
reverse during the tax holiday period, to the extent the Company's
gross total income is subject to the deduction during the tax holiday
period. Deferred tax in respect of timing differences which reverse
after the tax holiday period is recognized in the year in which the
timing differences originate. However, the Company restricts
recognition of deferred tax assets to the extent that it has become
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. For recognition of deferred taxes,
the timing differences which originate first are considered to reverse
first.
At each balance sheet date the Company re-assesses unrecognized
deferred tax assets. It recognizes unrecognized deferred tax assets to
the extent that it has become reasonably certain or virtual certain, as
the case may be, that sufficient future taxable income will be
available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes- down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set-off current tax assets against
current tax liabilities and the deferred tax assets and deferred taxes
relate to the same taxable entity and the same taxation authority.
Minimum Alternate Tax (MAT) paid during a year is charged to the
statement of profit and loss as current tax. MAT credit is recognised
as an asset only when and to the extent there is convincing evidence
that the Company will pay normal income tax during the specified period
i.e. for the period for which MAT credit is allowed to be carried
forward. In the year in which the company recognizes MAT credit as an
asset in accordance with the Guidance Note on Accounting for Credit
Available in respect of Minimum Alternative Tax under the Income-tax
Act, 1961, the said asset is created by way of credit to the statement
of profit and loss and shown as "MAT Credit Entitlement." The
company reviews the "MAT credit entitlement" asset at each
reporting date and writes down the asset to the extent the company does
not have convincing evidence that it will pay normal tax during the
specified period.
(o) SEGMENT REPORTING POLICIES Identification of segments :
Business Segment :
The Company's operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operate.
Intersegment Transfers :
The Company generally accounts for intersegment sales and transfers as
if the sales or transfers were to third parties at current market
prices.
Allocation of common cost :
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common cost.
Allocation of other income :
Other incomes are allocated to each segment according to the relative
contribution of each segment to the other income as per the
requirements of Accounting Standard-17 "Segment Reporting".
Unallocated items :
General corporate income and expense items are not allocated to any
business segment.
Segment Policies :
The Company prepares segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as a whole.
(p) EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, net profit
or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
(q) PROVISIONS
A provision is recognized when an enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which reliable estimate can be made. Provisions are not discounted to
its present value and are determined based on 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.
(r) CASH AND CASH EQUIVALENT
Cash and cash equivalents comprise cash at bank, cash/cheques in hand
and short-term investments with an original maturity of three months or
less for the purposes of cash-flow statement.
(s) CONTINGENT LIABILITY
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. The Company does not recognize a
contingent liability but discloses its existence in the financial
statements.
(t) GOVERNMENT GRANTS AND SUBSIDIES
Grants and subsidies from the government are recognized when there is
reasonable assurance that (i) the company will comply with the
conditions attached to them, and (ii) the grant/subsidy will be
received.
When the grant or subsidy relates to revenue, it is recognized as
income on a systematic basis in the statement of profit and loss over
the periods necessary to match them with the related costs, which they
are intended to compensate. Where the grant relates to an asset, it is
recognized as deferred income and released to income in equal amounts
over the expected useful life of the related asset. Where the company
receives non-monetary grants, the asset is accounted for on the basis
of its acquisition cost. In case a non-monetary asset is given free of
cost, it is recognized at a nominal value. Government grants of the
nature of promoters' contribution are credited to capital reserve and
treated as a part of the shareholders' funds.
Mar 31, 2013
(a) USE OF ESTIMATES
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management''s best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
(b) TANGIBLE FIXED ASSETS
Fixed assets are stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any. The cost comprises purchase
price, borrowing costs if capitalization criteria are met and directly
attributable cost of bringing the asset to its working condition for
the intended use. Any trade discounts and rebates are deducted in
arriving at the purchase price.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
(c) DEPRECIATION ON TANGIBLE FIXED ASSETS
Depreciation on leasehold land is provided over the unexpired period of
lease, which is 20 years and depreciation on leasehold improvements
which includes temporary structures is provided over unexpired period
of lease or estimated useful life whichever is lower.
Depreciation on all other fixed assets is provided on Straight Line
Method as per rates computed based on estimated useful lives, which are
equal to the corresponding rates prescribed in Schedule XIV to the
Companies Act, 1956.
Assets costing below Rs. 5,000.00 are depreciated at the rate of 100%.
(d) INTANGIBLE ASSETS
Intangible assets acquired separately are measured on initial
recognition at cost. These are amortized on a straight line basis over
the estimated useful economic life. The Company uses a rebuttable
presumption that the useful life of software will not exceed five years
from the date when the assets is available for use.
(e) IMPAIRMENT
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price 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.
(f) LEASES
Where the Company is the lessee
Leases where the lessor effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the statement of Profit and Loss on a straight- line basis over the
lease term.
(g) INVESTMENTS
Investments that are readily realizable and intended to be held for not
more than a year from the date on which such investments are made, are
classified as current investments. All other investments are classified
as long-term investments. Current investments are carried at lower of
cost and fair value determined on an individual investment basis.
Long-term investments are carried at cost. However, provision for
diminution in value is made to recognize a decline other than temporary
in the value of the investments.
