Accounting Policies of Supreme Petrochem Ltd. Company
Mar 31, 2023
Corporate Information
Supreme Petrochem Ltd (âthe Companyâ) a Public Limited Company incorporated under the Companies Act, 1956, is listed on the Bombay Stock Exchange and National Stock Exchange. The Company is mainly engaged in the business of Styrenics and manufactures Polystyrene (PS), Expandable Polystyrene (EPS), Masterbatches and Compounds of Styrenics and other Polymers, Extruded Polystyrene Insulation Board (XPS) with manufacturing facilities at Amdoshi Dist Raigad, Maharashtra and Manali New Town, Chennai, Tamil Nadu.
Authorisation of financial statements
The standalone financial statements were authorized for issue in accordance with a resolution of the Board of Directors passed on April 26, 2023.
1. SIGNIFICANT ACCOUNTING POLICIES1.1. Statement of Compliance
In accordance with the notification issued by the Ministry of Corporate Affairs, the Company has adopted Indian Accounting Standards (referred to as âInd ASâ) notified under the Companies (Indian Accounting Standards ) Rules 2015 with effect from April 01,2016.
Further, in accordance with the notification issued by the Ministry of Corporate Affairs under the Companies Act,, 2013 (18 of 2013), dated 24th, March 2021, the Company has adopted the amendments in Schedule III to the said Act, while preparing financial statements namely Balance Sheet, Statement of Profit and Loss, Statement of Change in Equity, Cash flow statement and Notes to the Stand alone financial statements with effect from April 01, 2021.
The financial statements of the Company are consistently prepared and presented under historical cost convention on an accrual basis in accordance with Ind AS except for certain financial assets and liabilities that are measured at fair values. Refer accounting policy No.1.10 on Financial Instruments.
The Company''s functional currency and presentation currency is Indian Rupees (INR). All amounts disclosed in the financial statements and notes have been rounded off to the nearest lakhs (R Lakhs), except otherwise indicated.
Classification of Assets and Liabilities into current and Non-Current
The Company presents its assets and liabilities in the Balance Sheet based on current / non-current classification.
An asset is treated as current when it is:
a) expected to be realised or intended to be sold or consumed in normal operating cycle;
b) held primarily for the purpose of trading;
c) expected to be realised within twelve months after the reporting period; or
d) cash or cash 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 treated as current when :
a) it is expected to be settled in normal operating cycle;
b) it is held primarily for the purpose of trading;
c) it is due to be settled within twelve months after the reporting period; or
d) there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non-current.
Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle being a period within twelve months for the purpose of current and non-current classification of assets and liabilities.
1.3. Use of judgements, estimates and assumptions
The preparation of the Company''s financial statements required management to make judgements, estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosures of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment in the future periods in the carrying amount of assets or liabilities affected.
The Company''s accounting policies, management has made judgements in respect of evaluation of recoverability of deferred tax assets, which has the most significant effect on the amounts recognized in the financial statements:
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within;
a) Useful life of property, plant and equipment and intangible assets: The Company has estimated useful life of the Property Plant and Equipment as specified in Schedule II to the Companies Act, 2013. However the actual useful life for individual equipments could turn out to be different, there could be technology changes, breakdown, unexpected failure leading to impairment or complete discard. Alternately the equipment may continue to provide useful service well beyond the useful life assumed.
b) Fair value measurement of financial instruments: When the fair values of financial assets and financial liabilities cannot be measured based on quoted process in active market, the fair value is measured using valuation techniques including the discounted cash flow (DCF) model. The inputs to these models are taken from observable markets where possible, but where this is not possible, a degree of judgement is required in establishing fair values.
c) Impairment of financial and non-financial assets: The impairment provisions for financial assets are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the input for the impairment calculations, based on Company''s past history, existing market conditions, technology, economic developments as well as forward looking estimates at the end of each reporting period.
d) Taxes: Taxes have been paid / provided, exemptions availed, allowances considered etc. are based on the extant laws and the Company''s interpretation of the same based on the legal advice received wherever required. These could differ in the view taken by the authorities, clarifications issued subsequently by the government and courts, amendments to statutes by the government etc.
e) Defined benefit plans: The cost of defined benefit plans and other post -employment benefits plans and the present value of such obligations are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future.
f) Provisions: A provision is recognised 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 a reliable estimate can be made. Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligations at the end of the reporting period. However, the actual liability could be considerably different.
Provisions for leave encashment and gratuity, are made based on report received from the independent actuary. These valuation reports use complex valuation models using not only the inputs provided by the Company but also various other economic variables. Considerable judgement is involved in the process.
g) Contingencies: 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. Potential liabilities that are possible but not probable of crystallizing or are very difficult to quantify reliably are treated as contingent liabilities. Such liabilities are disclosed in the notes but are not recognized.
1.4. Property, Plant and Equipment
Freehold land is carried at historical cost. All other Property, Plant and Equipment are stated at cost, net of recoverable taxes, trade discounts and rebates less accumulated depreciation and impairment loss, if any. The cost of tangible assets comprises its purchase price, borrowing cost, any costs directly attributable to bringing the asset into the location and condition necessary for it to be capable of operating in the manner intended by management, initial estimation of any decommissioning obligations and finance cost.
When significant parts of the Property, Plant and Equipment are required to be replaced at intervals, the Company derecognizes the replaced part, and recognizes the new part with its own associated useful life and depreciated accordingly. Likewise, when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in the Statement of Profit and Loss as incurred.
Cost of Software directly identified with hardware is recognized along with the cost of hardware.
Stores and spares which meet the definition of Property Plant and Equipment and satisfy recognition criteria of Ind AS 16 are capitalized as Property Plant and Equipment.
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. Any gain or loss arising on derecognition of the asset is included in the Statement of Profit and Loss when the asset is derecognized.
Capital work-in-progress includes cost of Property, Plant and Equipment which are not ready for their intended use.
The residual values and useful lives of Property, Plant and Equipment are reviewed at each financial year end, and changes, if any, are accounted prospectively.
Depreciation on the Property Plant and Equipment is provided over the useful life of assets as specified in Schedule II to the Companies Act, 2013 using straight line method. Property, Plant and Equipment which are added / disposed off during the year, depreciation is provided on pro rata basis with reference to the month of addition / deletion.
In line with the provisions of Schedule II of the Companies Act 2013, the Company depreciates significant components of the main asset (which have different useful lives as compared to the main asset) based on the individual useful life of those components. Useful life for such components has been assessed based on the historical experience and internal technical inputs.
Intangible Assets are recognized only if they are separately identifiable and the Company expects to receive future economic benefits arising out of them. Intangible Assets are stated at cost of acquisition net of recoverable taxes less accumulated amortization/ depletion and impairment loss, if any. The cost comprises purchase price, borrowing costs, and any cost directly attributable to bringing the asset to its working condition for the intended use.
Computer Software is amortised over a period of six years or right to use of period.
Intangible assets with finite lives are amortised on straight line basis over their useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at each year end. The amortised expense on intangible assets with finite lives and impairment loss is recognized in the Statement of Profit and Loss.
The useful lives of intangible assets are assessed as either finite or indefinite.
Gains or losses arising from derecognition of an intangible asset are recognized in the Statement of Profit and Loss when the asset is derecognized.
Intangible assets with indefinite useful lives, are not amortised, but are tested for impairment annually. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. The impairment loss on intangible assets with indefinite life is recognised in the Statement of Profit and Loss.
1.6. Impairment of non - financial assets
At each Balance Sheet date, the Company assesses whether there is an indication that an asset may be impaired and also whether there is an indication of reversal of impairment loss recognized 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 recognized when the carrying amount of an asset exceeds its recoverable amount.
An assets recoverable amount is the higher of an assets 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 the 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.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for the Company''s CGUs in the state of Tamilnadu and Maharashtra to which the individual assets are allocated.
Inventories are valued as under
Raw materials, packing material, stores and spares are valued at lower of cost (on a weighted average basis) and net realizable value. However, 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 manufacturing cost.
Stock in process is valued at lower of cost (on a weighted average basis) and net realizable value.
Finished goods (including in transit) are valued at cost (on a weighted average basis) or net realizable value whichever is lower. Cost for this purpose includes direct materials, direct labour utilities, other variable direct costs and manufacturing overheads, based on the normal operating capacity and depreciation.
1.8. 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 insignificant risk of change in value.
For the purpose of statement of cashflows, cash and cash equivalents consist of cash, short-term deposits as defined above, net of outstanding bank overdrafts (if any) and short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value as they are considered as an integral part of the Company''s cash management.
Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows . The cash flows from operating, investing and financing activities of the Company are segregated.
Bank Balances other than above
Dividend escrow account balances, deposits with banks as margin money for guarantees issued by the banks, deposits kept as security deposits for statutory authorities are accounted as bank balances other than Cash and Cash equivalents.
1.9. Non-current assets held for Sale
Non-current assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
Non-current assets are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets
Property, Plant and Equipment and Intangible Assets are not depreciated or amortized once classified as held for sale.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
A. Financial Assets:
(i) Classification:
The Company classifies financial assets as subsequently measured at amortised cost, fair value through other comprehensive income, or fair value through profit and loss on the basis of its business model for managing the financial asset and the contractual cash flow characteristics of the financial asset.
(ii) Initial recognition and measurement:
All financial assets are recognized initially at fair value plus, in the case of financial assets not recognized at fair value through profit and loss, transaction costs that are attributable to the acquisition of the financial asset. However, trade receivables that do not contain a significant financing component are measured at transaction price.
(iii) Financial assets measured at amortised cost:
Financial assets are subsequently measured at amortised cost using effective interest rate method (EIR), if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. The losses arising from the impairment are recognized in the Statement of Profit and Loss.
(iv) Financial assets at fair value through other comprehensive income:
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms give rise to cash flows that are solely payments of principal and interest on the principal outstanding.
(v) Financial Assets measured at fair value through profit and loss:
Financial assets under this category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in profit and loss.
(vi) Derecognition of financial assets:
A financial asset is primarily derecognized 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.
AA: Impairment of Financial Assets
In accordance with Ind-AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss.
The Company follows ''simplified approach'' for recognition of impairment loss allowance on trade receivables. The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
AB: Financial Liabilities
(i) Classification:
The Company classifies all financial liabilities as subsequently measured at amortised cost, except for financial liabilities at fair value through profit and loss. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value.
(ii) Initial recognition and measurement:
All financial liabilities are recognized initially at fair value, in the case of loans, borrowings and payables, net of directly attributable transaction costs. Financial liabilities include trade and other payables, loans and borrowings including bank overdrafts and derivative financial instruments.
(iii) Subsequent measurement:
All financial liabilities are re-measured at fair value through statement of profit and loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through statement of profit and loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.
(iv) Loans and borrowings:
Interest bearing loans and borrowings are subsequently measured at amortised cost using effective interest rate (EIR) method. Gains and losses are recognized in Statement of Profit and Loss when the liabilities are derecognized as well as through EIR amortization process. The EIR amortization is included as finance cost in the Statement of Profit and Loss.
(v) Derecognition of financial liabilities:
A financial liability is derecognized when the obligation under the liability is discharged or canceled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the Statement of Profit and Loss.
(vi) Derivative Financial Instruments:
The Company uses derivative financial instruments such as forward currency contracts and options to hedge its foreign currency risks. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. The gain or loss in the fair values is taken to Statement of Profit and Loss at the end of every period. Profit or loss on cancellations / renewals of forward contracts and options are recognized as income or expense during the period.
AC: Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis to realise the assets and settle the liabilities simultaneously.
The Company measures certain financial assets and financial liabilities including derivatives and defined benefit plans at fair value.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
⢠In the principal market for the asset or liability; or
⢠In the absence of a principal market, in the most advantageous market for the asset or liability
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For 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.
Borrowing costs directly attributable to the acquisition, construction or production of an asset 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.
1.13. Provisions, Contingent liabilities, Contingent Assets
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 a reliable estimate can be made. Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligations at the end of the reporting period. 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 changes in the provision due to the passage of time are recognized as a finance cost.
Contingent liabilities are disclosed in the case of:
⢠a present obligation arising from the past events, when it is not probable that an outflow of resources will be required to settle the obligation.
⢠a present obligation arising from the past events, when no reliable estimate is possible.
⢠a possible obligation arising from past events, unless the probability of outflow of resources is remote.
Contingent assets are not recognized but disclosed in the financial statements when an inflow of economic benefit is probable.
A. Short Term Benefits
Short Term Benefits are recognized as an expense at the undiscounted amount in the Statement of Profit and Loss of the period in which the related service is rendered.
Payment to defined contribution retirement benefit plans are recognized as an expense when employees have rendered the services entitling them to the contribution.
B. Post-Employment benefits - Defined Benefit Plans: Provident fund and Gratuity
The eligible employees of the Company are entitled to receive post-employment benefits in respect of provident fund in which both the employees and the Company make monthly contributions at a specified percentage of the employees'' eligible salary. The contributions are made to the provident fund managed by the trust set up by the Company which is charged to the Statement of Profit and Loss as incurred. Since the Company is obligated to meet interest shortfall, if any, with respect to covered employees, such employee benefit plan is classified as defined benefit plan.
The Company has an obligation towards gratuity - a defined benefit retirement plan covering eligible employees. The plan provides a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service and is payable thereafter on occurrence of any of above events. The Company has obtained an insurance policy with the Life Insurance Corporation of India (LIC) and makes an annual contribution to LIC for amounts notified by LIC.
The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method with actuarial valuations being carried out at each Balance Sheet date, which is recognized in each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in the net interest on the net defined 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 Other Comprehensive Income in the period in which they occur. Re-measurements are not reclassified to the Statement of Profit and Loss in subsequent periods. Past service cost is recognized in the Statement of Profit and Loss in the period of plan amendment.
Net interest is calculated by applying the discount rate to the net defined benefit plan liability or asset.
The Company recognizes the following changes in the net defined benefit obligations under employee benefit expenses in the Statement of Profit and Loss:
⢠Service costs comprising of current service costs, past-service costs, gains and losses on curtailments and nonroutine settlements
⢠Net current expenses or income
C. Defined Contribution Plans - Superannuation
The eligible employees of the Company are entitled to receive post employment benefits of superannuation under Company''s Senior Officers Superannuation Scheme to which the Company makes annual contribution at a specified percentage of the employees'' salary subject to the contribution not exceeding R1,00,000/- p.a. The contribution is made to the LIC. Superannuation is classified as defined contribution plan as the Company has no further obligations beyond making the contribution. The Company''s contribution is charged to the Statement of Profit and Loss as incurred.
D. Other Long-Term Employee Benefits - Compensated Absences
The Company provided for encashment of leave or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment / availment. The Company makes provisions for compensated absences based on an independent actuarial valuation carried out at each reporting date, using Projected Unit Cost Method. Actuarial gains and losses are recognized in the Statement of Profit and Loss.
Revenue is recognized upon transfer of control of promised goods to Customers (i.e. when performance obligation is satisfied) for an amount that reflects the consideration which the Company expects to receive in exchange for those products
Revenue is measured based on the transaction price, which is the consideration, adjusted for trade discounts such as price concessions, volume discounts, or any other price concessions as may be agreed with the customers at the time of sale. Revenues also excludes Goods and Services Tax (GST) or any other taxes collected from the Customers and net of returns and discounts.
Other Income
Other income is comprised primarily of interest income, dividend income, Lease rent income, gain/loss on investment and exchange gain/loss on forward and option contracts. Interest income is recognized using the effective interest method. Dividend income is recognized when the right to receive payment is established. Lease rental income is recognized on accrual basis, Gain/loss in investment recognized either of sale of investment or on fair value at the end of reporting period.
Export benefit
Benefits on account of entitlement to import duty-free raw materials under the Advance Authorization Scheme is measured at fair value and accounted for in the year of export and included under the head âOther Operating Incomeâ.
Insurance Income
Income in respect of insurance claims recognized on acceptance basis.
Income Tax expenses comprise current tax expenses and the net change in the deferred tax asset or liabilities during the year. Current and Deferred tax are recognized in Statement of Profit and Loss, except when they relate to items that are recognized in Other Comprehensive Income or directly in equity, in which case, the current and deferred tax are also recognized in Other Comprehensive Income or directly in equity respectively.
Current Tax
The Company provides current tax based on the provisions of the Income Tax Act, 1961 applicable to the Company. Deferred Tax
Deferred tax is recognised using the Balance Sheet approach. Deferred tax assets and liabilities are recognized for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount.
Deferred tax liabilities are recognized for all taxable temporary differences.
Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized.
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 assets 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 liability is settled, based on tax rates (and tax laws) that have been enacted or substantially enacted at the reporting 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 taxes relate to the same taxable entity and the same taxation authority.
Basic earnings per share are calculated by dividing the profit after tax or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. In case there are any dilutive securities during the period presented, the impact of the same is given to arrive at diluted earnings per share.
The operating segments have been identified on the basis of nature of products and same are accordingly evaluated by the Manager and Board of Directors. Company''s primary operating segment is Styrenics business which accounts for over 96% of total business. Company also operates in masterbatches and compounds of other Polymers, and miscellaneous others. This activity shares manufacturing assets and facilities with compounds/ masterbatches/ coloured products of Styrenics, have similar pattern, customer profile and distribution channels as of compounds/ masterbatches/ coloured products of Styrenics and does not have separately identifiable discreet financial information. Masterbatches and Compounds of other Polymers have therefore been aggregated with Styrenics business. Masterbatches and Compounds of other Polymers and miscellaneous others account for less than 4% of total business and are individually below threshold of total sale revenue specified in Ind AS 108, Para 13. Company accordingly reports its financials under one segment ''Styrenics and allied products''.
Determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date, whether fulfillment of the arrangement is dependent on the use of a specific asset(s) or the arrangement conveys right to use the asset, even if that right is not explicitly specified in an arrangement.
Leases where the lessor effectively retains substantially all the rights and benefits of ownership of the leased assets are classified as operating leases. At the date of commencement of lease the Company recognizes a right-of-use asset (ROU) and a corresponding lease liability for all lease arrangements in which it is a lease except for leases with a term of twelve months or less and low value leases. For these short term and low value leases the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
The right to use assets are initially recognized at cost which comprises initial amount of the lease liability adjusted for any lease payment made at or prior to the date of the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-to- use assets are depreciated from the commencement date on straight line basis over lesser of the lease period or the useful life of the asset.
Lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable using the incremental borrowing rate for the Company.
The right-to-use assets and the lease liabilities are tested for impairment and re-measured annually to arrive at the current carrying value and if found required, adjustments are made to the right-to-use assets and/or lease liability.
1.20. Foreign exchange transactions
Foreign currency transactions are accounted for at the exchange rate prevailing on the date of the transaction. All monetary foreign currency assets and liabilities are converted at the exchange rates prevailing at the reporting date. All exchange differences arising on translation of monetary items are dealt with in the Statement of Profit and Loss.
Non-monetary items are measured in terms of historical cost in foreign currency and translated using the exchange rate at the end of the dates of initial transaction.
1.21. Deemed cost for Property, Plant and Equipment, Investment Property and Intangible Assets
The Company has elected to continue with the carrying value of all of its plant and equipment, investment property, and intangible assets recognised as of 1st July, 2015 measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.
Mar 31, 2022
Corporate Information
Supreme Petrochem Ltd (âthe Companyâ) a Public Limited Company incorporated under the Companies Act, 1956, is listed on the Bombay Stock Exchange and National Stock Exchange. The Company is mainly engaged in the business of Styrenics and manufactures Polystyrene (PS), Expandable Polystyrene (EPS), Masterbatches and Compounds of Styrenics and other Polymers, Extruded Polystyrene Insulation Board (XPS) Styrene Methyl Methacrylate (SMMA) with manufacturing facilities at Amdoshi Dist Raigad, Maharashtra and Manali New Town, Chennai, Tamil Nadu.
Authorisation of financial statements
The standalone financial statements were authorized for issue in accordance with a resolution of the Board of Directors passed on April 27, 2022.
1. SIGNIFICANT ACCOUNTING POLICIES1.1. Statement of Compliance
In accordance with the notification issued by the Ministry of Corporate Affairs, the Company has adopted Indian Accounting Standards (referred to as âInd ASâ) notified under the Companies (Indian Accounting Standards ) Rules 2015 with effect from April 01,2016.
Further, in accordance with the notification issued by the Ministry of Corporate Affairs under the Companies Act, 2013 (18 of 2013), dated 24th, March 2021, the Company has adopted the amendments in Schedule III to the said Act, while preparing financial statements namely Balance Sheet, Statement of Profit and Loss, Statement of Change in Equity, Cash flow statement and Notes to the Standalone financial statements with effect from April 01, 2021.
The financial statements of the Company are consistently prepared and presented under historical cost convention on an accrual basis in accordance with Ind AS except for certain financial assets and liabilities that are measured at fair values. Refer accounting policy No.1.10 on Financial Instruments.
The Company''s functional currency and presentation currency is Indian Rupees (INR). All amounts disclosed in the financial statements and notes have been rounded off to the nearest lakhs (R Lakhs), except otherwise indicated.
Classification of Assets and Liabilities into current and Non-Current
The Company presents its assets and liabilities in the Balance Sheet based on current / non-current classification.
An asset is treated as current when it is:
a) expected to be realised or intended to be sold or consumed in normal operating cycle;
b) held primarily for the purpose of trading;
c) expected to be realised within twelve months after the reporting period; or
d) cash or cash 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 treated as current when :
a) it is expected to be settled in normal operating cycle;
b) it is held primarily for the purpose of trading;
c) it is due to be settled within twelve months after the reporting period; or
d) there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non-current.
Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle being a period within twelve months for the purpose of current and non-current classification of assets and liabilities.
1.3. Use of judgements, estimates and assumptions
The preparation of the Company''s financial statements required management to make judgements, estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosures of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment in the future periods in the carrying amount of assets or liabilities affected.
The Company''s accounting policies, management has made judgements in respect of evaluation of recoverability of deferred tax assets, which has the most significant effect on the amounts recognized in the financial statements:
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within;
a) Useful life of property, plant and equipment and intangible assets: The Company has estimated useful life of the Property Plant and Equipment as specified in Schedule II to the Companies Act, 2013. However the actual useful life for individual equipments could turn out to be different, there could be technology changes, breakdown, unexpected failure leading to impairment or complete discard. Alternately the equipment may continue to provide useful service well beyond the useful life assumed.
b) Fair value measurement of financial instruments: When the fair values of financial assets and financial liabilities cannot be measured based on quoted process in active market, the fair value is measured using valuation techniques including the discounted cash flow (DCF) model. The inputs to these models are taken from observable markets where possible, but where this is not possible, a degree of judgement is required in establishing fair values.
c) Impairment of financial and non-financial assets: The impairment provisions for financial assets are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the input for the impairment calculations, based on Company''s past history, existing market conditions, technology, economic developments as well as forward looking estimates at the end of each reporting period.
d) Taxes: Taxes have been paid / provided, exemptions availed, allowances considered etc. are based on the extant laws and the Company''s interpretation of the same based on the legal advice received wherever required. These could differ in the view taken by the authorities, clarifications issued subsequently by the government and courts, amendments to statutes by the government etc.
e) Defined benefit plans: The cost of defined benefit plans and other post -employment benefits plans and the present value of such obligations are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future.
f) Provisions: A provision is recognised 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 a reliable estimate can be made. Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligations at the end of the reporting period. However the actual liability could be considerably different.
Provisions for leave encashment and gratuity, are made based on report received from the independent actuary. These valuation reports use complex valuation models using not only the inputs provided by the Company but also various other economic variables. Considerable judgement is involved in the process.
g) Contingencies: 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. Potential liabilities that are possible but not probable of crystallizing or are very difficult to quantify reliably are treated as contingent liabilities. Such liabilities are disclosed in the notes but are not recognized.
1.4. Property, Plant and Equipment
Freehold land is carried at historical cost. All other Property, Plant and Equipment are stated at cost, net of recoverable taxes, trade discounts and rebates less accumulated depreciation and impairment loss, if any. The cost of tangible assets comprises its purchase price, borrowing cost, any costs directly attributable to bringing the asset into the location and condition necessary for it to be capable of operating in the manner intended by management, initial estimation of any decommissioning obligations and finance cost.
When significant parts of the Property, Plant and Equipment are required to be replaced at intervals, the Company derecognizes the replaced part, and recognizes the new part with its own associated useful life and depreciated accordingly. Likewise when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in the Statement of Profit and Loss as incurred.
Cost of Software directly identified with hardware is recognized along with the cost of hardware.
Stores and spares which meet the definition of Property, Plant and Equipment and satisfy recognition criteria of Ind AS 16 are capitalized as Property, Plant and Equipment.
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. Any gain or loss arising on derecognition of the asset is included in the Statement of Profit and Loss when the asset is derecognized.
Capital work-in-progress includes cost of Property, Plant and Equipment which are not ready for their intended use.
The residual values and useful lives of Property, Plant and Equipment are reviewed at each financial year end, and changes, if any, are accounted prospectively.
Depreciation on the Property, Plant and Equipment is provided over the useful life of assets as specified in Schedule II to the Companies Act, 2013 using straight line method. Property, Plant and Equipment which are added / disposed off during the year, depreciation is provided on pro rata basis with reference to the month of addition / deletion.
In line with the provisions of Schedule II of the Companies Act 2013, the Company depreciates significant components of the main asset (which have different useful lives as compared to the main asset) based on the individual useful life of those components. Useful life for such components has been assessed based on the historical experience and internal technical inputs.
Intangible Assets are recognized only if they are separately identifiable and the Company expects to receive future economic benefits arising out of them. Intangible Assets are stated at cost of acquisition net of recoverable taxes less accumulated amortization/ depletion and impairment loss, if any. The cost comprises purchase price, borrowing costs, and any cost directly attributable to bringing the asset to its working condition for the intended use.
Computer Software is amortised over a period of six years or right to use of period.
Intangible assets with finite lives are amortised on straight line basis over their useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at each year end. The amortised expense on intangible assets with finite lives and impairment loss is recognized in the Statement of Profit and Loss.
The useful lives of intangible assets are assessed as either finite or indefinite.
Gains or losses arising from derecognition of an intangible asset are recognized in the Statement of Profit and Loss when the asset is derecognized.
Intangible assets with indefinite useful lives, are not amortised, but are tested for impairment annually. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. The impairment loss on intangible assets with indefinite life is recognised in the Statement of Profit and Loss.
1.6. Impairment of non - financial assets
At each Balance Sheet date, the Company assesses whether there is an indication that an asset may be impaired and also whether there is an indication of reversal of impairment loss recognized 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 recognized when the carrying amount of an asset exceeds its recoverable amount.
An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (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 the 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.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for the Company''s CGUs in the state of Tamilnadu and Maharashtra to which the individual assets are allocated.
Inventories are valued as under
Raw materials, packing material, stores and spares are valued at lower of cost (on a weighted average basis) and net realizable value. However, 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 manufacturing cost.
Stock in process is valued at lower of cost (on a weighted average basis) and net realizable value.
Finished goods (including in transit) are valued at cost (on a weighted average basis) or net realizable value whichever is lower. Cost for this purpose includes direct materials, direct labour utilities, other variable direct costs and manufacturing overheads, based on the normal operating capacity and depreciation.
1.8. 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 insignificant risk of change in value.
For the purpose of statement of cashflows, cash and cash equivalents consist of cash, short-term deposits as defined above, net of outstanding bank overdrafts (if any) and short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value as they are considered as an integral part of the Company''s cash management.
Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows . The cash flows from operating, investing and financing activities of the Company are segregated.
Bank Balances other than above
Dividend escrow account balances, deposits with banks as margin money for guarantees issued by the banks, deposits kept as security deposits for statutory authorities are accounted as bank balances other than Cash and Cash equivalents.
1.9. Non-current assets Held for Sale
Non-current assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
Non-current assets are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets.
Property, Plant and Equipment and Intangible Assets are not depreciated or amortized once classified as held for sale.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
A . Financial Assets:
(i) Classification:
The Company classifies financial assets as subsequently measured at amortised cost, fair value through other comprehensive income, or fair value through profit and loss on the basis of its business model for managing the financial asset and the contractual cash flow characteristics of the financial asset.
(ii) Initial recognition and measurement.
All financial assets are recognized initially at fair value plus, in the case of financial assets not recognized at fair value through profit and loss, transaction costs that are attributable to the acquisition of the financial asset.
(iii) Financial assets measured at amortised cost:
Financial assets are subsequently measured at amortised cost using effective interest rate method (EIR), if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. The losses arising from the impairment are recognized in the Statement of Profit and Loss.
(iv) Financial assets at fair value through other comprehensive income
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms give rise to cash flows that are solely payments of principal and interest on the principal outstanding.
(v) Financial Assets measured at fair value through profit and loss
Financial assets under this category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in profit and loss.
(vi) Derecognition of financial assets
A financial asset is primarily derecognized 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.
AA. Impairment of Financial Assets
In accordance with Ind-AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss.
The Company follows ''simplified approach'' for recognition of impairment loss allowance on trade receivables. The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
AB. Financial Liabilities
(i) Classification
The Company classifies all financial liabilities as subsequently measured at amortised cost, except for financial liabilities at fair value through profit and loss. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value.
(ii) Initial recognition and measurement.
All financial liabilities are recognized initially at fair value, in the case of loans, borrowings and payables, net of directly attributable transaction costs. Financial liabilities include trade and other payables, loans and borrowings including bank overdrafts and derivative financial instruments.
(iii) Subsequent measurement:
All financial liabilities are re-measured at fair value through statement of profit and loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through statement of profit and loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.
(iv) Loans and borrowings
Interest bearing loans and borrowings are subsequently measured at amortised cost using effective interest rate (EIR) method. Gains and losses are recognized in Statement of Profit and Loss when the liabilities are derecognized as well as through EIR amortization process. The EIR amortization is included as finance cost in the Statement of Profit and Loss.
(v) Derecognition of financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged or canceled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the Statement of Profit and Loss.
(vi) Derivative Financial Instruments
The Company uses derivative financial instruments such as forward currency contracts and options to hedge its foreign currency risks. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. The gain or loss in the fair values is taken to Statement of Profit and Loss at the end of every period. Profit or loss on cancellations / renewals of forward contracts and options are recognized as income or expense during the period.
AC. Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis to realise the assets and settle the liabilities simultaneously.
The Company measures certain financial assets and financial liabilities including derivatives and defined benefit plans at fair value.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
⢠In the principal market for the asset or liability; or
⢠In the absence of a principal market, in the most advantageous market for the asset or liability
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For 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.
Borrowing costs directly attributable to the acquisition, construction or production of an asset 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.
1.13. Provisions, Contingent liabilities, Contingent Assets
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 a reliable estimate can be made. Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligations at the end of the reporting period. 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 changes in the provision due to the passage of time are recognized as a finance cost.
Contingent liabilities are disclosed in the case of:
⢠a present obligation arising from the past events, when it is not probable that an outflow of resources will be required to settle the obligation.
⢠a present obligation arising from the past events, when no reliable estimate is possible.
⢠a possible obligation arising from past events, unless the probability of outflow of resources is remote.
Contingent assets are not recognized but disclosed in the financial statements when an inflow of economic benefit is probable.
A. Short Term Benefits
Short Term Benefits are recognized as an expense at the undiscounted amount in the Statement of Profit and Loss of the period in which the related service is rendered.
Payment to defined contribution retirement benefit plans are recognized as an expense when employees have rendered the services entitling them to the contribution.
B. Post-Employment benefits - Defined Benefit Plans: Provident fund and Gratuity
The eligible employees of the Company are entitled to receive post-employment benefits in respect of provident fund in which both the employees and the Company make monthly contributions at a specified percentage of the employees'' eligible salary. The contributions are made to the provident fund managed by the trust set up by the Company which is charged to the Statement of Profit and Loss as incurred. Since the Company is obligated to meet interest shortfall, if any, with respect to covered employees, such employee benefit plan is classified as defined benefit plan.
The Company has an obligation towards gratuity - a defined benefit retirement plan covering eligible employees. The plan provides a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service and is payable thereafter on occurrence of any of above events. The Company has obtained an insurance policy with the Life Insurance Corporation of India (LIC) and makes an annual contribution to LIC for amounts notified by LIC.
The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method with actuarial valuations being carried out at each Balance Sheet date, which is recognized in each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in the net interest on the net defined 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 Other Comprehensive Income in the period in which they occur. Re-measurements are not reclassified to the Statement of Profit and Loss in subsequent periods. Past service cost is recognized in the Statement of Profit and Loss in the period of plan amendment.
Net interest is calculated by applying the discount rate to the net defined benefit plan liability or asset.
The Company recognizes the following changes in the net defined benefit obligations under employee benefit expenses in the Statement of Profit and Loss:
⢠Service costs comprising of current service costs, past-service costs, gains and losses on curtailments and nonroutine settlements.
⢠Net current expenses or income.
C. Defined Contribution Plans - Superannuation
The eligible employees of the Company are entitled to receive post employment benefits of superannuation under Company''s Senior Officers Superannuation Scheme to which the Company makes annual contribution at a specified percentage of the employees'' salary subject to the contribution not exceeding R 1,00,000/- p.a. The contribution is made to the LIC. Superannuation is classified as defined contribution plan as the Company has no further obligations beyond making the contribution. The Company''s contribution is charged to the Statement of Profit and Loss as incurred.
D. Other Long-Term Employee Benefits - Compensated Absences
The Company provided for encashment of leave or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment / availment. The Company makes provisions for compensated absences based on an independent actuarial valuation carried out at each reporting date, using Projected Unit Cost Method. Actuarial gains and losses are recognized in the Statement of Profit and Loss.
Revenue is recognized upon transfer of control of promised goods to Customers (i.e. when performance obligation is satisfied) for an amount that reflects the consideration which the Company expects to receive in exchange for those products.
Revenue is measured based on the transaction price, which is the consideration, adjusted for trade discounts such as price concessions, volume discounts, or any other price concessions as may be agreed with the customers at the time of sale. Revenues also excludes Goods and Services Tax (GST) or any other taxes collected from the Customers and net of returns and discounts.
Other Income
Other income is comprised primarily of interest income, dividend income, Lease rent income, gain/loss on investment and exchange gain/loss on forward and option contracts. Interest income is recognized using the effective interest method. Dividend income is recognized when the right to receive payment is established. Lease rental income is recognized on accrual basis, Gain/loss in investment recognized either of sale of investment or on fair value at the end of reporting period.
Export benefit
Benefits on account of entitlement to import duty-free raw materials under the Advance Authorization Scheme is measured at fair value and accounted for in the year of export and included under the head âOther Operating Income.â
Insurance Income
Income in respect of insurance claims recognized on acceptance basis.