(h) INVENTORIES
Inventories are valued as follows:
Raw materials, goods purchased for resale, stores and spare parts
Lower of cost and net realizable value. Materials and other items held
for use in the production of inventories are not written down below
cost if the finished products in which they will be incorporated are
expected to be sold at or above cost. Cost is determined on weighted
average basis.
Work-in-progress and finished goods Lower of cost and net realizable
value. Cost includes direct materials
and labour and a proportion of manufacturing overheads based on normal
operating capacity. Cost of finished goods includes excise duty,
wherever applicable. Cost is determined on a weighted average basis.
Waste Net realizable value
(i) REVENUE RECOGNITION
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognized.
(i) SALE OF GOODS
Revenue from sale of goods is recognized when all the significant risks
and rewards of ownership of the goods have been passed to the buyer,
usually on delivery of the goods. The Company collects sales taxes and
value added taxes (VAT) on behalf of the government and therefore these
are not economic benefits flowing to the Company. Hence, they are
excluded from revenue. Excise duty deducted from revenue (gross) is the
amount that is included in the revenue (gross) and not the entire
amount of liability arising during the year.
(ii) POWER GENERATION INCOME
Revenue from sale of power is recognized on accrual basis in accordance
with the provisions of the agreements with the respective state
governments/organization.
(iii) INTEREST
Revenue is recognized on a time proportion basis taking into account
the amount outstanding and the rate applicable.
(j) BORROWING COST
Borrowing costs include interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
(k) FOREIGN CURRENCY TRANSACTIONS
(i) INITIAL RECOGNITION
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(ii) CONVERSION
Foreign currency monetary items are reported using the exchange rate
prevailing at the reporting date. Non-monetary items which are carried
in terms of historical cost denominated in a foreign currency are
reported using the exchange rate at the date of the transaction and
non-monetary items which are carried at fair value or other similar
valuation denominated in a foreign currency are reported using the
exchange rates that existed when the values were determined.
(iii) EXCHANGE DIFFERENCES
Exchange differences arising on the settlement of monetary items or on
reporting Company''s monetary items at rates different from those at
which they were initially recorded during the year or reported in
previous financial statements are recognized as income or as expenses
in the year in which they arise.
(iv) FORWARD EXCHANGE CONTRACTS ENTERED INTO TO HEDGE FOREIGN CURRENCY
RISK OF AN ASSET / LIABILITY
The premium or discount arising at the inception of forward exchange
contracts is amortized as expense or income over the life of the
contract. Exchange differences on such contracts are recognized in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognized as income or as expense for
that year.
(I) DERIVATIVE INSTRUMENTS
In accordance with the ICAI announcement, derivative contracts, other
than foreign currency forward contracts covered under AS 11, are marked
to market on a portfolio basis, and the net loss, if any, after
considering the offsetting effect of gain on the underlying hedged
item, is charged to the statement of profit and loss. Net gain, if any,
after considering the offsetting effect of loss on the underlying
hedged item, is ignored.
(m) RETIREMENT AND OTHER BENEFITS
(i) Retirement benefit in the form of provident fund is a defined
contribution scheme. The Company has no obligation, other than the
contribution payable to the provident fund. The Company recognizes
contribution payable to the provident fund scheme as an expenditure,
when an employee renders the related service. If the contribution
payable to the scheme for service received before the balance sheet
date exceeds the contribution already paid, the deficit payable to the
scheme is recognized as a liability after deducting the contribution
already paid. If the contribution already paid exceeds the contribution
due for services received before the balance sheet date, then excess is
recognized as an asset to the extent that the pre payment will lead to,
for example, a reduction in future payment or a cash refund.
(ii) Gratuity liability is defined benefit obligation and is provided
for on the basis of an actuarial valuation on projected unit credit
(PUC) method made at the end of each financial year.
(iii) Short term compensated absences are measured at the expected cost
of such absences that is expected to be paid as a result of the unused
entitlement that has accumulated at the reporting date.
(iv) Actuarial gains/losses are immediately taken to the statement of
profit and loss and are not deferred.
(n) INCOME TAXES
Tax expense comprises of current and deferred taxes. Current income tax
is measured at the amount expected to be paid to the income tax
authorities in accordance with Income Tax Act, 1961. Deferred income
taxes reflect the impact of current year timing differences between
taxable income and accounting income for the year and reversal of
timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognized only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. If the Company
has unabsorbed depreciation or carry forward tax losses, entire
deferred tax assets are recognized only if there is virtual certainty
supported by convincing evidence that such deferred tax assets can be
realized against future taxable profits.
In the situations where the Company is entitled to a tax holiday under
the Income-tax Act, 1961 enacted in India or tax laws prevailing in the
respective tax jurisdictions where it operates, no deferred tax (asset
or liability) is recognized in respect of timing differences which
reverse during the tax holiday period, to the extent the Company''s
gross total income is subject to the deduction during the tax holiday
period. Deferred tax in respect of timing differences which reverse
after the tax holiday period is recognized in the year in which the
timing differences originate. However, the Company restricts
recognition of deferred tax assets to the extent that it has become
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. For recognition of deferred taxes,
the timing differences which originate first are considered to reverse
first.