Income Tax expenses comprise current tax expenses and the net change in the deferred tax asset or liabilities during the year. Current and Deferred tax are recognized in Statement of Profit and Loss, except when they relate to items that are recognized in Other Comprehensive Income or directly in equity, in which case, the current and deferred tax are also recognized in Other Comprehensive Income or directly in equity respectively.
Current Tax
The Company provides current tax based on the provisions of the Income Tax Act, 1961 applicable to the Company. Deferred Tax
Deferred tax is recognised using the Balance Sheet approach. Deferred tax assets and liabilities are recognized for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount.
Deferred tax liabilities are recognized for all taxable temporary differences.
Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized.
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 assets 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 liability is settled, based on tax rates (and tax laws) that have been enacted or substantially enacted at the reporting 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 taxes relate to the same taxable entity and the same taxation authority.
Basic earnings per share are calculated by dividing the profit after tax or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. In case there are any dilutive securities during the period presented, the impact of the same is given to arrive at diluted earnings per share.
The operating segments have been identified on the basis of nature of products and same are accordingly evaluated by the Manager and Board of Directors. Company''s primary operating segment is Styrenics business which accounts for over 96% of total business. Company also operates in masterbatches and compounds of other Polymers, and miscellaneous others. This activity shares manufacturing assets and facilities with compounds/ masterbatches/ coloured products of Styrenics, have similar pattern, customer profile and distribution channels as of compounds/ masterbatches/ coloured products of Syrenics and does not have separately identifiable discreet financial information. Masterbatches and Compounds of other Polymers have therefore been aggregated with Styrenics business. Masterbatches and Compounds of other Polymers and miscellaneous others account for less than 4% of total business and are individually below threshold of total sale revenue specified in Ind AS 108, Para 13. Company accordingly reports its financials under one segment ''Styrenics and allied products''.
Determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date, whether fulfillment of the arrangement is dependent on the use of a specific asset(s) or the arrangement conveys right to use the asset, even if that right is not explicitly specified in an arrangement.
Leases where the lessor effectively retains substantially all the rights and benefits of ownership of the leased assets are classified as operating leases. At the date of commencement of lease the Company recognizes a right-of-use asset (ROU) and a corresponding lease liability for all lease arrangements in which it is a lease except for leases with a term of twelve months or less and low value leases. For these short term and low value leases the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
The right to use assets are initially recognized at cost which comprises initial amount of the lease liability adjusted for any lease payment made at or prior to the date of the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-to-use assets are depreciated from the commencement date on straight line basis over lesser of the lease period or the useful life of the asset.
Lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable using the incremental borrowing rate for the Company.
The right-to-use assets and the lease liabilities are tested for impairment and re-measured annually to arrive at the current carrying value and if found required, adjustments are made to the right-to-use assets and/or lease liability.
1.20. Foreign exchange transactions
Foreign currency transactions are accounted for at the exchange rate prevailing on the date of the transaction. All monetary foreign currency assets and liabilities are converted at the exchange rates prevailing at the reporting date. All exchange differences arising on translation of monetary items are dealt with in the Statement of Profit and Loss.
Non-monetary items are measured in terms of historical cost in foreign currency and translated using the exchange rate at the end of the dates of initial transaction.
1.21. Deemed cost for Property, Plant and Equipment, Investment Property and Intangible Assets
The Company has elected to continue with the carrying value of all of its plant and equipment, investment property, and intangible assets recognised as of 1st July, 2015 measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.
Mar 31, 2019
1. SIGNIFICANT ACCOUNTING POLICIES
1.1. Statement of Compliance
In accordance with the notification issued by the Ministry of Corporate Affairs, the Company has adopted Indian Accounting Standards (referred to as âInd ASâ) notified under the Companies (Indian Accounting Standards ) Rules 2015 with effect from April 01, 2016.
1.2. Basis of Preparation
The financial statements of the Company are consistently prepared and presented under historical cost convention on an accrual basis in accordance with Ind AS except for certain financial assets and liabilities that are measured at fair values. Refer accounting policy No.1.10 on Financial Instruments.
The Companyâs functional currency and presentation currency is Indian Rupees (INR). All amounts disclosed in the financial statements and notes have been rounded off to the nearest lakhs (V Lakhs), except otherwise indicated.
Classification of Assets and Liabilities into current and Non-Current
The Company presents its assets and liabilities in the Balance Sheet based on current / non-current classification.
An asset is treated as current when it is:
a) expected to be realised or intended to be sold or consumed in normal operating cycle;
b) held primarily for the purpose of trading;
c) expected to be realised within twelve months after the reporting period; or
d) cash or cash 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 treated as current when :
a) it is expected to be settled in normal operating cycle;
b) it is held primarily for the purpose of trading;
c) it is due to be settled within twelve months after the reporting period; or
d) there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non-current.
Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle being a period within twelve months for the purpose of current and non-current classification of assets and liabilities.
1.3. Use of judgements, estimates and assumptions
The preparation of the Companyâs financial statements required management to make judgements, estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosures of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment in the future periods in the carrying amount of assets or liabilities affected.
The Companyâs accounting policies, management has made judgements in respect of evaluation of recoverability of deferred tax assets, which has the most significant effect on the amounts recognized in the financial statements:
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within;
a) Useful life of property, plant and equipment and intangible assets: The Company has estimated useful life of the Property Plant and Equipment as specified in Schedule II to the Companies Act, 2013. However the actual useful life for individual equipments could turn out to be different, there could be technology changes, breakdown, unexpected failure leading to impairment or complete discard. Alternately the equipment may continue to provide useful service well beyond the useful life assumed.
b) Fair value measurement of financial instruments : When the fair values of financial assets and financial liabilities cannot be measured based on quoted process in active market, the fair value is measured using valuation techniques including the discounted cash flow (DCF) model. The inputs to these models are taken from observable markets where possible, but where this is not possible, a degree of judgement is required in establishing fair values.
c) Impairment of financial and non-financial assets: The impairment provisions for financial assets are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the input for the impairment calculations, based on Companyâs past history, existing market conditions, technology, economic developments as well as forward looking estimates at the end of each reporting period.
d) Taxes: Taxes have been paid / provided, exemptions availed, allowances considered etc. are based on the extant laws and the Companyâs interpretation of the same based on the legal advice received wherever required. These could differ in the view taken by the authorities, clarifications issued subsequently by the government and courts, amendments to statutes by the government etc.
e) Defined benefit plans: The cost of defined benefit plans and other post -employment benefits plans and the present value of such obligations are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future.
f) Provisions: A provision is recognised 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 obligations in respect of which a reliable estimate can be made. Provisions are measured at the present value of managementâs best estimate of the expenditure required to settle the present obligations at the end of the reporting period. However the actual liability could be considerably different.
Provisions for leave encashment and gratuity, are made based on report received from the independent actuary. These valuation reports use complex valuation models using not only the inputs provided by the Company but also various other economic variables. Considerable judgement is involved in the process.
g) Contingencies: 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. Potential liabilities that are possible but not probable of crystallizing or are very difficult to quantify reliably are treated as contingent liabilities. Such liabilities are disclosed in the notes but are not recognized.
1.4. Property, Plant and Equipment
Freehold land is carried at historical cost. All other Property, Plant and Equipment are stated at cost, net of recoverable taxes, trade discounts and rebates less accumulated depreciation and impairment loss, if any. The cost of tangible assets comprises its purchase price, borrowing cost, any costs directly attributable to bringing the asset into the location and condition necessary for it to be capable of operating in the manner intended by management, initial estimation of any decommissioning obligations and finance cost.
When significant parts of the Property, Plant and Equipment are required to be replaced at intervals, the Company derecognizes the replaced part, and recognizes the new part with its own associated useful life and depreciated accordingly. Likewise when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in the Statement of Profit and Loss as incurred.
Cost of Software directly identified with hardware is recognized along with the cost of hardware.
Stores and spares which meet the definition of Property Plant and Equipment and satisfy recognition criteria of Ind AS 16 are capitalized as Property Plant and Equipment.
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. Any gain or loss arising on derecognition of the asset is included in the Statement of Profit and Loss when the asset is derecognized.
Capital work-in-progress includes cost of Property, Plant and Equipment which are not ready for their intended use.
The residual values and useful lives of Property, Plant and Equipment are reviewed at each financial year end, and changes, if any, are accounted prospectively.
Depreciation on the Property Plant and Equipment is provided over the useful life of assets as specified in Schedule II to the Companies Act, 2013 using straight line method. Property, Plant and Equipment which are added / disposed off during the year, depreciation is provided on pro rata basis with reference to the month of addition / deletion.
In line with the provisions of Schedule II of the Companies Act 2013, the Company depreciates significant components of the main asset (which have different useful lives as compared to the main asset) based on the individual useful life of those components. Useful life for such components has been assessed based on the historical experience and internal technical inputs.
1.5. Intangible Assets
Intangible Assets are recognized only if they are separately identifiable and the Company expects to receive future economic benefits arising out of them. Intangible Assets are stated at cost of acquisition net of recoverable taxes less accumulated amortization / depletion and impairment loss, if any. The cost comprises purchase price, borrowing costs, and any cost directly attributable to bringing the asset to its working condition for the intended use.
Computer Software is amortised over a period of six years.
Intangible assets with finite lives are amortised on straight line basis over their useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at each year end. The amortised expense on intangible assets with finite lives and impairment loss is recognized in the Statement of Profit and Loss.
The useful lives of intangible assets are assessed as either finite or indefinite.
Gains or losses arising from derecognition of an intangible asset are recognized in the Statement of Profit and Loss when the asset is derecognized.
Intangible assets with indefinite useful lives, are not amortised, but are tested for impairment annually. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. The impairment loss on intangible assets with indefinite life is recognised in the Statement of Profit and Loss.
1.6. Impairment of non - financial assets
At each Balance Sheet date, the Company assesses whether there is an indication that an asset may be impaired and also whether there is an indication of reversal of impairment loss recognized 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 recognized when the carrying amount of an asset exceeds its recoverable amount.
An assetâs recoverable amount is the higher of an assetâs or cash-generating unitâs (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 the 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.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for the Companyâs CGUs in the state of Tamil Nadu and Maharashtra to which the individual assets are allocated.
1.7. Inventories
Inventories are valued as under
Raw materials, packing material, stores and spares are valued at lower of cost (on a weighted average basis) and net realizable value. However, 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 manufacturing cost.
Stock in process is valued at lower of cost (on a weighted average basis) and net realizable value.
Finished goods (including in transit) are valued at cost (on a weighted average basis) or net realizable value whichever is lower. Cost for this purpose includes direct materials, direct labour utilities, other variable direct costs and manufacturing overheads, based on the normal operating capacity and depreciation.
1.8. 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 insignificant risk of change in value.
For the purpose of statement of cash flows, cash and cash equivalents consist of cash, short-term deposits as defined above, net of outstanding bank overdrafts (if any) and short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value as they are considered as an integral part of the Companyâs cash management.
Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
Bank Balances other than above
Dividend escrow account balances, deposits with banks as margin money for guarantees issued by the banks, deposits kept as security deposits for statutory authorities are accounted as bank balances other than Cash and Cash equivalents.
1.9. Non-current assets Held for Sale
Non-current assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
Non-current assets are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets.
Property, Plant and Equipment and Intangible Assets are not depreciated or amortized once classified as held for sale.
1.10.Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
A. Financial Assets:
(i) Classification:
The Company classifies financial assets as subsequently measured at amortised cost, fair value through other comprehensive income, or fair value through profit and loss on the basis of its business model for managing the financial asset and the contractual cash flow characteristics of the financial asset.
(ii) Initial recognition and measurement:
All financial assets are recognized initially at fair value plus, in the case of financial assets not recognized at fair value through profit and loss, transaction costs that are attributable to the acquisition of the financial asset.
(iii) Financial assets measured at amortised cost:
Financial assets are subsequently measured at amortised cost using effective interest rate method (EIR), if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. The losses arising from the impairment are recognized in the Statement of Profit and Loss.
(iv) Financial assets at fair value through other comprehensive income:
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms give rise to cash flows that are solely payments of principal and interest on the principal outstanding.
(v) Financial Assets measured at fair value through profit and loss:
Financial assets under this category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in profit and loss.
(vi) Derecognition of financial assets:
A financial asset is primarily derecognized 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.
A: Impairment of Financial Assets
In accordance with Ind-AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss.
The Company follows âsimplified approachâ for recognition of impairment loss allowance on trade receivables. The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
B: Financial Liabilities
(i) Classification:
The Company classifies all financial liabilities as subsequently measured at amortised cost, except for financial liabilities at fair value through profit and loss. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value.
(ii) Initial recognition and measurement:
All financial liabilities are recognized initially at fair value, in the case of loans, borrowings and payables, net of directly attributable transaction costs. Financial liabilities include trade and other payables, loans and borrowings including bank overdrafts and derivative financial instruments.
(iii) Subsequent measurement:
All financial liabilities are re-measured at fair value through statement of profit and loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through statement of profit and loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.
(iv) Loans and borrowings:
Interest bearing loans and borrowings are subsequently measured at amortised cost using effective interest rate (EIR) method. Gains and losses are recognized in Statement of Profit and Loss when the liabilities are derecognized as well as through EIR amortization process. The EIR amortization is included as finance cost in the Statement of Profit and Loss.
(vi) Derecognition of financial liabilities:
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the Statement of Profit and Loss.
(vii) Derivative Financial Instruments:
The Company uses derivative financial instruments such as forward currency contracts and options to hedge its foreign currency risks. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. The gain or loss in the fair values is taken to Statement of Profit and Loss at the end of every period. Profit or loss on cancellations / renewals of forward contracts and options are recognized as income or expense during the period.
C: Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis to realise the assets and settle the liabilities simultaneously.
1.11.Fair value measurement
The Company measures certain financial assets and financial liabilities including derivatives and defined benefit plans at fair value.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability; or
- In the absence of a principal market, in the most advantageous market for the asset or liability
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest.
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 recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
1.12.Borrowing cost
Borrowing costs directly attributable to the acquisition, construction or production of an asset are capitalised 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.
1.13.Provisions, Contingent liabilities, Contingent Assets
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 a reliable estimate can be made. Provisions are measured at the present value of managementâs best estimate of the expenditure required to settle the present obligations at the end of the reporting period. 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 changes in the provision due to the passage of time are recognized as a finance cost.
Contingent liabilities are disclosed in the case of :
- a present obligation arising from the past events, when it is not probable that an outflow of resources will be required to settle the obligation;
- a present obligation arising from the past events, when no reliable estimate is possible;
- a possible obligation arising from past events, unless the probability of outflow of resources is remote.
Contingent assets are not recognized but disclosed in the financial statements when an inflow of economic benefit is probable.
1.14. Employee Benefits
A. Short Term Benefits
Short Term Benefits are recognized as an expense at the undiscounted amount in the Statement of Profit and Loss of the period in which the related service is rendered.
Payment to defined contribution retirement benefit plans are recognized as an expense when employees have rendered the services entitling them to the contribution.
B. Post Employment benefits - Defined Benefit Plans: Provident fund and Gratuity
The eligible employees of the Company are entitled to receive post employment benefits in respect of provident fund in which both the employees and the Company make monthly contributions at a specified percentage of the employeesâ eligible salary. The contributions are made to the provident fund managed by the trust set up by the Company which is charged to the Statement of Profit and Loss as incurred. Since the Company is obligated to meet interest shortfall, if any, with respect to covered employees, such employee benefit plan is classified as defined benefit plan.
The Company has an obligation towards gratuity - a defined benefit retirement plan covering eligible employees. The plan provides a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service and is payable thereafter on occurrence of any of above events. The Company has obtained an insurance policy with the Life Insurance Corporation of India (LIC) and makes an annual contribution to LIC for amounts notified by LIC.
The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method with actuarial valuations being carried out at each Balance Sheet date, which is recognized in each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in the net interest on the net defined 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 earning through Other Comprehensive Income in the period in which they occur. Re-measurements are not reclassified to the Statement of Profit and Loss in subsequent periods. Past service cost is recognized in the Statement of Profit and Loss in the period of plan amendment.
Net interest is calculated by applying the discount rate to the net defined benefit plan liability or asset.
The Company recognizes the following changes in the net defined benefit obligations under employee benefit expenses in the Statement of Profit and Loss:
- Service costs comprising of current service costs, past-service costs, gains and losses on curtailments and non-routine settlements
- Net current expenses or income
C. Defined Contribution Plans - Superannuation
The eligible employees of the Company are entitled to receive post employment benefits of superannuation under Companyâs Senior Officers Superannuation Scheme to which the Company makes annual contribution at a specified percentage of the employeesâ salary subject to the contribution not exceeding RS. 1,00,000/- p.a.. The contribution is made to the LIC. Superannuation is classified as defined contribution plan as the Company has no further obligations beyond making the contribution. The Companyâs contribution is charged to the Statement of Profit and Loss as incurred.
D. Other Long-Term Employee Benefits - Compensated Absences
The Company provided for encashment of leave or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment / availment. The Company makes provisions for compensated absences based on an independent actuarial valuation carried out at each reporting date, using Projected Unit Cost Method. Actuarial gains and losses are recognized in the Statement of Profit and Loss.