At each balance sheet date the Company re-assesses unrecognized
deferred tax assets. It recognizes unrecognized deferred tax assets to
the extent that it has become reasonably certain or virtual certain, as
the case may be, that sufficient future taxable income will be
available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
Minimum Alternate Tax (MAT) paid during a year is charged to the
statement of profit and loss as current tax. MAT credit is recognised
as an asset only when and to the extent there is convincing evidence
that the Company will pay normal income tax during the specified period
i.e. for the period for which MAT credit is allowed to be carried
forward. In the year in which the MAT credit becomes eligible to be
recognized as an asset in accordance with the recommendations contained
in guidance Note issued by the Institute of Chartered Accountants of
India, the said asset is created by way of a credit to the statement of
profit and loss and shown as MAT Credit Entitlement. The Company
reviews the same at each balance sheet date and writes down the
carrying amount of MAT Credit Entitlement to the extent there is no
longer convincing evidence to the effect that Company will pay normal
Income Tax during the specified period.
(o) SEGMENT REPORTING POLICIES Identification of segments
Business Segment
The Company''s operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operate.
Intersegment Transfers
The Company generally accounts for intersegment sales and transfers as
if the sales or transfers were to third parties at current market
prices.
Allocation of common costs
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Allocation of other income
Other incomes are allocated to each segment according to the relative
contribution of each segment to the other income as per the
requirements of AS-17.
Unallocated items
General corporate income and expense items are not allocated to any
business segment.
Segment Policies
The Company prepares segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the Company as a whole.
(p) EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year. For the
purpose of calculating diluted earnings per share, net profit or loss
for the year attributable to equity shareholders and the weighted
average number of shares outstanding during the year are adjusted for
the effects of all dilutive potential equity shares.
(q) PROVISIONS
A provision is recognized when an enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which reliable estimate can be made. Provisions are not discounted to
its present value and are determined based on 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.
(r) CASH AND CASH EQUIVALENT
Cash and cash equivalents comprise cash at bank, cash/cheques in hand
and short-term investments with an original maturity of three months or
less.
(s) CONTINGENT LIABILITY
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. The Company does not recognize a
contingent liability but discloses its existence in the financial
statements.
Mar 31, 2012
(a) CHANGE IN ACCOUNTING POLICY
Presentation and disclosure of financial statements
During the year ended March 31, 2012, the Revised Schedule VI notified
under the Companies Act 1956, has become applicable to the Company, for
preparation and presentation of its financial statements. The adoption
of Revised Schedule VI does not impact recognition and measurement
principles followed for preparation of financial statements, however,
it has significant impact on presentation and disclosures made in the
financial statements. The Company has also reclassified the previous
year figures in accordance with the requirements applicable in the
current year.
(b) USE OF ESTIMATES
The preparation of financial statements in conformity with Indian GAAP
requires the management to make judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities, at the end of
the reporting period. Although these estimates are based on the
management's best knowledge of current events and actions, uncertainty
about these assumptions and estimates could result in the outcomes
requiring a material adjustment to the carrying amounts of assets or
liabilities in future periods.
(c) tangible fixed assets
Fixed assets, are stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any. The cost comprises purchase
price, borrowing costs if capitalization criteria are met and directly
attributable cost of bringing the asset to its working condition for
the intended use. Any trade discounts and rebates are deducted in
arriving at the purchase price.
Subsequent expenditure related to an item of fixed asset is added to
its book value only if it increases the future benefits from the
existing asset beyond its previously assessed standard of performance.
All other expenses on existing fixed assets, including day-to-day
repair and maintenance expenditure and cost of replacing parts, are
charged to the statement of profit and loss for the period during which
such expenses are incurred.
Gains or losses arising from derecognition of fixed assets are measured
as the difference between the net disposal proceeds and the carrying
amount of the asset and are recognized in the statement of profit and
loss when the asset is derecognized.
(d) depreciation on tangible fixed assets
Depreciation on leasehold land is provided over the unexpired period of
lease, which is 20 years and depreciation on leasehold improvements
which includes temporary structures is provided over unexpired period
of lease or estimated useful life whichever is lower.
Depreciation on all other fixed assets is provided on straight line
method as per rates computed based on estimated useful lives, which are
equal to the corresponding rates prescribed in Schedule XIV to the
Companies Act, 1956. Assets costing below Rs. 5,000 are depreciated at
the rate of 100%.
(e) INTANGIBLE ASSETS
Intangible assets amortized on a straight line basis over the estimated
useful economic life. The Company uses a rebuttable presumption that
the useful life of software will not exceed five years from the date
when the assets is available for use.
(f) IMPAIRMENT
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price 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.
(g) LEASES
Where the Company is the lessee
where the lesser effectively retains substantially all the risks and
benefits of ownership of the leased item, are classified as operating
leases. Operating lease payments are recognized as an expense in the
statement of profit and loss on a straight-line basis over the lease
term.
(h) INVESTMENTS
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognize a
decline other than temporary in the value of the investments.