1.15.Revenue Recognition
The Company has adopted Ind AS 115 standard on April 1, 2018 by using the cumulative catch-up transition method and accordingly comparatives for the year ending or ended March 31, 2018 will not be retrospectively adjusted. The effect on adoption of Ind AS 115 is nil.
Revenue is recognized upon transfer of control of promised goods to Customers (i.e. when performance obligation is satisfied) for an amount that reflects the consideration which the Company expects to receive in exchange for those products.
Revenue is measured based on the transaction price, which is the consideration, adjusted for trade discounts such as price concessions, volume discounts, or any other price concessions as may be agreed with the customers at the time of sale. Revenues also excludes Goods and Services Tax (GST) or any other taxes collected from the Customers and net of returns and discounts.
Dividend Income
Dividend income is recognized when the right to receive is established and there is a reasonable certainty of its collection.
Export benefit
Benefits on account of entitlement to import duty-free raw materials under the Advance Authorization Scheme is measured at fair value and accounted for in the year of export and included under the head âOther Operating Income.â
Interest Income
Interest income is recognized using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instruments (for example, prepayment, extension, call and similar options) but does not consider the expected credit loss.
Insurance Income
Income in respect of insurance claims recognized on acceptance basis or when there is reasonable certainty that the ultimate collection will be made.
Others
Income in respect of other claims and commissions are measured at fair value and recognised when there is reasonable certainty that the ultimate collection will be made.
1.16.Taxes on income
Income Tax expenses comprise current tax expenses and the net change in the deferred tax asset or liabilities during the year. Current and Deferred tax are recognized in Statement of Profit and Loss, except when they relate to items that are recognized in Other Comprehensive Income or directly in equity, in which case, the current and deferred tax are also recognized in Other Comprehensive Income or directly in equity respectively.
Current Tax
The Company provides current tax based on the provisions of the Income Tax Act, 1961 applicable to the Company. Deferred Tax
Deferred tax is recognised using the Balance Sheet approach. Deferred tax assets and liabilities are recognized for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount.
Deferred tax liabilities are recognized for all taxable temporary differences.
Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized.
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. Unrecognised 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 assets 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 liability is settled, based on tax rates (and tax laws) that have been enacted or substantially enacted at the reporting 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 taxes relate to the same taxable entity and the same taxation authority.
1.17.Earnings per share
Basic earnings per share are calculated by dividing the profit after tax or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. In case there are any dilutive securities during the period presented, the impact of the same is given to arrive at diluted earnings per share.
1.18.Segment Reporting
The operating segments have been identified on the basis of nature of products and same are accordingly evaluated by the Manager and Board of Directors. Companyâs primary operating segment is Styrenics business which accounts for over 96% of total business. Company also operates in masterbatches and compounds of other Polymers, and miscellaneous others. This activity shares manufacturing assets and facilities with compounds / masterbatches / coloured products of Styrenics, have similar pattern, customer profile and distribution channels as of compounds / masterbatches / coloured products of Syrenics and does not have separately identifiable discreet financial information. Masterbatches and Compounds of other Polymers have therefore been aggregated with Styrenics business. Masterbatches and Compounds of other Polymers and miscellaneous others account for less than 4% of total business and are individually below threshold of total sale revenue specified in Ind AS 108, Para 13. Company accordingly reports its financials under one segment âStyrenics and allied productsâ.
1.19.Leases
Determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date, whether fulfillment of the arrangement is dependent on the use of a specific asset(s) or the arrangement conveys right to use the asset, even if that right is not explicitly specified in an arrangement.
Leases where the lessor effectively retains substantially all the rights and benefits of ownership of the leased assets are classified as operating leases. Lease payments under operating leases are recognised as an expense in the Statement of Profit and Loss on a straight line basis.
1.20.Foreign exchange transactions
Foreign currency transactions are accounted for at the exchange rate prevailing on the date of the transaction. All monetary foreign currency assets and liabilities are converted at the exchange rates prevailing at the reporting date. All exchange differences arising on translation of monetary items are dealt with in the Statement of Profit and Loss.
Non-monetary items are measured in terms of historical cost in foreign currency and translated using the exchange rate at the end of the dates of initial transaction.
1.21.Deemed cost for Property, Plant and Equipment, Investment Property and Intangible Assets
The Company has elected to continue with the carrying value of all of its plant and equipment, investment property, and intangible assets recognised as of 1st July, 2015 measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.
Mar 31, 2018
1.1 Statement of Compliance
In accordance with the notification issued by the Ministry of Corporate Affairs, the Company has adopted Indian Accounting Standards (referred to as âInd ASâ) notified under the Companies (Indian Accounting Standards ) Rules 2015 with effect from April 01, 2016 and comply with the requirement under Para 3 of Ind AS 101.
1.2 Basis of Preparation
The financial statements of the Company are consistently prepared and presented under historical cost convention on an accrual basis in accordance with IndAS except for certain financial assets and liabilities that are measured at fair values. Refer accounting policy No.1.10 on Financial Instruments.
The Companyâs functional currency and presentation currency is Indian Rupees (INR). All amounts disclosed in the financial statements and notes have been rounded off to the nearest lakhs (V Lakhs), except otherwise indicated.
Classification of Assets and Liabilities into current and Non-Current
The Company presents its assets and liabilities in the Balance Sheet based on current / non-current classification.
An asset is treated as current when it is:
a) expected to be realised or intended to be sold or consumed in normal operating cycle;
b) held primarily for the purpose of trading;
c) expected to be realised within twelve months after the reporting period; or
d) cash or cash 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 treated as current when :
a) it is expected to be settled in normal operating cycle;
b) it is held primarily for the purpose of trading;
c) it is due to be settled within twelve months after the reporting period; or
d) there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non-current.
Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle being a period within twelve months for the purpose of current and non-current classification of assets and liabilities.
1.3 Use of judgements, estimates and assumptions
The preparation of the Companyâs financial statements required management to make judgements, estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosures of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment in the future periods in the carrying amount of assets or liabilities affected.
The Companyâs accounting policies, management has made judgements in respect of evaluation of recoverability of deferred tax assets, which has the most significant effect on the amounts recognized in the financial statements:
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within;
a) Useful life of property, plant and equipment and intangible assets: The Company has estimated useful life of the Property Plant and Equipment as specified in Schedule II to the Companies Act, 2013. However the actual useful life for individual equipments could turn out to be different, there could be technology changes, breakdown, unexpected failure leading to impairment or complete discard. Alternately the equipment may continue to provide useful service well beyond the useful life assumed.
b) Fair value measurement of financial instruments : When the fair values of financial assets and financial liabilities cannot be measured based on quoted process in active market, the fair value is measured using valuation techniques including the discounted cash flow (DCF) model. The inputs to these models are taken from observable markets where possible, but where this is not possible, a degree of judgement is required in establishing fair values.
c) Impairment of financial and non-financial assets: The impairment provisions for financial assets are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the input for the impairment calculations, based on Companyâs past history, existing market conditions, technology, economic developments as well as forward looking estimates at the end of each reporting period.
d) Taxes: Taxes have been paid / provided, exemptions availed, allowances considered etc. are based on the extant laws and the Companyâs interpretation of the same based on the legal advice received wherever required. These could differ in the view taken by the authorities, clarifications issued subsequently by the government and courts, amendments to statutes by the government etc.
e) Defined benefit plans: The cost of defined benefit plans and other post -employment benefits plans and the present value of such obligations are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future.
f) Provisions: The Company makes provisions for leave encashment and gratuity, based on report received from the independent actuary. These valuation reports use complex valuation models using not only the inputs provided by the Company but also various other economic variables. Considerable judgement is involved in the process.
g) Contingencies: A provision is recognised 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 a reliable estimate can be made. Provisions are measured at the present value of managementâs best estimate of the expenditure required to settle the present obligations at the end of the reporting period. However the actual liability could be considerably different.
1.4 Property, Plant and Equipment
Freehold land is carried at historical cost. All other Property, Plant and Equipment are stated at cost, net of recoverable taxes, trade discounts and rebates less accumulated depreciation and impairment loss, if any. The cost of tangible assets comprises its purchase price, borrowing cost, any costs directly attributable to bringing the asset into the location and condition necessary for it to be capable of operating in the manner intended by management, initial estimation of any decommissioning obligations and finance cost.
When significant parts of the Property, Plant and Equipment are required to be replaced at intervals, the Company derecognizes the replaced part, and recognizes the new part with its own associated useful life and depreciated accordingly. Likewise when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in the Statement of Profit and Loss as incurred.
Cost of Software directly identified with hardware is recognized along with the cost of hardware.
Stores and spares which meet the definition of Property Plant and Equipment and satisfy recognition criteria of Ind AS 16 are capitalized as Property Plant and Equipment.
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. Any gain or loss arising on derecognition of the asset is included in the Statement of Profit and Loss when the asset is derecognized.
Capital work-in-progress includes cost of Property, Plant and Equipment which are not ready for their intended use.
The residual values and useful lives of Property, Plant and Equipment are reviewed at each financial year end, and changes, if any, are accounted prospectively.
Depreciation on the Property Plant and Equipment is provided over the useful life of assets as specified in Schedule II to the Companies Act, 2013 using straight line method. Property, Plant and Equipment which are added / disposed off during the year, depreciation is provided on pro rata basis with reference to the month of addition / deletion.
In line with the provisions of Schedule II of the Companies Act 2013, the Company depreciates significant components of the main asset (which have different useful lives as compared to the main asset) based on the individual useful life of those components. Useful life for such components has been assessed based on the historical experience and internal technical inputs.
1.5 Intangible Assets
Intangible Assets are recognized only if they are separately identifiable and the Company expects to receive future economic benefits arising out of them. Intangible Assets are stated at cost of acquisition net of recoverable taxes less accumulated amortization/ depletion and impairment loss, if any. The cost comprises purchase price, borrowing costs, and any cost directly attributable to bringing the asset to its working condition for the intended use.
Computer Software is amortised over a period of six years.
Intangible assets with finite lives are amortised on straight line basis over their useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at each year end. The amortised expense on intangible assets with finite lives and impairment loss is recognized in the Statement of Profit and Loss.
The useful lives of intangible assets are assessed as either finite or indefinite.
Gains or losses arising from derecognition of an intangible asset are recognized in the Statement of Profit and Loss when the asset is derecognized.
Intangible assets with indefinite useful lives, are not amortised, but are tested for impairment annually. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. The impairment loss on intangible assets with indefinite life is recognised in the Statement of Profit and Loss.
1.6 Impairment of non - financial assets
At each Balance Sheet date, the Company assesses whether there is an indication that an asset may be impaired and also whether there is an indication of reversal of impairment loss recognized 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 recognized when the carrying amount of an asset exceeds its recoverable amount.
An assetâs recoverable amount is the higher of an assetâs or cash-generating unitâs(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 the 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.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for the Companyâs CGUs in the state of Tamilnadu and Maharashtra to which the individual assets are allocated.
1.7 Inventories
Inventories are valued as under
Raw materials, packing material, stores and spares are valued at lower of cost (on a weighted average basis) and net realizable value. However, 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 manufacturing cost.
Stock in process is valued at lower of cost (on a weighted average basis) and net realizable value.
Finished goods (including in transit) are valued at cost (on a weighted average basis) or net realizable value whichever is lower. Cost for this purpose includes direct materials, direct labour utilities, other variable direct costs and manufacturing overheads, based on the normal operating capacity and depreciation.
1.8 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 insignificant risk of change in value.
For the purpose of statement of cashflows, cash and cash equivalents consist of cash, short-term deposits as defined above, net of outstanding bank overdrafts and short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value as they are considered as an integral part of the Companyâs cash management.
Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows . The cash flows from operating, investing and financing activities of the Company are segregated.
Bank Balances other than above
Dividend escrow account balances, deposits with banks as margin money for guarantees issued by the banks, deposits kept as security deposits for statutory authorities are accounted as bank balances other than Cash and Cash equivalents.
1.9 Non-current assets Held for Sale
Non-current assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
Non-current assets are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets
Property, Plant and Equipment and Intangible Assets are not depreciated or amortized once classified as held for sale.
1.10 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entitiy and a financial liability or equity instrument of another entity.
A. Financial Assets:
(i) Classification:
The Company classifies financial assets as subsequently measured at amortised cost, fair value through other comprehensive income, or fair value through profit and loss on the basis of its business model for managing the financial asset and the contractual cash flow characteristics of the financial asset.
(ii) Initial recognition and measurement.
All financial assets are recognized initially at fair value plus, in the case of financial assets not recognized at fair value through profit and loss transaction costs that are attributable to the acquisition of the financial asset.
(iii) Financial assets measured at amortised cost:
Financial assets are subsequently measured at amortised cost using effective interest rate method (EIR), if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. The losses arising from the impairment are recognized in the Statement of Profit and Loss.
(iv) Financial assets at fair value through other comprehensive income
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms give rise to cash flows that are solely payments of principal and interest on the principal outstanding.
(v) Financial Assets measured at fair value through profit and loss
Financial assets under this category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in profit and loss.
(vi) Derecognition of financial assets
A financial asset is primarily derecognized 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.
AA. Impairment of Financial Assets
In accordance with Ind-AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss.
The Company follows âsimplified approachâ for recognition of impairment loss allowance on trade receivables. The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
B: Financial Liabilities
(i) Classification
The Company classifies all financial liabilities as subsequently measured at amortised cost, except for financial liabilities at fair value through profit and loss. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value.
(ii) Initial recognition and measurement.
All financial liabilities are recognized initially at fair value, in the case of loans, borrowings and payables, net of directly attributable transaction costs. Financial liabilities include trade and other payables, loans and borrowings including bank overdrafts and derivative financial instruments.
(iii) Subsequent measurement:
All financial liabilities are re-measured at fair value through statement of profit and loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through statement of profit and loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.
(iv) Loans and borrowings
Interest bearing loans and borrowings are subsequently measured at amortised cost using effective interest rate (EIR) method. Gains and losses are recognized in Statement of Profit and Loss when the liabilities are derecognized as well as through EIR amortization process. The EIR amortization is included as finance cost in the Statement of Profit and Loss.
(vi) Derecognition of financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged or canceled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the Statement of Profit and Loss.
(vii) Derivative Financial Instruments
The Company uses derivative financial instruments such as forward currency contracts and options to hedge its foreign currency risks. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. The gain or loss in the fair values is taken to Statement of Profit and Loss at the end of every period. Profit or loss on cancellations / renewals of forward contracts and options are recognized as income or expense during the period.
C: Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis to realise the assets and settle the liabilities simultaneously.
1.11 Fair value measurement
The Company measures certain financial assets and financial liabilities including derivatives and defined benefit plans at fair value.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability; or
- In the absence of a principal market, in the most advantageous market for the asset or liability
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest.
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 recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
1.12 Borrowing cost
Borrowing costs directly attributable to the acquisition, construction or production of an asset are capitalised 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.
1.13 Provisions, Contingent liabilities, Contingent Assets
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 a reliable estimate can be made. Provisions are measured at the present value of managementâs best estimate of the expenditure required to settle the present obligations at the end of the reporting period. 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 changes in the provision due to the passage of time are recognized as a finance cost.
Contingent liabilities are disclosed in the case of :
- a present obligation arising from the past events, when it is not probable that an outflow of resources will be required to settle the obligation;
- a present obligation arising from the past events, when no reliable estimate is possible;
- a possible obligation arising from past events, unless the probability of outflow of resources is remote.
Contingent assets are not recognized but disclosed in the financial statements when an inflow of economic benefit is probable.
1.14 Employee Benefits
A. Short Term Benefits
Short Term Benefits are recognized as an expense at the undiscounted amount in the Statement of Profit and Loss of the period in which the related service is rendered.
Payment to defined contribution retirement benefit plans are recognized as an expense when employees have rendered the services entitling them to the contribution.
B. Post Employment benefits - Defined Benefit Plans: Provident fund and Gratuity
The eligible employees of the Company are entitled to receive post employment benefits in respect of provident fund in which both the employees and the Company make monthly contributions at a specified percentage of the employeesâ eligible salary. The contributions are made to the provident fund managed by the trust set up by the Company which is charged to the Statement of Profit and Loss as incurred. Since the Company is obligated to meet interest shortfall, if any, with respect to covered employees, such employee benefit plan is classified as defined benefit plan.
The Company has an obligation towards gratuity - a defined benefit retirement plan covering eligible employees. The plan provides a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service and is payable thereafter on occurrence of any of above events. The Company has obtained an insurance policy with the Life Insurance Corporation of India (LIC) and makes an annual contribution to LIC for amounts notified by LIC.
The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method with actuarial valuations being carried out at each Balance Sheet date, which is recognized in each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in the net interest on the net defined 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 earning through Other Comprehensive Income in the period in which they occur. Re-measurements are not reclassified to the Statement of Profit and Loss in subsequent periods. Past service cost is recognized in the Statement of Profit and Loss in the period of plan amendment.
Net interest is calculated by applying the discount rate to the net defined benefit plan liability or asset.
The Company recognizes the following changes in the net defined benefit obligations under employee benefit expenses in the Statement of Profit and Loss:
- Service costs comprising of current service costs, past-service costs, gains and losses on curtailments and nonroutine settlements
- Net current expenses or income
C. Defined Contribution Plans - Superannuation
The eligible employees of the Company are entitled to receive post employment benefits of superannuation under Companyâs Senior Officers Superannuation Scheme to which the Company makes annual contribution at a specified percentage of the employeesâ salary subject to the contribution not exceeding RS.1,00,000/- p. a.. The contribution is made to the LIC. Superannuation is classified as defined contribution plan as the Company has no further obligations beyond making the contribution. The Companyâs contribution is charged to the Statement of Profit and Loss as incurred.
D. Other Long-Term Employee Benefits - Compensated Absences
The Company provided for encashment of leave or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment / availment. The Company makes provisions for compensated absences based on an independent actuarial valuation carried out at each reporting date, using Projected Unit Cost Method. Actuarial gains and losses are recognized in the Statement of Profit and Loss.
1.15 Revenue Recognition
The Company recognizes revenue when the amount of revenue can be reliably measured and it is fairly certain that it will be realized.
Sale of Goods
Sales are accounted on passing of risks, rewards and control of ownership attached to the goods to external customers. Gross sales measured at the fair value of the consideration received or receivable including Excise duty but excluding Value Added Tax (VAT) and Goods and Service Tax (GST) and are net of returns and discounts.
Dividend Income
Dividend income is recognized when the right to receive is established and there is a reasonable certainty of its collection. Export benefit
Benefits on account of entitlement to import duty-free raw materials under the Advance Authorization Scheme is measured at fair value and accounted for in the year of export and included under the head âOther Operating Income.â
Interest Income
Interest income is recognized using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instruments (for example, prepayment, extension, call and similar options) but does not consider the expected credit loss.
Insurance Income
Income in respect of insurance claims recognized on acceptance basis or when there is reasonable certainty that the ultimate collection will be made.
Others
Income in respect of other claims and commissions are measured at fair value and recognised when there is reasonable certainty that the ultimate collection will be made.
1.16 Taxes on income
Income Tax expenses comprise current tax expenses and the net change in the deferred tax asset or liabilities during the year. Current and Deferred tax are recognized in Statement of Profit and Loss, except when they relate to items that are recognized in Other Comprehensive Income or directly in equity, in which case, the current and deferred tax are also recognized in Other Comprehensive Income or directly in equity respectively.
Current Tax
The Company provides current tax based on the provisions of the Income Tax Act, 1961 applicable to the Company. Deferred Tax
Deferred tax is recognised using the Balance Sheet approach. Deferred tax assets and liabilities are recognized for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount.
Deferred tax liabilities are recognized for all taxable temporary differences.
Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized.
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. Unrecognised 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 assets 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 liability is settled, based on tax rates (and tax laws) that have been enacted or substantially enacted at the reporting 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 taxes relate to the same taxable entity and the same taxation authority.
1.17 Earnings per share
Basic earnings per share are calculated by dividing the profit after tax or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. In case there are any dilutive securities during the period presented, the impact of the same is given to arrive at diluted earnings per share.
1.18 Segment Reporting
The operating segments have been identified on the basis of nature of products and same are accordingly evaluated by the Manager and Board of Directors. Companyâs primary operating segment is Styrenics business which accounts for over 96% of total business. Company also operates in masterbatches and compounds of other Polymers, and miscellaneous others. This activity shares manufacturing assets and facilities with compounds/ masterbatches/ coloured products of Styrenics, have similar pattern, customer profile and distribution channels as of compounds/ masterbatches/ coloured products of Syrenics and does not have separately identifiable discreet financial information. Masterbatches and Compounds of other Polymers have therefore been aggregated with Styrenics business. Masterbatches and Compounds of other Polymers and miscellaneous others account for less than 4% of total business and are individually below threshold of total sale revenue specified in Ind AS 108, Para 13. Company accordingly reports its financials under one segment âStyrenics and allied productsâ.
1.19 Leases
Determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date, whether fulfillment of the arrangement is dependent on the use of a specific asset(s) or the arrangement conveys right to use the asset, even if that right is not explicitly specified in an arrangement.
Leases where the lessor effectively retains substantially all the rights and benefits of ownership of the leased assets are classified as operating leases. Lease payments under operating leases are recognised as an expense in the Statement of Profit and Loss on a straight line basis.
1.20 Foreign exchange transactions
Foreign currency transactions are accounted for at the exchange rate prevailing on the date of the transaction. All monetary foreign currency assets and liabilities are converted at the exchange rates prevailing at the reporting date. All exchange differences arising on translation of monetary items are dealt with in the Statement of Profit and Loss.
1.21 Deemed cost for Property, Plant and Equipment, Investment Property and Intangible Assets
The Company has elected to continue with the carrying value of all of its plant and equipment, investment property, and intangible assets recognised as of 1st July, 2015 measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.
Mar 31, 2017
1. Property Plant and Equipment:
The Company has availed the exemption available under Ind AS 101 to continue the carrying value for all of its property, plant and equipment and intangibles as recognized in the financial statements as at the date of transition to Ind AS, measured as per the IGAAP and use that as its deemed cost as at the date of transition (1 July 2015).
Spares which meet the definition criteria of property plant and equipment , amounting to RS,127.55 Lakhs (Gross value) were capitalized from inventory. After providing depreciation of RS,7.43 Lakhs, the property plant and equipment increased by RS,120.12 Lakhs as of March 31, 2016.
2. Expected Credit Loss:
Under Indian GAAP no provision for doubtful debt was made. Under Ind AS, impairment allowance has been determined based on expected credit loss (ECL) model. Due to this model, the Company impaired its trade receivables by RS, 29.34 Lakhs as on the transition date which has been recognized in retained earnings. The impairment of RS,14.06 Lakhs for the period ended March 31, 2016 has been recognized in the Trade Receivable and RS, 15.28 Lakhs net of tax in the Statement of Profit and Loss.
3. Defined Benefit Obligations:
The 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 the net interest on the net defined benefit liability are recognized in balance sheet through other comprehensive income. Thus employee benefit expenses are reduced by RS, 99.38 Lakhs and recognized in other comprehensive income gross of tax for the year ended March 31, 2016.
4. Forward Contracts
Under IGAAP, the difference between and spot rate and forward rate is amortized over the tenure of the forward contract and premium paid on options were expensed out. Under Ind AS, forward/option contract is required to be accounted at fair value. Accordingly, the company has provided for gain of RS, 6.94 Lakhs in the retained earnings on the transition date July 1, 2015 and a gain of RS, 0.86 Lakhs for the period ended March 31, 2016.
5. Sale of goods
Under IGAAP, excise duty was reduced from Gross Sales. Under Ind AS, excise duty is not reduced from Gross but shown as an expense in the notes. Sale of goods has increased by RS, 28519.53 Lakhs with a corresponding increase in expense for the period ended March 31, 2016.
6. Loan to Employees
The Company has given interest free loans to its employees. Under IGAAP this loan was accounted at principal value.
As per Ind AS employee loans should be measured at fair value on initial recognition with a subsequent decrease in the amount of employee loan. The fair value is determined using the present value method using discount rate which is the market borrowing rate. The Company is required to accrue interest income at the effective interest rate (discount rate) over the term of the loan. The difference between the loan amount and its fair value is charged to the Statement of Profit and Loss as âEmployee Costâ. This results in the decrease in the carrying amount of the loan by RS, 23.14 Lakhs on the transition date July 1, 2015 and adjusted in total equity.
7. Dealer/Distributor Deposits
The Company has received security deposits from its Dealers and Distributors under the Dealership Agreement at rates below the prevailing market rates. Under the Indian GAAP these Security Deposits were shown under long term liability. Under the Ind AS, these deposits have been revalued at fair value using the present value method using a discount rate which is market borrowing rate. An amount of RS, 0.28 lakhs was reduced from Deposit amount and charged to the Statement of Profit and Loss during the year ended March 31, 2017.
8. Prior Period Adjustment
An amount of RS, 15.84 Lakhs shown under prior period adjustment under Indain GAAP is added to Profit after Tax as on March 31, 2016,under Ind AS it was charged to retained earnings as on July 1, 2015.
9. Security Deposit Paid
Under IGAAP, interest free lease security deposits (that are refundable in cash on completion of the lease term) are recorded at their transaction alue. Under Ind AS, all financial assets are required to be recognized at fair value. Accordingly the Company has fair valued these security deposits under Ind AS. Difference between the fair value and the transaction value of the security deposit has been recognized as prepaid rent. Consequent to this change, the security deposit increased by RS, 0.28 Lakhs as at July 01, 2015 and reversed by same amount as on March 31, 2016.
10. Dividend
As per Ind AS dividend is recognized only when it is approved by the shareholders and hence dividend provision of V 1,447.53 Lakhs together with tax on dividend of RS, 294.68 Lakhs (Total of RS, 1,742.21 Lakhs) proposed for the year ended June 30, 2015 was reduced from provisions and from total equity in the opening balance sheet as on July 1, 2015.
11. Other Comprehensive Income
Under previous GAAP, the Company has not presented Other Comprehensive Income(OCI) separately. Hence, the Statement of Profit and Loss under previous GAAP has been reconciled with statement of profit and loss and other comprehensive income as per Ind AS.
Actuarial loss of RS, 99.38 Lakhs on defined benefit plans for the employees and RS,34.39 Lakhs deferred tax credit on the same as per Ind AS has been reclassified to Other Comprehensive Income from Statement of Profit and loss.
12. Deferred Tax
Indian GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of Ind AS 12 approach has resulted in recognition of deferred tax on new temporary differences which was not required under Indian GAAP. This has resulted in deferred tax asset by RS, 4.79 Lakhs.
Corporate Information
Supreme Petrochem Ltd (âthe Companyâ) a Public Limited Company incorporated under the Companies Act, 1956, is listed on the Bombay Stock Exchange and National Stock Exchange. The Company is mainly engaged in the business of Styrenics and manufactures Polystyrene (PS), Expandable Polystyrene (EPS), Masterbatches and Compounds of Styrenics and other Polymers,Extruded Polystyrene Insulation Board (XPS) with manufacturing facilities at Nagothane, Dist Raigad, Maharashtra and Manali New Township, Chennai, Tamil Nadu.
Authorization of financial statements
The standalone financial statements were authorized for issue in accordance with a resolution of the Board of Directors passed on April 26, 2017.
Change in the financial year
Until June 30, 2015, the financial year followed by the Company was a period of twelve months from 1st July to 30th June each year. Thereafter the Company has changed its financial year to twelve months period from 1st April to 31st March. Accordingly, the Company has prepared its previous financial statements for a nine month period from July 1, 2015 to March 31, 2016. The current financial statements are for twelve months from April 1, 2016 to March 31, 2017.
1. SIGNIFICANT ACCOUNTING POLICIES 1.1 Statement of Compliance
In accordance with the notification issued by the Ministry of Corporate Affairs, the Company has adopted Indian Accounting Standards (referred to as âInd ASâ) notified under the Companies (Indian Accounting Standards) Rules 2015 with effect from April 01, 2016 and comply with the requirement under Para 3 of Ind AS 101.
These financial statements are the first financial statements of the Company under Ind AS. The date of transition to Ind AS is July 1, 2015. (Refer Note 1.21 for information on how the Company has adopted Ind AS).
1.2 Basis of Preparation
The financial statements of the Company are consistently prepared and presented under historical cost convention on an accrual basis in accordance with Ind AS except for certain financial assets and liabilities that are measured at fair values. Refer accounting policy No.1.10 on Financial Instruments.
The Company''s functional currency and presentation currency is Indian Rupees (INR). All amounts disclosed in the financial statements and notes have been rounded off to the nearest lakhs (RS, Lakhs), except otherwise indicated.
Classification of Assets and Liabilities into current and Non-Current
The Company presents its assets and liabilities in the Balance Sheet based on current / non-current classification.
An asset is treated as current when it is:
a) expected to be realized or intended to be sold or consumed in normal operating cycle;
b) held primarily for the purpose of trading;
c) expected to be realized within twelve months after the reporting period; or
d) 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 treated as current when :
a) it is expected to be settled in normal operating cycle;
b) it is held primarily for the purpose of trading;
c) it is due to be settled within twelve months after the reporting period; or
d) there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non-current.
Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle being a period within twelve months for the purpose of current and non-current classification of assets and liabilities.
1.3 Use of judgments, estimates and assumptions
The preparation of the Company''s financial statements required management to make judgments, estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosures of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment in the future periods in the carrying amount of assets or liabilities affected.
The Company''s accounting policies, management has made judgments in respect of evaluation of recoverability of deferred tax assets, which has the most significant effect on the amounts recognized in the financial statements:
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within;
a) Useful life of property, plant and equipment and intangible assets: The Company has estimated useful life of the Property Plant and Equipment as specified in Schedule II to the Companies Act, 2013. However the actual useful life for individual equipments could turn out to be different, there could be technology changes, breakdown, unexpected failure leading to impairment or complete discard. Alternately the equipment may continue to provide useful service well beyond the useful life assumed.
b) Fair value measurement of financial instruments : When the fair values of financial assets and financial liabilities cannot be measured based on quoted process in active market, the fair value is measured using valuation techniques including the discounted cash flow (DCF) model. The inputs to these models are taken from observable markets where possible, but where this is not possible, a degree of judgment is required in establishing fair values.
c) Impairment of financial and non-financial assets: The impairment provisions for financial assets are based on assumptions about risk of default and expected loss rates. The Company uses judgment in making these assumptions and selecting the input for the impairment calculations, based on Company''s past history, existing market conditions, technology, economic developments as well as forward looking estimates at the end of each reporting period.
d) Taxes: Taxes have been paid / provided, exemptions availed, allowances considered etc. are based on the extant laws and the Company''s interpretation of the same based on the legal advice received wherever required. These could differ in the view taken by the authorities, clarifications issued subsequently by the government and courts, amendments to statutes by the government etc.
e) Defined benefit plans: The cost of defined benefit plans and other post -employment benefits plans and the present value of such obligations are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future.
f) Provisions: The Company makes provisions for leave encashment and gratuity, based on report received from the independent actuary. These valuation reports use complex valuation models using not only the inputs provided by the Company but also various other economic variables. Considerable judgment is involved in the process.
g) Contingencies: 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 a reliable estimate can be made. Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligations at the end of the reporting period. However the actual liability could be considerably different.
1.4 Property, Plant and Equipment
Freehold land is carried at historical cost. All other property, plant and equipment are stated at cost, net of recoverable taxes, trade discounts and rebates less accumulated depreciation and impairment loss, if any. The cost of tangible assets comprises its purchase price, borrowing cost, any costs directly attributable to bringing the asset into the location and condition necessary for it to be capable of operating in the manner intended by management, initial estimation of any decommissioning obligations and finance cost.
When significant parts of the Property, Plant and Equipment are required to be replaced at intervals, the Company derecognizes the replaced part, and recognizes the new part with its own associated useful life and depreciated accordingly. Likewise when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in the Statement of Profit and Loss as incurred.
Cost of Software directly identified with hardware is recognized along with the cost of hardware.
Stores and spares which meet the definition of Property, Plant and Equipment and satisfy recognition criteria of Ind AS 16 are capitalized as Property, Plant and Equipment.
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. Any gain or loss arising on derecognition of the asset is included in the Statement of Profit and Loss when the asset is derecognized.
Capital work-in-progress includes cost of Property, Plant and Equipment which are not ready for their intended use.
The residual values and useful lives of Property, Plant and Equipment are reviewed at each financial year end, and changes, if any, are accounted prospectively.
Depreciation on the property, plant and equipment is provided over the useful life of assets as specified in Schedule II to the Companies Act, 2013 using straight line method. Property, Plant and Equipment which are added / disposed off during the year, depreciation is provided on pro rata basis with reference to the month of addition / deletion.
In line with the provisions of Schedule II of the Companies Act 2013, the Company depreciates significant components of the main asset (which have different useful lives as compared to the main asset) based on the individual useful life of those components. Useful life for such components has been assessed based on the historical experience and internal technical inputs.
1.5 Intangible Assets
Intangible Assets are recognized only if they are separately identifiable and the Company expects to receive future economic benefits arising out of them. Intangible Assets are stated at cost of acquisition net of recoverable taxes less accumulated amortization/ depletion and impairment loss, if any. The cost comprises purchase price, borrowing costs, and any cost directly attributable to bringing the asset to its working condition for the intended use.
Computer Software is amortized over a period of six years.
Intangible assets with finite lives are amortized on straight line basis over their 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 each year end. The amortized expense on intangible assets with finite lives and impairment loss is recognized in the Statement of Profit and Loss.
The useful lives of intangible assets are assessed as either finite or indefinite.
Gains or losses arising from derecognition of an intangible asset are recognized in the Statement of Profit and Loss when the asset is derecognized.
Intangible assets with indefinite useful lives, are not amortized, but are tested for impairment annually. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. The impairment loss on intangible assets with indefinite life is recognized in the Statement of Profit and Loss.
1.6 Impairment of non - financial assets
At each Balance Sheet date, the Company assesses whether there is an indication that an asset may be impaired and also whether there is an indication of reversal of impairment loss recognized 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 recognized when the carrying amount of an asset exceeds its recoverable amount.
An asset''s recoverable amount is the higher of an asset''s or cash-generating unit''s (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 the 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.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for the Company''s CGUs in the state of Tamilnadu and Maharashtra to which the individual assets are allocated.
1.7 Inventories
Inventories are valued as under
Raw materials, packing material, stores and spares are valued at lower of cost (on a weighted average basis) and net realizable value. However, 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 manufacturing cost.
Stock in process is valued at lower of cost (on a weighted average basis) and net realizable value.
Finished goods (including in transit) are valued at cost (on a weighted average basis) or net realizable value whichever is lower. Cost for this purpose includes direct materials, direct labour utilities, other variable direct costs and manufacturing overheads, based on the normal operating capacity and depreciation.