(i) INVENTORIES
Inventories are valued as follows:
Raw materials, goods purchased for resale, stores and spare parts
Lower of cost and net realizable value. Materials and other items held
for use in the production of inventories are not written down below
cost if the finished products in which they will be incorporated are
expected to be sold at or above cost. Cost is determined on weighted
average basis.
Lower of cost and net realizable value. Cost includes direct materials
and labour and a proportion of manufacturing overheads based on
Work-in-progress and finished goods normal operating capacity. Cost of
finished goods includes excise duty, wherever applicable. Cost is
determined on a weighted average basis.
Waste Net realizable value
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
cost necessary to make sale.
(j) REVENUE RECOGNITION
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured. The following specific recognition criteria must
also be met before revenue is recognized.
(i) SALE OF GOODS
Revenue from sale of goods is recognized when all the significant risks
and rewards of ownership of the goods have been passed to the buyer,
usually on delivery of the goods. The Company collects sales taxes and
value added taxes (VAT) on behalf of the government and, therefore,
these are not economic benefits flowing to the Company. Hence, they are
excluded from revenue. Excise duty deducted from revenue (gross) is the
amount that is included in the revenue (gross) and not the entire
amount of liability arising during the year.
(ii) INCOME FROM SERVICES
Revenue from services is accounted for in accordance with the terms of
contracts, as and when these services are rendered.
(iii) POWER GENERATION INCOME
Revenue from sale of power is recognized on accrual basis in accordance
with the provisions of the the agreements with the respective state
governments/organization.
(iv) INTEREST
Revenue is recognized on a time proportion basis taking into account
the amount outstanding and the rate applicable.
(v) EXPORT BENEFITS
Export benefits under Duty Exemption Pass Book Schemes (DEPB) and Duty
Drawback are accrued when no significant uncertainties as to the amount
of consideration that would be derived and as to its ultimate
collection exist.
(vii) ROYALTY
Revenue is recognized on an accrual basis in accordance with the terms
of the relevant agreement.
(k) BORROWING COST
Borrowing costs include interest, amortization of ancillary costs
incurred in connection with the arrangement of borrowings and exchange
differences arising from foreign currency borrowings to the extent they
are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur.
(l) FOREIGN CURRENCY TRANSACTIONS
(i) INITIAL RECOGNITION
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(ii) CONVERSION
Foreign currency monetary items are reported using the exchange rate
prevailing at the reporting date. Non-monetary items which are carried
in terms of historical cost denominated in a foreign currency are
reported using the exchange rate at the date of the transaction and
non-monetary items which are carried at fair value or other similar
valuation denominated in a foreign currency are reported using the
exchange rates that existed when the values were determined.
(iii) EXCHANGE DIFFERENCES
Exchange differences arising on the settlement of monetary items or on
reporting company's monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognized as income or as expenses
in the year in which they arise.
(iv) FORWARD EXCHANGE CONTRACTS ENTERED INTO TO HEDGE FOREIGN CURRENCY
RISK OF AN ASSET / LIABILITY
The premium or discount arising at the inception of forward exchange
contracts is amortized as expense or income over the life of the
contract. Exchange differences on such contracts are recognized in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognized as income or as expense for
that year.
(m) DERIVATIVE INSTRUMENTS
In accordance with the ICAI announcement, derivative contracts, other
than foreign currency forward contracts covered under AS 11, are marked
to market on a portfolio basis, and the net loss, if any, after
considering the offsetting effect of gain on the underlying hedged
item, is charged to the statement of profit and loss. Net gain, if any,
after considering the offsetting effect of loss on the underlying
hedged item, is ignored.
(n) RETIREMENT AND OTHER BENEFITS
(i) Retirement benefits in the form of provident fund is a defined
contribution scheme and the contributions are charged to the statement
of profit and loss for the year when the contributions to respective
funds are due. There are no other obligations other than the
contribution payable to the fund.
(ii) Gratuity liability is defined benefit obligation and is provided
for on the basis of an actuarial valuation on projected unit credit
(PUC) method made at the end of each financial year.
(iii) Short term compensated absences are measured at the expected cost
of such absences that is expected to be paid as a result of the unused
entitlement that has accumulated at the reporting date.
(iv) Actuarial gains/losses are immediately taken to the statement of
profit and loss and are not deferred.
(o) income taxes
Tax expense comprises of current and deferred taxes. Current income tax
is measured at the amount expected to be paid to the income tax
authorities in accordance with Income Tax Act, 1961. Deferred income
taxes reflect the impact of current year timing differences between
taxable income and accounting income for the year and reversal of
timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognized only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. If the Company
has unabsorbed depreciation or carry forward tax losses, entire
deferred tax assets are recognized only if there is virtual certainty
supported by convincing evidence that such deferred tax assets can be
realized against future taxable profits.