1.8 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 insignificant risk of changes in value.
For the purpose of statement of cash flows, cash and cash equivalents consist of cash and short-term deposits as defined above, net of outstanding bank overdrafts as they are considered as an integral part of the Company''s cash management.
Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows . The cash flows from operating, investing and financing activities of the Company are segregated.
Bank Balances other than above
Dividend escrow account balances, deposits with banks as margin money for guarantees issued by the banks, deposits kept as security deposits for statutory authorities are accounted as bank balances other than Cash and Cash equivalents.
1.9 Non-current Assets Held for Sale
Non-current assets classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
Non-current assets are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets
Property, plant and equipment and intangible assets are not depreciated or amortized once classified as held for sale.
1.10 Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
A. Financial Assets:
(i) Classification:
The Company classifies financial assets as subsequently measured at amortized cost, fair value through other comprehensive income, or fair value through profit and loss on the basis of its business model for managing the financial asset and the contractual cash flow characteristics of the financial asset.
(ii) Initial recognition and measurement
All financial assets are recognized initially at fair value plus, in the case of financial assets not recognized at fair value through profit and loss, transaction costs that are attributable to the acquisition of the financial asset.
(iii) Financial assets measured at amortized cost:
Financial assets are subsequently measured at amortized cost using effective interest rate method (EIR), if these financial assets are held within a business whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. The losses arising from the impairment are recognized in the Statement of Profit and Loss.
(iv) Financial assets at fair value through other comprehensive income
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms give rise to cash flows that are solely payments of principal and interest on the principal outstanding.
(v) Financial assets measured at fair value through profit and loss
Financial assets under this category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in profit and loss.
(vi) Derecognition of financial assets
A financial asset is primarily derecognized 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.
AA. Impairment of Financial Assets
In accordance with Ind-AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss.
The Company follows ''simplified approach'' for recognition of impairment loss allowance on trade receivables. The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
B. Financial Liabilities
(i) Classification
The Company classifies all financial liabilities as subsequently measured at amortized cost, except for financial liabilities at fair value through profit and loss. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value.
(ii) Initial recognition and measurement
All financial liabilities are recognized initially at fair value, in the case of loans, borrowings and payables, net of directly attributable transaction costs. Financial liabilities include trade and other payables, loans and borrowings including bank overdrafts and derivative financial instruments.
(iii) Subsequent measurement
All financial liabilities are re-measured at fair value through statement of profit and loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through statement of profit and loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.
(iv) Loans and borrowings
Interest bearing loans and borrowings are subsequently measured at amortized cost using effective interest rate (EIR) method. Gains and losses are recognized in Statement of Profit and Loss when the liabilities are derecognized as well as through EIR amortization process. The EIR amortization is included as finance cost in the Statement of Profit and Loss.
(v) Derecognition of financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged or canceled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the Statement of Profit and Loss.
(vi) Derivative financial instruments
The Company uses derivative financial instruments such as forward currency contracts and options to hedge its foreign currency risks. Such derivative financial instruments are initially recognized at fair value on the date on which
a derivative contract is entered into and are subsequently re-measured at fair value. The gain or loss in the fair values is taken to Statement of Profit and Loss at the end of every period. Profit or loss on cancellations / renewals of forward contracts and options are recognized as income or expense during the period.
C. 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.
1.11 Fair value measurement
The Company measures certain financial assets and financial liabilities including derivatives and defined benefit plans at fair value.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
- In the principal market for the asset or liability; or
- In the absence of a principal market, in the most advantageous market for the asset or liability
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 â Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For 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.
1.12 Borrowing cost
Borrowing costs directly attributable to the acquisition, construction or production of an asset 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.
1.13 Provisions, Contingent liabilities, Contingent Assets
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 a reliable estimate can be made. Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligations at the end of the reporting period. 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 changes in the provision due to the passage of time are recognized as a finance cost.
Contingent liabilities are disclosed in the case of :
- a present obligation arising from the past events, when it is not probable that an outflow of resources will be required to settle the obligation;
- a present obligation arising from the past events, when no reliable estimate is possible;
- a possible obligation arising from past events, unless the probability of outflow of resources is remote.
Contingent assets are not recognized but disclosed in the financial statements when an inflow of economic benefit is probable.
1.14 Employee Benefits
A. Short Term Benefits
Short Term Benefits are recognized as an expense at the undiscounted amount in the Statement of Profit and Loss of the period in which the related service is rendered.
Payment to defined contribution retirement benefit plans are recognized as an expense when employees have rendered the services entitling them to the contribution.
B. Post Employment benefits - Defined Benefit Plans: Provident fund and Gratuity
The eligible employees of the Company are entitled to receive post employment benefits in respect of provident fund in which both the employees and the Company make monthly contributions at a specified percentage of the employees'' eligible salary. The contributions are made to the provident fund managed by the trust set up by the Company which is charged to the Statement of Profit and Loss as incurred. Since the Company is obligated to meet interest shortfall, if any, with respect to covered employees, such employee benefit plan is classified as defined benefit plan.
The Company has an obligation towards gratuity - a defined benefit retirement plan covering eligible employees. The plan provides a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service and is payable thereafter on occurrence of any of above events. The Company has obtained an insurance policy with the Life Insurance Corporation of India (LIC) and makes an annual contribution to LIC for amounts notified by LIC.
The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method with actuarial valuations being carried out at each Balance Sheet date, which is recognized in each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in the net interest on the net defined 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 Other Comprehensive Income in the period in which they occur. Re-measurements are not reclassified to the Statement of Profit and Loss in subsequent periods. Past service cost is recognized in the Statement of Profit and Loss in the period of plan amendment.
Net interest is calculated by applying the discount rate to the net defined benefit plan liability or asset.
The Company recognizes the following changes in the net defined benefit obligations under employee benefit expenses in the Statement of Profit and Loss:
- Service costs comprising of current service costs, past-service costs, gains and losses on curtailments and no routine settlements
- Net current expenses or income
C. Defined Contribution Plans - Superannuation
The eligible employees of the Company are entitled to receive post employment benefits of superannuation under Company''s Senior Officers Superannuation Scheme to which the Company makes annual contribution at a specified percentage of the employees'' salary subject to the contribution not exceeding V1,00,000/- p.a.. The contribution is made to the LIC. Superannuation is classified as defined contribution plan as the Company has no further obligations beyond making the contribution. The Company''s contribution is charged to the Statement of Profit and Loss as incurred.
D. Other Long-Term Employee Benefits - Compensated Absences
The Company provided for encashment of leave or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment / a ailment. The Company makes provisions for compensated absences based on an independent actuarial valuation carried out at each reporting date, using Projected Unit Cost Method. Actuarial gains and losses are recognized in the Statement of Profit and Loss.
1.15 Revenue Recognition
The Company recognizes revenue when the amount of revenue can be reliably measured and it is fairly certain that it will be realized.
Sale of Goods
Sales are accounted on passing of risks, rewards and control of ownership attached to the goods to external customers. Gross sales measured at the fair value of the consideration received or receivable include excise duty and are net of returns and discounts.
Dividend Income
Dividend income is recognized when the right to receive is established and there is a reasonable certainty of its collection. Export benefit
Benefits on account of entitlement to import duty-free raw materials under the Advance Authorization Scheme is measured at fair value and accounted for in the year of export and included under the head âOther Operating Income.â
Interest Income
Interest income is recognized using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instruments (for example, prepayment, extension, call and similar options) but does not consider the expected credit loss.
Insurance Income
Income in respect of insurance claims recognized on acceptance basis or when there is reasonable certainty that the ultimate collection will be made.
Others
Income in respect of other claims and commissions are measured at fair value and recognized when there is reasonable certainty that the ultimate collection will be made.
1.16 Taxes on Income
Income Tax expenses comprise current tax expenses and the net change in the deferred tax asset or liabilities during the year. Current and Deferred tax are recognized in Statement of Profit and Loss, except when they relate to items that are recognized in Other Comprehensive Income or directly in equity, in which case, the current and deferred tax are also recognized in Other Comprehensive Income or directly in equity respectively.
Current Tax
The Company provides current tax based on the provisions of the Income Tax Act, 1961 applicable to the Company. Deferred Tax
Deferred tax is recognized using the Balance Sheet approach. Deferred tax assets and liabilities are recognized for deductible and taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount.
Deferred tax liabilities are recognized for all taxable temporary differences.
Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized.
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 assets 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 liability is settled, based on tax rates (and tax laws) that have been enacted or substantially enacted at the reporting 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 taxes relate to the same taxable entity and the same taxation authority.
1.17 Earnings per Share
Basic earnings per share are calculated by dividing the profit after tax or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. In case there are any dilutive securities during the period presented, the impact of the same is given to arrive at diluted earnings per share.
1.18 Segment Reporting
The operating segments have been identified on the basis of nature of products and some are accordingly evaluated by the Manager and Board of Directors. Company''s primary operating segment is Styrenics business which accounts for over 96% of total business. Company also operates in masterbatches and compounds of other Polymers, and miscellaneous others. This activity shares manufacturing assets and facilities with compounds/ masterbatches/ coloured products of Styreneâs, have similar pattern, customer profile and distribution channels as of compounds/ masterbatches/ coloured products of Syrenics and does not have separately identifiable discreet financial information. Masterbatches and Compounds of other Polymers have therefore been aggregated with Styrenics business. Master batches and Compounds of other Polymers and miscellaneous others account for less than 4% of total business and are individually below threshold of total sale revenue specified in Ind AS 108, Para 13. Company accordingly reports its financials under one segment ''Styreneâs and allied products''.
1.19 Leases
Determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date, whether fulfillment of the arrangement is dependent on the use of a specific asset(s) or the arrangement conveys right to use the asset, even if that right is not explicitly specified in an arrangement.
Leases where the less or effectively retains substantially all the rights and benefits of ownership of the leased assets are classified as operating leases. Lease payments under operating leases are recognized as an expense in the Statement of Profit and Loss on a straight line basis.
1.20 Foreign exchange transactions
Foreign currency transactions are accounted for at the exchange rate prevailing on the date of the transaction. All monetary foreign currency assets and liabilities are converted at the exchange rates prevailing at the reporting date. All exchange differences arising on translation of monetary items are dealt with in the Statement of Profit and Loss.
1.21 First-time adoption - mandatory exceptions, optional exemptions
The Company has prepared the opening Balance Sheet as per Ind AS as of the transition date which is 1st July 2015, by
(a) recognizing all assets and liabilities whose recognition is required by Ind AS;
(b) not recognizing items of assets or liabilities which are not permitted by lnd AS;
(c) reclassifying items from previous GAAP to Ind AS as required under Ind AS; and
(d) applying Ind AS in measurement of recognized assets and liabilities.
However, this principle is subject to certain exceptions and certain optional exemptions availed by the Company as detailed below:
Mar 31, 2016
1] Corporate Information
Supreme Petrochem Ltd (The Company) a public limited company incorporated under the Companies Act, 1956 is engaged in the manufacture of Polystyrene (PS), Expandable Polystyrene (EPS), Specialty Polymers & Compounds and Extruded Polystyrene (XPS) with manufacturing facilities at Nagothane Dist Raigad, Maharashtra and Ammulavoyil Village, Manali New Township, Chennai, Tamil Nadu. The Company also has a captive gas power plant at Nagothane.
SIGNIFICANT ACCOUNTING POLICIES 2] Basis of Preparation
The financial statements of the Company are consistently prepared and presented under historical cost convention on an accrual basis 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 rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013. In accordance with first proviso to section 129(1) of the Companies Act, 2013 (the Act), and clause 6 of the General Instructions given in Schedule III to the Act the items contained in the enclosed financial statements are in accordance with the Accounting Standards as referred to herein. The accounting policies adopted in the preparation of financial statements are consistent with those of previous year.
All the assets and liabilities have been classified as current or non-current as per the normal operating cycle of the Company and other criteria set out in Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle being a period within 12 months for the purpose of current and non-current classification of assets and liabilities.
3] Use of Estimates
The preparation of financial statements in conformity with Indian generally accepted accounting principles (GAAP) requires management to make judgments, estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities and disclosures relating to contingent liabilities as at the date of financial statements and reported amounts of revenues and expenses during the reporting period. Although these estimates are based on the management''s best knowledge of current events and actions, actual results could differ from these estimates. Differences on account of revision of estimates, actual results and existing estimates are recognized in periods in which the results are known/ materialized in accordance with the requirements of the respective accounting standard, as may be applicable.
4] Revenue Recognition
[a] Income and Expenditure
Income and expenditure are accounted on accrual basis and is recognized when it is reasonably certain of the ultimate collection.
[b] Sale of Goods
Domestic sales are accounted on passing of risks and rewards attached to the goods to customers. Export sales are accounted on date of bill of lading. Gross Sales include Excise duty but excludes Value Added Tax/ Central Sales Tax and are net of trade discounts.
[c] Dividend Income
Dividend income is recognised for when the right to receive is established.
[d] Interest Income
Interest income is accounted on accrual basis.
[e] Export Incentives
Benefits on account of entitlement to import duty-free raw materials under the Advance Authorization Scheme is accounted for in the year of export calculated on the basis of rate of exchange and import duty prevailing at the date of the Balance sheet. This is included under the head âOther Operating Income.â
5] Fixed Assets, Capital Work-in-progress, Depreciation and Amortization:
Fixed Assets
[a] Tangible Assets
Tangible assets are stated at cost net of recoverable taxes, trade discounts and rebates and include amounts added on revaluation, less accumulated depreciation and impairment loss, if any. The cost of tangible assets comprises its purchase price, borrowing cost, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the assets, and any cost directly attributable to bringing the asset to its working condition for its intended use.
Subsequent expenditures related to any item of tangible assets are added to its book value only if they increase the future benefits from the existing asset beyond its previously assessed standard of performance.
[b] Capital Work-in-progress
Projects under which assets are not ready for their intended use are shown as Capital Work-in-Progress.
[c] Intangible Assets
Intangible Assets are recognized only if they are separately identifiable and the Company expects to receive future economic benefits arising out of them. Intangible Assets are stated at cost of acquisition net of recoverable taxes less accumulated amortization/ depletion and impairment loss, if any. The cost comprises purchase price, borrowing costs, net charges on foreign exchange contracts and adjustments arising from exchange rate variations attributable to the intangible assets and any cost directly attributable to bringing the asset to its working condition for the intended use.
[d] Depreciation and Amortization
Depreciation is provided on a straight-line basis over the useful life as prescribed in Schedule II to the Companies Act, 2013, unless otherwise specified.
When significant parts of the fixed assets are required to be replaced at interval, the Company depreciates them separately based on their specific useful lives. All other repair and maintenance costs are recognized in the Statement of Profit or Loss as incurred.
Intangible assets are amortized over the estimated period of future economic benefit of the asset or a period of six years, whichever is lower.
6] Impairment of Assets
The carrying amounts of tangible and intangible assets are tested for impairment at each Balance Sheet date to determine if there is any indication of impairment, based on internal / external factors. If any such indication exists, an estimate of the recoverable amount of the asset / cash generating unit is made. Assets whose carrying value exceeds their recoverable amount are written down to the recoverable amount. Recoverable amount is higher of an asset''s or cash generating unit''s net selling price and its value in use. The reduction is treated as an impairment loss and is recognized in the Statement of Profit and Loss. If at the Balance Sheet date there is an indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the assets are reflected at the recoverable amount.
7] Inventories
Inventories are valued as under :
[a] Raw materials, packing material, stores and spares are valued at lower of cost and net realizable value. However, 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 of raw materials, components and stores and spares is determined on a moving weighted average basis.
[b] Stock in process is valued at lower of cost (on a moving weighted average basis) and net realizable value.
[c] Finished goods (including in transit) are valued at cost (on a moving weighted average basis) or net realizable value whichever is lower. Cost for this purpose includes direct materials, direct labor and appropriate overheads and depreciation.
8] Cash and Cash Equivalents
Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank, cash / cherubs in hand, demand deposits with banks and other short-term investments with an original maturity of three months or less.
9] Foreign exchange transactions and forward contracts
Foreign currency transactions are accounted for at the exchange rate prevailing on the date of the transaction. All monetary foreign currency assets and liabilities are converted at the exchange rates prevailing at the date of the balance sheet. All exchange differences other than in relation to acquisition of fixed assets and other long term foreign currency monetary liabilities are dealt with in the Statement of Profit and Loss.
Foreign exchange differences on long term foreign currency monetary items relating to acquisition of depreciable assets are adjusted to the carrying cost of the assets and in other cases, if any, accumulated in âForeign Currency Monetary Item Translation Difference Accountâ and amortized over the balance period of loan.
In respect of Foreign Exchange contracts entered into to hedge foreign currency risks, the difference between the forward rate and exchange rate at the inception of the contract is recognized as income or expense over the life of the contract. Option contracts entered into to hedge foreign currency hedge are marked to market at the date of balance sheet. The difference between premium paid and the current market value of the option is taken to the statement of Profit and Loss account. Gains if any, are ignored. Profit or loss on cancellations/ renewals of forward contracts and options are recognized as income or expense during the year.
10] Cenvat Credit
Cenvat credit on Raw Materials and Capital Goods has been accounted for by reducing the purchase cost of Raw Materials and Capital Goods respectively.