In the situations where the Company is entitled to a tax holiday under
the Income-tax Act, 1961 enacted in India or tax laws prevailing in the
respective tax jurisdictions where it operates, no deferred tax (asset
or liability) is recognized in respect of timing differences which
reverse during the tax holiday period, to the extent the Company's
gross total income is subject to the deduction during the tax holiday
period. Deferred tax in respect of timing differences which reverse
after the tax holiday period is recognized in the year in which the
timing differences originate. However, the Company restricts
recognition of deferred tax assets to the extent that it has become
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available against which such
deferred tax assets can be realized. For recognition of deferred taxes,
the timing differences which originate first are considered to reverse
first.
At each balance sheet date the Company re-assesses unrecognized
deferred tax assets. It recognizes unrecognized deferred tax assets to
the extent that it has become reasonably certain or virtual certain, as
the case may be, that sufficient future taxable income will be
available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The Company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
Minimum Alternate Tax (MAT) paid in during a year is charged to the
statement of profit and loss as current tax. MAT credit is recognised
as an asset only when and to the extent there is convincing evidence
that the company will pay normal income tax during the specified period
i.e. for the period for which MAT credit is allowed to be carried
forward. In the year in which the MAT credit becomes eligible to be
recognized as an asset in accordance with the recommendations contained
in guidance note issued by the Institute of Chartered Accountants of
India, the said asset is created by way of a credit to the statement of
profit and loss and shown as MAT Credit Entitlement. The Company
reviews the same at each balance sheet date and writes down the
carrying amount of MAT Credit Entitlement to the extent there is no
longer convincing evidence to the effect that Company will pay normal
Income Tax during the specified period.
(p) SEGMENT REPORTING POLICIES
Identification of segments Business Segment
The Company's operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operate.
Intersegment Transfers
The Company generally accounts for intersegment sales and transfers as
if the sales or transfers were to third parties at current market
prices.
Allocation of common costs
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Allocation of other income
Other income are allocated to each segment according to the relative
contribution of each segment to the other income as per the
requirements of AS-17.
Unallocated items
General corporate income and expense items are not allocated to any
business segment.
Segment Policies
The company prepares segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the company as a whole.
(q) EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, net profit
or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
(r) PROVISIONS
A provision is recognized when an enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which reliable estimate can be made. Provisions are not discounted to
its present value and are determined based on 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.
(s) CASH AND CASH EQUIVALENT
Cash and cash equivalents comprise cash at bank, cash/cheques in hand
and short-term investments with an original maturity of three months or
less.
(t) CONTINGENT LIABILITY
A contingent liability is a possible obligation that arises from past
events whose existence will be confirmed by the occurrence or
non-occurrence of one or more uncertain future events beyond the
control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be
required to settle the obligation. The company does not recognize a
contingent liability but discloses its existence in the financial
statements.
Mar 31, 2011
(a) Basis of preparation
The financial statements have been prepared to comply in all material
respects with the Notified accounting standard by Companies (Accounting
Standards) Rules, 2006 (as amended) and the relevant provisions of the
Companies Act, 1956. The financial statements have been prepared under
the historical cost convention on an accrual basis. The accounting
policies are consistent with those used in the previous year.
(b) Use of estimates
The preparation of financial statements is in conformity with generally
accepted accounting principles requiring management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon management's best
knowledge of current events and actions, actual results could differ
from these estimates.
(c) Fixed Assets and Intangible assets
Fixed assets and intangible assets are stated at cost less accumulated
depreciation/amortisation and impairment losses, if any. Cost comprises
the purchase price and any attributable cost of bringing the asset to
its working condition for its intended use. Borrowing costs relating to
acquisition of fixed assets which takes substantial period of time to
get ready for its intended use are also included to the extent they
relate to the period till such assets are ready to be put to use.
(d) Depreciation/amortization
Depreciation on leasehold land is provided over the unexpired period of
lease and depreciation on leasehold improvements which includes
temporary structures is provided over unexpired period of lease or
estimated useful life whichever is lower.
Depreciation on all other fixed assets is provided on Straight Line
Method as per rates computed based on estimated useful lives (estimated
by the management), which are equal to the corresponding rates
prescribed in Schedule XIV to the Companies Act, 1956.
Software is amortized using the straight-line method over a period of 5
years.
Depreciation on assets costing below Rs. 5000 is provided at the rate
of 100%.
(e) Impairment
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value at the weighted average cost of capital.
(f) Leases
Where the Company is the lessee
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalized at the lower of the fair value and present value of the
minimum lease payments at the inception of the lease term and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction of the lease liability based on the implicit rate
of return. Finance charges are charged directly against income. Lease
management fees, legal charges and other initial direct costs are
capitalised.
If there is no reasonable certainty that the Company will obtain the
ownership by the end of the lease term, capitalized leased assets are
depreciated over the shorter of the estimated useful life of the asset
or the lease term.
Leases where the lesser effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit & Loss Account on a straight-line basis over the lease
term.
(g) Investments
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognize a
decline other than temporary in the value of the investments.
(h) Inventories
Inventories are valued as follows:
Raw materials, goods purchased for resale, stores and spare parts Lower
of cost and net realizable value. Materials and other items held for
use in the production of inventories are not written down below cost if
the finished products in which they will be incorporated are expected
to be sold at or above cost. Cost is determined on weighted average
basis.
Work-in-progress and finished goods Lower of cost and net realizable
value. Cost includes direct materials and labour and a proportion of
manufacturing overheads based on normal operating capacity. Cost of
finished goods includes excise duty, wherever applicable. Cost is
determined on a weighted average basis.
Waste Net realizable value
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
cost necessary to make sale.
(i) Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
(i) Sale of goods
Revenue is recognized when the significant risks and rewards of
ownership of the goods have passed to the buyer. Excise Duty deducted
from turnover (gross) is the amount that is included in the amount of
turnover (gross) and not the entire amount of liability accrued during
the year.
(ii) Income from Services
Revenue from services is accounted for in accordance with the terms of
contracts, as and when these services are rendered.
(iii) Power generation income
Revenue from sale of Power is recognized on accrual basis in accordance
with the provisions of the agreements with the respective state
governments/organization.
(iv) Interest
Revenue is recognized on a time proportion basis taking into account
the amount outstanding and the rate applicable.
(v) Export Benefits
Export Benefits under Duty Exemption Pass Book Schemes (DEPB) are
accrued in the year of export.
(vi) Dividends
Revenue is recognised when the shareholders' right to receive payment
is established by the balance sheet date.
(vii) Royalty
Revenue is recognized on an accrual basis in accordance with the terms
of the relevant agreement.
(j) Borrowing Cost
Borrowing costs directly attributable to the acquisition, construction
or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as
part of the cost of the respective asset. All other borrowing costs are
expensed in the period they occur. Borrowing costs consist of interest
and other costs that an entity incurs in connection with the borrowing
of funds
(k) Foreign currency transactions
(i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
(iii) Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reporting company's monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognized as income or as expenses
in the year in which they arise.
(iv) Forward Exchange Contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of forward exchange
contracts is amortized as expense or income over the life of the
contract. Exchange differences on such contracts are recognized in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognized as income or as expense for
that year.
(l) Derivative Instruments
As per the ICAI Announcement, derivative contracts other than those
covered under Accounting Standard-11, are marked to market on a
portfolio basis, and the net loss after considering the offsetting
effect on the underlying hedge item are recognized in profit and loss
account except effective portion of hedges which is transferred to
Hedge Reserve account.
(m) Retirement and other benefits
(i) Retirement benefits in the form of Provident Fund is a defined
contribution scheme and the contributions are charged to the Profit and
Loss Account of the year when the contributions to respective funds are
due. There are no other obligations other than the contribution payable
to the fund.
(ii) Gratuity liability is a defined benefit obligation and is provided
for on the basis of an actuarial valuation on projected unit credit
(PUC) method made at the end of each financial year.
(iii) Short term compensated absences are provided for on based on
estimates at cost to company basis. Long term compensated absences are
provided for based on actuarial valuation. The actuarial valuation is
done as per projected unit credit method.
(iv) Actuarial gains/losses are immediately taken to Profit and Loss
account and are not deferred.
(n) Income taxes
Tax expense comprises of current and deferred taxes. Current income tax
are measured at the amount expected to be paid to the income tax
authorities in accordance with Income Tax Act, 1961. Deferred income
taxes reflect the impact of current year timing differences between
taxable income and accounting income for the year and reversal of
timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets are recognized only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. If the Company
has unabsorbed depreciation or carry forward tax losses, entire
deferred tax assets are recognized only if there is virtual certainty
supported by convincing evidence that such deferred tax assets can be
realized against future taxable profits.
At each balance sheet date the Company re-assesses unrecognized
deferred tax assets. It recognizes unrecognized deferred tax assets to
the extent that it has become reasonably certain or virtual certain, as
the case may be, that sufficient future taxable income will be
available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
MAT credit is recognised as an asset only when and to the extent there
is convincing evidence that the company will pay normal income tax
during the specified period. In the year in which the Minimum
Alternative tax (MAT) credit becomes eligible to be recognized as an
asset in accordance with the recommendations contained in guidance Note
issued by the Institute of Chartered Accountants of India, the said
asset is created by way of a credit to the profit and loss account and
shown as MAT Credit Entitlement. The Company reviews the same at each
balance sheet date and writes down the carrying amount of MAT Credit
Entitlement to the extent there is no longer convincing evidence to the
effect that Company will pay normal Income Tax during the specified
period.
(o) Segment Reporting Policies
Identification of segments :
Business Segment:
The Company's operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operate.
Intersegment Transfers :
The Company generally accounts for intersegment sales and transfers as
if the sales or transfers were to third parties at current market
prices.
Allocation of common costs :
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Allocation of other income :
Other income are allocated to each segment according to the relative
contribution of each segment to the other income as per the
requirements of AS-18.
Unallocated items :
General corporate income and expense items are not allocated to any
business segment.
Segment Policies
The company prepares segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the company as a whole.
(p) Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or
loss for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding during the year. For the
purpose of calculating diluted earnings per share, net profit or loss
for the year attributable to equity shareholders and the weighted
average number of shares outstanding during the year are adjusted for
the effects of all dilutive potential equity shares.
(q) Provisions
A provision is recognized when an enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which reliable estimate can be made. Provisions are not discounted to
its present value and are determined based on 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.