11] Employee Benefits
[a] Short Term Employee Benefits
Short Term Employee Benefits are recognized as an expense at the undiscounted amount in the Statement of Profit
and Loss of the year in which the related service is rendered.
[b] Post-employment Benefits
[i] Provident and Family Pension Fund
The eligible employees of the Company are entitled to receive post employment benefits in respect of provident and family pension funds, in which both the employees and the Company make monthly contributions at a specified percentage of the employees eligible salary. The contributions are made to the provident fund managed by the trust set up by the Company which are charged to the Statement of Profit and Loss as incurred. Since the Company is obligated to meet interest shortfall, if any, with respect to covered employees, such employee benefit plan is classified as Defined Benefit Plan in accordance with the Guidance on implementing Accounting Standard (AS) 15 (Revised) on Employee Benefits. Contributions towards employees pension scheme is deposited with Regional Provident Fund Commissioner.
[ii] Gratuity
The Company has an obligation towards gratuity - a defined benefit retirement plan covering eligible employees. The plan provides a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service and is payable thereafter on occurrence of any of above events. The Company has obtained insurance policies with the Life Insurance Corporation of India (LIC) and makes an annual contribution to LIC for amounts notified by LIC. The Company accounts for gratuity benefits payable in future based on an independent external actuarial valuation carried out at the end of the year using the Projected Unit Cost Method, Actuarial gains and losses are recognized in the Statement of Profit and Loss.
[iii] Superannuation
The eligible employees of the Company are entitled to receive post employment benefits of superannuation under Company''s Senior Officers Superannuation Scheme to which the Company makes annual contribution at a specified percentage of the employees'' salary subject to the contribution not exceeding Rs.1,00,000/- p.a. except in the case of Manager where the upper limit of Rs.1,00,000/- is not applicable. The contribution is made to the Life Insurance Corporation of India (LIC). Superannuation is classified as Defined Contribution Plan as the Company has no further obligations beyond making the contribution. The Company''s contribution is charged to the Statement of Profit and Loss as incurred.
[iv] Other Long-Term Employee Benefits - Compensated Absences
The Company provided for encashment of leave or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment/ a ailment. The Company makes provisions for compensated absences based on an independent actuarial valuation carried out at the end of the year. Actuarial gains and losses are recognized in the Statement of Profit and Loss.
12] Segment Reporting
Styrenics is the primary business segment of the Company. There are no separate segments within the Company as defined by AS 17 (Segment Reporting) notified under section 133 of the Companies Act, 2013, read together with rule 7 of the Companies (Accounts) Rules, 2014 except Geographical segment as reportable segment.
13] Taxation
[a] The Company provides current tax based on the provisions of the Income Tax Act, 1961 applicable to it.
[b] Deferred Tax Asset or Liability is recognized for timing differences between the profit as per financial statements and the profit offered for Income tax, based on tax rates that have been enacted or substantively enacted at the Balance Sheet date and is recognized on timing differences that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax assets are recognized on carry forward of unabsorbed depreciation and tax losses only if there is virtual certainty that sufficient future taxable income will be available against which such deferred tax asset can be realized. Other deferred tax assets are recognized only to the extent there is a reasonable certainty of realization in future. The effect on deferred tax assets and liabilities of change in tax rates is recognized in the Statement of Profit and Loss in the period of enactment of the change.
Minimum Alternate Tax (MAT) paid in a year is charged to the Statement of Profit and Loss as current tax. The Company recognizes MAT credit available as an asset only to the extent that there is convincing evidence that the Company will pay normal income tax during the specified period.
Deferred Tax Assets on carry forward of unabsorbed depreciation and tax losses are recognized only if there is reasonable certainty that sufficient future taxable income will be available, against which they can be realized.
14] Contingent Liabilities
All known liabilities are provided for in the accounts except liabilities of a contingent nature, which are disclosed at their estimated value in the notes on accounts.
a) Contingent liabilities are disclosed separately by way of note to financial statements after careful evaluation by the management of the facts and legal aspects of the matter involved in the case of
i. probable obligation arising from the past event, when it is not probable that an outflow of resources will be required to settle the obligation.
ii. possible obligation, unless the probability of out flow of resources is remote.
b) Contingent Assets are neither recognized nor disclosed.
A Contingent Liability is disclosed, unless the possibility of an outflow of resources embodying the economic benefit is remote.
15] Provision
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 a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on management''s estimate for the amount required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current estimates of the management.
16] Investments
Investments, which are readily realizable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments. Long - term investments are carried at cost. Diminution, if any, other than temporary, is provided for. Current investments are carried at lower of cost or fair value.
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.
17] Leases
Leases where the less or effectively retains substantially all the rights and benefits of ownership of the leased assets are classified as operating leases. Lease payments under operating leases are recognized as an expense in the Statement of Profit and Loss.
18] Borrowing Costs
Borrowing costs that are directly attributable to the acquisition or production of qualifying assets are capitalized as the cost of the respective assets. Other borrowing costs are charged to the Statement of Profit and Loss in the year in which they are incurred.
19] Earnings Per Share
Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events such as bonus issue, share split, etc., if any that have changed the number of equity shares outstanding, without a corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
Jun 30, 2015
2] Basis of Preparation
The financial statements of the Company are consistently prepared and
presented under historical cost convention on an accrual basis 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 rule 7
of the Companies (Accounts) Rules, 2014 and the relevant provisions of
the Companies Act, 2013. In accordance with first proviso to section
129(1) of the Companies Act, 2013 (the Act), and clause 6 of the
General Instructions given in Schedule III to the Act the items
contained in the enclosed financial statements are in accordance with
the Accounting Standards as referred to herein. The accounting policies
adopted in the preparation of financial statements are consistent with
those of previous year.
All the assets and liabilities have been classified as current or
non-current as per the normal operating cycle of the Company and other
criteria set out in Schedule III to the Companies Act, 2013. Based on
the nature of products and the time between the acquisition of assets
for processing and their realization in cash and cash equivalents, the
Company has ascertained its operating cycle being a period within 12
months for the purpose of current and non-current classification of
assets and liabilities.
3] Use of Estimates
The preparation of financial statements in conformity with Indian
generally accepted accounting principles (GAAP) requires management to
make judgements, estimates and assumptions that affect the reported
amounts of revenue, expenses, assets and liabilities and disclosures
relating to contingent liabilities as at the date of financial
statements and reported amounts of revenues and expenses during the
reporting period. Although these estimates are based on the
management's best knowledge of current events and actions, actual
results could differ from these estimates. Differences on account of
revision of estimates, actual results and existing estimates are
recognised in periods in which the results are known/ materialised in
accordance with the requirements of the respective accounting standard,
as may be applicable.
4] Revenue Recognition
[a] Income and Expenditure
Income and expenditure are accounted on accrual basis and is recognised
when it is reasonably certain of the ultimate collection.
[b] Sale of Goods
Domestic sales are accounted on passing of risks and rewards attached
to the goods to customers. Export sales are accounted on date of bill
of lading. Gross sales include Excise duty but excludes Value Added
Tax/ Central Sales Tax and are net of trade discounts.
[c] Dividend Income
Dividend income is recognised for when the right to receive is
established.
[d] Export Incentives
Benefits on account of entitlement to import duty-free raw materials
under the Advance Authorization Scheme is accounted for in the year of
export calculated on the basis of rate of exchange and import duty
prevailing at the date of the Balance sheet. This is included under the
head "Other Operating Income."
5] Fixed Assets, Capital Work-in-progress, Depreciation and
Amortization:
Fixed Assets
[a] Tangible Assets
Tangible assets are stated at cost net of recoverable taxes, trade
discounts and rebates and include amounts added on revaluation, less
accumulated depreciation and impairment loss, if any. The cost of
tangible assets comprises its purchase price, borrowing cost, net
charges on foreign exchange contracts and adjustments arising from
exchange rate variations attributable to the assets, and any cost
directly attributable to bringing the asset to its working condition
for its intended use.
Subsequent expenditures related to any item of tangible assets are
added to its book value only if they increase the future benefits from
the existing asset beyond its previously assessed standard of
performance.
[b] Capital Work-in-progress,
Projects under which assets are not ready for their intended use are
shown as Capital-Work-in-Progress.
[c] Intangible Assets
Intangible assets are recognised only if they are separately
identifiable and the Company expects to receive future economic
benefits arising out of them. Intangible assets are stated at cost of
acquisition net of recoverable taxes less accumulated amortization/
depletion and impairment loss, if any. The cost comprises purchase
price, borrowing costs, net charges on foreign exchange contracts and
adjustments arising from exchange rate variations attributable to the
intangible assets and any cost directly attributable to bringing the
asset to its working condition for the intended use.
[d] Depreciation and Amortization
Depreciation is provided on a straight-line basis over the useful life
as prescribed in Schedule II to the Companies Act, 2013, unless
otherwise specified.
When significant parts of the fixed assets are required to be replaced
at interval, the Company depreciates them separately based on their
specific useful lives. All other repair and maintenance costs are
recognized in the Statement of Profit and Loss as incurred.
Depreciable amount for assets is the cost of an asset less its
estimated residual value.
In case of certain assets, based on the technical evaluation, the
Company uses different useful life than those prescribed in Schedule II
to the Companies Act, 2013. Such class of assets and their estimated
useful lives are as under:
Assets Useful Life
Plant and Machinery 15 to 25 Years
Intangible assets are amortized over the estimated period of future
economic benefit of the asset or a period of six years, whichever is
lower.
6] Impairment of Assets
The carrying amounts of Tangible and Intangible assets are tested for
impairment at each Balance Sheet date to determine if there is any
indication of impairment, based on internal / external factors. If any
such indication exists, an estimate of the recoverable amount of the
asset / cash generating unit is made. Assets whose carrying value
exceeds their recoverable amount are written down to the recoverable
amount. Recoverable amount is higher of an asset's or cash generating
unit's net selling price and its value in use. The reduction is treated
as an impairment loss and is recognized in the Statement of Profit and
Loss. If at the Balance Sheet date there is an indication that if a
previously assessed impairment loss no longer exists, the recoverable
amount is reassessed and the assets are reflected at the recoverable
amount.
7] Inventories
Inventories are valued as under :
[a] Raw materials, packing material, stores and spares are valued at
lower of cost and net realizable value. However, 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 of raw
materials, components and stores and spares is determined on a moving
weighted average basis.
[b] Stock in process is valued at lower of cost (on a moving weighted
average basis) and net realizable value.
[c] Finished goods (including in transit) are valued at cost (on a
moving weighted average basis) or net realizable value whichever is
lower. Cost for this purpose includes direct materials, direct labour
and appropriate overheads and depreciation.
8] Cash and Cash Equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank, cash / cheques in hand, demand deposits with
banks and other short-term investments with an original maturity of
three months or less.
9] Foreign Exchange Transactions and Forward Contracts
Foreign currency transactions are accounted for at the exchange rate
prevailing on the date of the transaction. All monetary foreign
currency assets and liabilities are converted at the exchange rates
prevailing at the date of the balance sheet. All exchange differences
other than in relation to acquisition of fixed assets and other long
term foreign currency monetary liabilities are dealt with in the
Statement of Profit and Loss.
Foreign exchange differences on long term foreign currency monetary
items relating to acquisition of depreciable assets are adjusted to the
carrying cost of the assets and in other cases, if any, accumulated in
"Foreign Currency Monetary Item Translation Difference Account" and
amortised over the balance period of loan.
In respect of Foreign Exchange contracts entered into to hedge foreign
currency risks, the difference between the forward rate and exchange
rate at the inception of the contract is recognized as income or
expense over the life of the contract. Option contracts entered into
to hedge foreign currency hedge are marked to market at the date of
balance sheet. The difference between premium paid and the current
market value of the option is taken to the statement of Profit and Loss
account. Gains if any, are ignored. Profit or loss on cancellations/
renewals of forward contracts and options are recognized as income or
expense during the year.
10] Cenvat Credit
Cenvat credit on Raw Materials and Capital Goods has been accounted for
by reducing the purchase cost of Raw Materials and Capital Goods
respectively.
11] Employee Benefits
[a] Short Term Employee Benefits
Short Term Employee Benefits are recognized as an expense at the
undiscounted amount in the Statement of Profit and Loss of the year in
which the related service is rendered.
[b] Post-employment Benefits
[i] Provident and Family Pension Fund
The eligible employees of the Company are entitled to receive post
employment benefits in respect of provident and family pension funds,
in which both the employees and the Company make monthly contributions
at a specified percentage of the employees eligible salary. The
contributions are made to the provident fund managed by the trust set
up by the Company which are charged to the Statement of Profit and Loss
as incurred. Since the Company is obligated to meet interest shortfall,
if any, with respect to covered employees, such employee benefit plan
is classified as Defined Benefit Plan in accordance with the Guidance
on implementing Accounting Standard (AS) 15 (Revised) on Employee
Benefits. Contributions towards employees pension scheme is deposited
with Regional Provident Fund Commissioner.
[ii] Gratuity
The Company has an obligation towards gratuity - a defined benefit
retirement plan covering eligible employees. The plan provides a lump
sum payment to vested employees at retirement, death while in
employment or on termination of employment of an amount equivalent to
15 days salary payable for each completed year of service or part
thereof in excess of six months. Vesting occurs upon completion of five
years of service and is payable thereafter on occurrence of any of
above events. The Company has obtained insurance policies with the Life
Insurance Corporation of India (LIC) and makes an annual contribution
to LIC for amounts notified by LIC. The Company accounts for gratuity
benefits payable in future based on an independent external actuarial
valuation carried out at the end of the year using the Projected Unit
Cost Method, Actuarial gains and losses are recognized in the Statement
of Profit and Loss.
[iii] Superannuation
The eligible employees of the Company are entitled to receive post
employment benefits of superannuation under Company's Senior Officers
Superannuation Scheme to which the Company makes annual contribution at
a specified percentage of the employees' salary subject to the
contribution not exceeding Rs.1,00,000/- p.a. except in the case of
Manager where the upper limit of Rs.1,00,000/- is not applicable. The
contribution is made to the Life Insurance Corporation of India (LIC).
Superannuation is classified as Defined Contribution Plan as the
Company has no further obligations beyond making the contribution. The
Company's contribution is charged to the Statement of Profit and Loss
as incurred.
[iv] Other Long-Term Employee Benefits - Compensated Absences
The Company provided for encashment of leave or leave with pay subject
to certain rules. The employees are entitled to accumulate leave
subject to certain limits for future encashment/ availment. The Company
makes provisions for compensated absences based on an independent
actuarial valuation carried out at the end of the year. Actuarial gains
and losses are recognized in the Statement of Profit and Loss.
12] Segment Reporting
Styrenics is the primary business segment of the Company. There are no
separate segments within the Company as defined by AS 17 (Segment
Reporting) notified under section 133 of the Companies Act, 2013, read
together with rule 7 of the Companies (Accounts) Rules, 2014 except
Geographical segment as reportable segment.
13] Taxation
[a] The Company provides current tax based on the provisions of the
Income Tax Act, 1961 applicable to it.
[b] Deferred Tax Asset or Liability is recognised for timing
differences between the profit as per financial statements and the
profit offered for Income tax, based on tax rates that have been
enacted or substantively enacted at the Balance Sheet date and is
recognized on timing differences that originate in one period and are
capable of reversal in one or more subsequent periods. Deferred tax
assets are recognized on carry forward of unabsorbed depreciation and
tax losses only if there is virtual certainty that sufficient future
taxable income will be available against which such deferred tax asset
can be realized. Other deferred tax assets are recognised only to the
extent there is a reasonable certainty of realization in future. The
effect on deferred tax assets and liabilities of change in tax rates is
recognized in the Statement of Profit and Loss in the period of
enactment of the change.
Minimum Alternate Tax (MAT) paid in a year is charged to the Statement
of Profit and Loss as current tax. The Company recognizes MAT credit
available as an asset only to the extent that there is convincing
evidence that the Company will pay normal income tax during the
specified period.
Deferred Tax Assets on carry forward of unabsorbed depreciation and tax
losses are recognised only if there is reasonable certainty that
sufficient future taxable income will be available, against which they
can be realized.
14] Contingent Liabilities
All known liabilities are provided for in the accounts except
liabilities of a contingent nature, which are disclosed at their
estimated value in the notes on accounts.
a) Contingent liabilities are disclosed separately by way of note to
financial statements after careful evaluation by the management of the
facts and legal aspects of the matter involved in the case of
i. probable obligation arising from the past event, when it is not
probable that an outflow of resources will be required to settle the
obligation.
ii. possible obligation, unless the probability of out flow of
resources is remote.
b) Contingent Assets are neither recognised nor disclosed.
A Contingent Liability is disclosed, unless the possibility of an
outflow of resources embodying the economic benefit is remote.
15] Provision
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
a reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on management's estimate for the
amount required to settle the obligation at the balance sheet date.
These are reviewed at each balance sheet date and adjusted to reflect
the current estimates of the management.
16] Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments. Long - term investments are
carried at cost. Diminution, if any, other than temporary, is provided
for. Current investments are carried at lower of cost or fair value.
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.
17] Leases
Leases where the lessor effectively retains substantially all the
rights and benefits of ownership of the leased assets are classified as
operating leases. Lease payments under operating leases are recognised
as an expense in the Statement of Profit and Loss.
18] Borrowing Costs
Borrowing costs that are directly attributable to the acquisition or
production of qualifying assets are capitalised as the cost of the
respective assets. Other borrowing costs are charged to the Statement
of Profit and Loss in the year in which they are incurred.