(r) Cash Flow Statement
Cash and cash equivalents in the cash flow statement comprise cash at
bank, cash/cheques in hand and short-term investments with an original
maturity of three months or less.
Mar 31, 2010
(a) Basis of preparation
The financial statements have been prepared to comply in all material
respects with the Notified accounting standard by Companies (Accounting
Standards) Rules, 2006 (as amended) and the relevant provisions of the
Companies Act, 1956. The financial statements have been prepared under
the historical cost convention on an accrual basis. The accounting
policies are consistent with those used in the previous year.
(b) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon managementÃs best
knowledge of current events and actions, actual results could differ
from these estimates.
(c) Fixed Assets
Fixed assets are stated at cost less accumulated depreciation and
impairment losses, if any. Cost comprises the purchase price and any
attributable cost of bringing the asset to its working condition for
its intended use. Borrowing costs relating to acquisition of fixed
assets which takes substantial period of time to get ready for its
intended use are also included to the extent they relate to the period
till such assets are ready to be put to use.
(d) Depreciation
Depreciation on leasehold land is provided over the unexpired period of
lease and depreciation on leasehold improvements which includes
temporary structures is provided over unexpired period of lease or
estimated useful life whichever is lower.
Depreciation on all other fixed assets is provided on Straight Line
Method as per rates computed based on estimated useful lives (estimated
by the management), which are equal to the corresponding rates
prescribed in Schedule XIV to the Companies Act, 1956.
Depreciation on assets costing below Rs. 5000 is depreciated at the
rate of 100% on pro-rata basis.
(e) Impairment
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal/external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the assets net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value at the weighted average cost of capital.
(f) Intangible Assets Software :
Software is amortized using the straight-line method over a period of 5
years.
(g) Leases
Where the Company is the lessee
Finance leases, which effectively transfer to the Company substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalized at the lower of the fair value and present value of the
minimum lease payments at the inception of the lease term and disclosed
as leased assets. Lease payments are apportioned between the finance
charges and reduction of the lease liability based on the implicit rate
of return. Finance charges are charged directly against income. Lease
management fees, legal charges and other initial direct costs are
capitalised.
If there is no reasonable certainty that the Company will obtain the
ownership by the end of the lease term, capitalized leased assets are
depreciated over the shorter of the estimated useful life of the asset
or the lease term.
Leases where the lesser effectively retains substantially all the risks
and benefits of ownership of the leased item, are classified as
operating leases. Operating lease payments are recognized as an expense
in the Profit & Loss Account on a straight-line basis over the lease
term.
(h) Investments
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
an individual investment basis. Long-term investments are carried at
cost. However, provision for diminution in value is made to recognize a
decline other than temporary in the value of the investments.
(i) Inventories
Inventories are valued as follows:
Raw materials, Goods purchased for resale, stores and spares
Lower of cost and net realisable value. Cost is determined on weighted
average basis. Materials and other items held for use in the production
of inventories are not written down below cost if the finished products
in which they will be incorporated are expected to be sold at or above
cost.
Work-in-progress and finished goods
Lower of cost and net realizable value. Cost includes direct materials
and labour and a proportion of manufacturing overheads based on normal
operating capacity. Cost of finished goods includes excise duty,
wherever applicable.
Waste Net realizable value
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
cost necessary to make sale.
(j) Revenue recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
reliably measured.
(i) Sale of Goods
Revenue is recognized when the significant risks and rewards of
ownership of the goods have passed to the buyer. Excise Duty and value
added tax deducted from turnover (gross) is the amount that is included
in the amount of turnover (gross) and not the entire amount of
liability accrued during the year.
(ii) Maintenance and Repair Services
Revenue from maintenance and repair services is accounted for in
accordance with the terms of contracts, as and when these services are
rendered.
(iii) Interest
Revenue is recognized on a time proportion basis taking into account
the amount outstanding and the rate applicable.
(iv) Export Benefits
Export Benefits under Duty Exemption Advance License Scheme are
accounted for in the year of purchase of raw materials under the above
scheme. However, Export Benefits under Duty Exemption Pass Book Schemes
(DEPB) are accrued in the year of export. The same is disclosed in
ÃOther incomeÃ.
(v) Dividends
Revenue is recognised when the shareholdersà right to receive payment
is established by the balance sheet date.
(vi) Royalty
Revenue is recognized on an accrual basis in accordance with the terms
of the relevant agreement.
(k) Foreign currency transactions
(i) Initial Recognition
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are reported using the closing rate.
Non-monetary items which are carried in terms of historical cost
denominated in a foreign currency are reported using the exchange rate
at the date of the transaction; and non-monetary items which are
carried at fair value or other similar valuation denominated in a
foreign currency are reported using the exchange rates that existed
when the values were determined.
(iii) Exchange Differences
Exchange differences arising on the settlement of monetary items or on
reporting companyÃs monetary items at rates different from those at
which they were initially recorded during the year, or reported in
previous financial statements, are recognized as income or as expenses
in the year in which they arise.
(iv) Forward Exchange Contracts not intended for trading or speculation
purposes
The premium or discount arising at the inception of forward exchange
contracts is amortized as expense or income over the life of the
contract. Exchange differences on such contracts are recognized in the
statement of profit and loss in the year in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognized as income or as expense for
that year.
(l) As per the ICAI Announcement, derivative contracts other than those
covered under Accounting Standard-11, are accounted on the basis of
hedging principles to the extent that the same does not conflict with
the existing mandatory Accounting Standards, other Authoritative
pronouncements and other regulatory requirements. Accordingly, the
derivative contract are marked to market on a portfolio basis, and the
net gain/loss after considering the offsetting effect on the underlying
hedge item are recognized in profit and loss account except effective
portion of hedges which is transferred to Hedge Reserve account.
(m) Retirement and other benefits
i. Retirement benefits in the form of Provident Fund is a defined
contribution scheme and the contributions are charged to the Profit and
Loss Account of the year when the contributions are due to Regional
Provident Fund Commissioner. There are no other obligations other than
the contribution payable to the fund.
ii. Gratuity liability is defined benefit obligation and is provided
for on the basis of an actuarial valuation on projected unit credit
(PUC) method made at the end of each financial year. However, the
Company has created an approved Gratuity Fund, which has taken a group
gratuity cum insurance policy with the Life Insurance Corporation of
India (LIC) to cover the gratuity liability of the employees and
premium paid to LIC is charged to Profit & Loss account. At the end of
accounting year, difference between obligation as per actuarial
valuation and the fair value of plan asset is further provided for.
iii. Short term compensated absences are provided for on based on
estimates at cost to company basis. Long term compensated absences are
provided for based on actuarial valuation. The actuarial valuation is
done as per projected unit credit method.
iv. Actuarial gains/losses are immediately taken to Profit and Loss
account and are not deferred.
v. Payments made under the Voluntary Retirement Scheme are charged to
the Profit and Loss account.
(n) Income taxes
Tax expense comprises of current, fringe benefit and deferred taxes.
Current income tax and fringe benefit tax are measured at the amount
expected to be paid to the income tax authorities in accordance with
Income Tax Act, 1961. Deferred income taxes reflect the impact of
current year timing differences between taxable income and accounting
income for the year and reversal of timing differences of earlier
years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the balance sheet date. Deferred
tax assets and deferred tax liabilities are offset, if a legally
enforceable right exists to set off current tax assets against current
tax liabilities and the deferred tax assets and deferred tax
liabilities relate to the taxes on income levied by same governing
taxation laws. Deferred tax assets are recognized only to the extent
that there is reasonable certainty that sufficient future taxable
income will be available against which such deferred tax assets can be
realized. If the Company has unabsorbed depreciation or carry forward
tax losses, entire deferred tax assets are recognized only if there is
virtual certainty supported by convincing evidence that such deferred
tax assets can be realized against future taxable profits.
At each balance sheet date the Company re-assesses unrecognized
deferred tax assets. It recognizes unrecognized deferred tax assets to
the extent that it has become reasonably certain or virtual certain, as
the case may be , that sufficient future taxable income will be
available against which such deferred tax assets can be realized.
The carrying amount of deferred tax assets are reviewed at each balance
sheet date. The company writes-down the carrying amount of a deferred
tax asset to the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient future taxable
income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case may be, that
sufficient future taxable income will be available.
(o) Segment Reporting Policies
Identification of segments : Business Segment:
The CompanyÃs operating businesses are organized and managed separately
according to the nature of products and services provided, with each
segment representing a strategic business unit that offers different
products and serves different markets. The analysis of geographical
segments is based on the areas in which major operating divisions of
the Company operate.
Intersegment Transfers :
The Company generally accounts for intersegment sales and transfers as
if the sales or transfers were to third parties at current market
prices.
Allocation of common costs :
Common allocable costs are allocated to each segment according to the
relative contribution of each segment to the total common costs.
Unallocated items :
General corporate income and expense items are not allocated to any
business segment.
Segment Policies
The company prepares it segment information in conformity with the
accounting policies adopted for preparing and presenting the financial
statements of the company as a whole.
(p) Earnings Per Share
Basic earnings per share is calculated by dividing the net profit or
loss for the year attributable to equity shareholders (after deducting
preference dividends and attributable taxes) by the weighted average
number of equity shares outstanding during the year.
For the purpose of calculating diluted earnings per share, net profit
or loss for the year attributable to equity shareholders and the
weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares.
(q) Provisions
A provision is recognized when an enterprise has a present obligation
as a result of past event and it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which reliable estimate can be made. Provisions are not discounted to
its present value and are determined based on 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. Provision for expenditure relating to voluntary retirement
is made when the employee accepts the offer of early retirement.
(r) Cash Flow Statement
Cash flows are reported using indirect method, whereby profit before
tax is adjusted for the effects of transactions of a non-cash nature
and any deferrals or accruals of past or future cash receipts or
payments. The cash flows from regular revenue generating, financing and
investing activities of the Company are segregated.
Cash and cash equivalents in the cash flow statement comprise cash at
bank, cash/cheques in hand and short- term investments with an original
maturity of three months or less.
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