19] Earnings Per Share
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders (after
deducting preference dividends and attributable taxes) by the weighted
average number of equity shares outstanding during the period. The
weighted average number of equity shares outstanding during the period
is adjusted for events such as bonus issue, share split, etc., if any
that have changed the number of equity shares outstanding, without a
corresponding change in resources.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
Jun 30, 2014
1] Corporate Information
Supreme Petrochem Limited (SPL) is engaged in the manufacture of
Polystyrene (PS), Expendable Polystyrene (EPS), Specialty Polymers &
Compounds and Extruded Polystyrene (XPS) with manufacturing facilities
at Nagothane Dist Raigad, Maharashtra and Ammulavoyil Village, Manali
New Township, Chennai, Tamil Nadu. SPL also has a captive gas power
plant at Nagothane.
2] Basis of Preparation
These financial statements have been prepared in accordance with the
generally accepted accounting principles in India, on the basis of
going concern under the historical cost convention and also on accrual
basis. These financial statements comply, in all material aspects, with
the provisions of the Companies Act, 1956 and the Companies Act, 2013
(to the extent applicable) and also accounting standards prescribed by
the Companies (Accounting Standards) Rules, 2006, which continue to be
applicable in respect of Section 133 of the Companies Act, 2013 in
terms of General Circular 15/2013 dated September 13, 2013 of the
Ministry of Corporate Affairs.
All the assets and liabilities have been classified as current or
non-current as per the normal operating cycle of the Company and other
criteria set out in Schedule VI to the Companies Act, 1956. Based on
the nature of products and the time between the acquisition of assets
for processing and their realization in cash and cash equivalents, the
Company has ascertained its operating cycle being a period within 12
months for the purpose of current and non-current classification of
assets and liabilities.
3] Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires estimates and assumptions to be
made that affect the reported amounts of assets and liabilities on the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from these estimates. Differences between actual results and estimates
are recognized in the period in which the results are known/
materialised.
4] Revenue Recognition
[a] Income and Expenditure
Income and expenditure are accounted on accrual basis. Income in
respect of insurance / other claims, interest, commission, etc. is
recognised when it is reasonably certain that the ultimate collection
will be made.
[b] Sale of Goods
Domestic sales are accounted on dispatch of goods to customers. Export
sales are accounted on date of bill of lading. Gross Sales include
Excise duty but exclude Value Added Tax/ Central Sales Tax and are net
of trade discounts.
[c] Dividend Income
Dividend income is recognised for when the right to receive is
established.
[d] Purchases
Purchases are net of Value Added Tax set off and Cenvat wherever
applicable, but include inward freight. Import purchases are accounted
on date of bill of lading.
[e] Export Incentives
Benefits on account of entitlement to import duty-free raw materials
under the Advance Licence scheme is accounted for in the year of export
calculated on the basis of rate of exchange and import duty prevailing
at the date of the Balance sheet. This is included under the head
"Other Operating Income."
5] Fixed Assets, Capital Work-in-progress, Depreciation and
Amortisation:
Fixed Assets
[a] Tangible Assets
Tangible assets are stated at cost net of recoverable taxes, trade
discounts and rebates and include amounts added on revaluation, less
accumulated depreciation and impairment loss, if any. The cost of
tangible assets comprises its purchase price, borrowing cost, net
charges on foreign exchange contracts and adjustments arising from
exchange rate variations attributable to the assets, and any cost
directly attributable to bringing the asset to its working condition
for its intended use.
Subsequent expenditures related to any item of tangible assets are
added to its book value only if they increase the future benefits from
the existing asset beyond its previously assessed standard of
performance.
Projects under which assets are not ready for their intended use are
shown as Capital-Work-in-Progress.
[b] Intangible Assets
Intangible Assets are recognised only if they are separately
identifiable and the Company expects to receive future economic
benefits arising out of them. Intangible Assets are stated at cost of
acquisition net of recoverable taxes less accumulated amortisation/
depletion and impairment loss, if any. The cost comprises purchase
price, borrowing costs, net charges on foreign exchange contracts and
adjustments arising from exchange rate variations attributable to the
intangible assets and any cost directly attributable to bringing the
asset to its working condition for the intended use.
[c] Depreciation and Amortisation
Depreciation on Tangible Fixed Assets (except free hold land) is
provided on "Straight Line Method" at the rates and in the manner
specified in the Schedule XIV to the Companies Act, 1956 Intangible
assets are amortised over the estimated period of future economic
benefit of the asset or a period of five years, whichever is lower.
6] Impairment of Assets
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. An impairment loss is charged to the Statement
of Profit and Loss in the year in which an asset is identified as
impaired. The impairment loss recognized in prior accounting period is
reversed if there has been a change in the estimate of recoverable
amount.
7] Inventories
Inventories are valued as under :
[a] Raw materials, packing material, stores and spares are valued at
lower of cost and net realizable value. However, 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 of raw
materials, components and stores and spares is determined on a moving
weighted average basis.
[b] Stock in process is valued at lower of cost (a moving weighted
average basis) and net realizable value.
[c] Finished goods (including in transit) are valued at cost (on moving
weighted average basis) or net realizable value whichever is lower.
Cost for this purpose includes direct materials, direct labour and
appropriate overheads and depreciation.
8] Cash and Cash Equivalents
Cash and cash equivalents for the purposes of cash flow statement
comprise cash at bank, cash / cheques in hand, demand deposits with
banks and other short-term investments with an original maturity of
three months or less.
9] Foreign exchange transactions and forward contracts
Foreign currency transactions are accounted for at the exchange rate
prevailing on the date of the transaction. All monetary foreign
currency assets and liabilities are converted at the exchange rates
prevailing at the date of the balance sheet. All exchange differences
other than in relation to acquisition of fixed assets and other long
term foreign currency monetary liabilities are dealt with in the
Statement of Profit and Loss.
In respect of Foreign Exchange contracts entered into to hedge foreign
currency risks, the difference between the forward rate and exchange
rate at the inception of the contract is recognized as income or
expense over the life of the contract. Profit or loss on
cancellations/ renewals of forward contracts is recognized during the
year.
10] Cenvat Credit
Cenvat credit on Raw Materials and Capital Goods has been accounted for
by reducing the purchase cost of Raw Materials and Capital Goods
respectively.
11] Employee Benefits
[a] Short Term Employee Benefits
Short Term Employee Benefits are recognized as an expense at the
undiscounted amount in the Statement of Profit and Loss of the year in
which the related service is rendered.
[b] Post-employment Benefits
[i] Provident and Family Pension Fund
The eligible employees of the Company are entitled to receive post
employment benefits in respect of provident and family pension funds,
in which both the employees and the Company make monthly contributions
at a specified percentage of the employees eligible salary. The
contributions are made to the provident fund managed by the trust set
up by the Company which are charged to the Statement of Profit and Loss
as incurred. Since the Company is obligated to meet interest shortfall,
if any, with respect to covered employees, such employee benefit plan
is classified as Defined Benefit Plan in accordance with the Guidance
on implementing Accounting Standard (AS) 15 (Revised) on Employee
Benefits. Contributions towards employees pension scheme is deposited
with Regional Provident Fund Commissioner.
[ii] Gratuity
The Company has an obligation towards gratuity - a defined benefit
retirement plan covering eligible employees. The plan provides a lump
sum payment to vested employees at retirement, death while in
employment or on termination of employment of an amount equivalent to
15 days salary payable for each completed year of service or part
thereof in excess of six months. Vesting occurs upon completion of five
years of service and is payable thereafter on occurrence of any of
above events. The Company has obtained insurance policies with the Life
Insurance Corporation of India (LIC) and makes an annual contribution
to LIC for amounts notified by LIC. The Company accounts for gratuity
benefits payable in future based on an independent external actuarial
valuation carried out at the end of the year using the Projected Unit
Cost Method, Actuarial gains and losses are recognized in the Statement
of Profit and Loss.
[iii] Superannuation
The eligible employees of the Company are entitled to receive post
employment benefits of superannuation under Company''s Senior Officers
Superannuation Scheme to which the Company makes annual contribution at
a specified percentage of the employees'' salary as defined under the
scheme. The contribution is made to the Life Insurance Corporation of
India (LIC). Superannuation is classified as Defined Contribution Plan
as the Company has no further obligations beyond making the
contribution. The Company''s contribution is charged to the Statement of
Profit and Loss as incurred.
[iv] Other Long-Term Employee Benefits - Compensated Absences
The Company provided for encashment of leave or leave with pay subject
to certain rules. The employees are entitled to accumulate leave
subject to certain limits for future encashment/ availment. The Company
makes provisions for compensated absences based on an independent
actuarial valuation carried out at the end of the year. Actuarial gains
and losses are recognized in the Statement of Profit and Loss.
12] Segment Reporting
Styrenics is the primary business segment of the Company. There are no
separate segments within the Company as defined by AS 17 (Segment
Reporting) prescribed by the Companies (Accounting Standards) Rules,
2006, which continue to be applicable in respect of Section 133 of the
Companies Act, 2013 in terms of General Circular 15/2013 dated
September 13, 2013 of the Ministry of Corporate Affairs. except
Geographical segment as reportable segment.
13] Taxation
[a] Current Income Tax and Wealth Tax have been accounted as per
payable method.
[b] Deferred Tax Asset or Liability is recognised for timing
differences between the profit as per financial statements and the
profit offered for Income tax, based on tax rates that have been
enacted or substantively enacted at the Balance Sheet date. Deferred
Tax Assets are recognised only if there is reasonable certainty that
sufficient future taxable income will be available, against which they
can be realized.
14] Contingent Liabilities
All known liabilities are provided for in the accounts except
liabilities of a contingent nature, which are disclosed at their
estimated value in the notes on accounts.
a) Contingent liabilities are disclosed separately by way of note to
financial statements after careful evaluation by the management of the
facts and legal aspects of the matter involved in the case of
i. probable obligation arising from the past event, when it is not
probable that an outflow of resources will be required to settle the
obligation.
ii. possible obligation, unless the probability of out flow of
resources is remote.
b) Contingent Assets are neither recognised nor disclosed.
A Contingent Liability is disclosed, unless the possibility of an
outflow of resources embodying the economic benefit is remote.
15] Provision
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
a reliable estimate can be made. Provisions are not discounted to its
present value and are determined based on management''s estimate for the
amount required to settle the obligation at the balance sheet date.
These are reviewed at each balance sheet date and adjusted to reflect
the current estimates of the management.
16] Investments
Investments, which are readily realizable and intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments.
Long - term investments are carried at cost. Diminution, if any, other
than temporary, is provided for. Current investments are carried at
lower of cost or fair value.
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.
17] Leases
Leases where the lessor effectively retains substantially all the
rights and benefits of ownership of the leased assets are classified as
operating leases. Lease payments under operating leases are recognised
as an expense in the Statement of Profit and Loss.
18] Borrowing Costs
Borrowing costs that are directly attributable to the acquisition or
production of qualifying assets are capitalised as the cost of the
respective assets. Other borrowing costs are charged to the Statement
of Profit and Loss in the year in which they are incurred.
Jun 30, 2013
1) Basis of preparation
These financial statements have been prepared on accrual basis and
under historical cost convention and in compliance, in all material
aspects, with the applicable Accounting Principles in India, the
applicable Accounting Standards notified under Section 211 (3C) and the
relevant provisions of the Companies Act, 1956.
All the assets and liabilities have been classified as current or
non-current as per the normal operating cycle of the Company and other
criteria set out in Schedule VI to the Companies Act, 1956. Based on
the nature of products and the time between the acquisition of assets
for processing and their realization in cash and cash equivalents, the
Company has ascertained its operating cycle being a period within 12
months for the purpose of current and non-current classification of
assets and liabilities.
2) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires estimates and assumptions to be
made that affect the reported amounts of assets and liabilities on the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Differences between actual
results and estimates are recognized in the period in which the results
are known/ materialized.
3) Revenue Recognition
[a] income and Expenditure
Items of Income and Expenditure are generally recorded on accrual
basis.
[b] Export Incentives
Benefits on account of entitlement to import duty-free raw materials
under the Advance Licence scheme is accounted for in the year of export
calculated on the basis of rate of exchange and import duty prevailing
at the date of the Balance sheet. This is included under the head
"Other Operating Income."
4) Fixed Assets and Depreciation / Amortisation
[a] Fixed Assets
Fixed Assets (except freehold land) are valued at cost less
depreciation. Cost comprises of the purchase price and any attributable
cost of bringing the asset to working condition for its intended use.
[b] Depreciation and Amortisation
i. Depreciation on Tangible Fixed Assets (except freehold land) is
provided on "Straight Line Method" at the rates and in the manner
specified in Schedule XIV to the Companies Act, 1956.
ii. Amortisation on Intangible Fixed Assets is provided over a period
of five years.
5) Impairment of Assets
An asset is treated as impaired when the carrying cost of asset exceeds
its recoverable value. An impairment loss is charged to the Profit and
Loss Account in the year in which an asset is identified as impaired.
The impairment loss recognized in prior accounting period is reversed
if there has been a change in the estimate of recoverable amount.
6) Inventories
Inventories are valued as under:
a. Raw materials (including packing materials) and traded goods
(including in transit) are valued at cost (on moving weighted average
basis) or net realizable value, whichever is lower.
b. Stores and spares are valued at cost (on weighted average basis).
c. Stock in process is valued at cost (on moving weighted average
basis) of raw materials.
d. Finished goods (including in transit) are valued at cost (on moving
weighted average basis) or net realizable value whichever is lower.
Cost for this purpose includes direct materials, direct labour and
appropriate overheads and depreciation.
7) Foreign exchange transactions and forward contracts
i. Foreign currency transactions are accounted for at the exchange rate
prevailing on the date of the transaction. All monetary foreign
currency assets and liabilities are converted at the exchange rates
prevailing at the date of the balance sheet. All exchange differences
other than in relation to acquisition of fixed assets and other long
term foreign currency monetary liabilities are dealt with in the
Statement of Profit and Loss.
ii. In respect of Foreign Exchange contracts entered into to hedge
foreign currency risks, the. difference between the forward rate and
exchange rate at the inception of the contract is recognized as income
or expense over the life of the contract. Profit or loss on
cancellations/ renewals of forward contracts is recognized during the
year. In case of options contracts, the losses are accounted on marked
to market basis.
8) Cenvat Credit
Cenvat credit on Raw Materials and Capital Goods has been accounted for
by reducing the purchase cost of Raw Materials and Capital Goods
respectively.
9) Employee Benefits
a. Short Term Employee Benefits
Short Term Employee Benefits are recognized as an expense at the
undiscounted amount In the Statement of Profit and Loss of the year in
which the related service is rendered.
b. Post-employment Benefits
[i] Provident and Family Pension Fund
The eligible employees of the Company are entitled to receive post
employment benefits in respect of provident and family pension funds,
in which both the employees and the Company make monthly contributions
at a specified percentage of the employees eligible salary. The
contributions are made to the provident fund managed by the trust set
up by the Company which are charged to the Statement of Profit and Loss
as incurred. Since the Company is obligated to meet interest shortfall,
if any, with respect to covered employees, such employee benefit plan
is classified as Defined Benefit Plan in accordance with the Guidance
on implementing Accounting Standard (AS) 15 (Revised) on Employee
Benefits. Contributions towards employees pension scheme is deposited
with Regional Provident Fund Commissioner.
[ii] Superannuation
The eligible employees of the Company are entitled to receive post
employment benefits of superannuation under Company''s Senior Officers
Superannuation Scheme to which the Company makes annual contribution at
a specified percentage of the employees'' salary as defined under the
scheme. The contribution is made to the Life Insurance Corporation of
India (LIC). Superannuation is classified as Defined Contribution Plan
as the Company has no further obligations beyond making the
contribution. The Company''s contribution is charged to the Statement of
Profit and Loss as incurred.
[iii] Gratuity
The Company has an obligation towards gratuity - a defined benefit
retirement plan covering eligible employees. The plan provides a lump
sum payment to vested employees at retirement, death while in
employment or on termination of employment of an amount equivalent to
15 days salary payable for each completed year of service or part
thereof in excess of six months. Vesting occurs upon completion of five
years of service and is payable thereafter on occurrence of any of
above events. The Company has obtained insurance policies with the Life
Insurance Corporation of India (LIC) and makes an annual contribution
to LIC for amounts notified by LIC. The Company accounts for gratuity
benefits payable in future based on an independent external actuarial
valuation carried out at the end of the year. Actuarial gains and
losses are recognized in the Statement of Profit and Loss.
c. Other Long-Term Employee Benefits - Compensated Absences
The Company provided for encashment of leave or leave with pay subject
to certain rules. The employees are entitled to accumulate leave
subject to certain limits for future encashment/ availment. The Company
makes provisions for compensated absences based on an independent
actuarial valuation carried out at the end of the year. Actuarial gains
and losses are recognized in the Statement of Profit and Loss.
10) Segment Reporting
Styrenics is the primary business segment of the Company. There are no
separate segments within the Company as defined by AS 17 (Segment
Reporting) issued by The Institute of Chartered Accountants of India
except Geographical segment as reportable segment.
11) Taxation
(a) Current Income Tax and Wealth Tax have been accounted as per
payable method.
(b) Deferred Tax Asset or Liability is recognised for timing
differences between the profit as per financial statements and the
profit offered for Income tax, based on tax rates that have been
enacted or substantively enacted at the Balance Sheet date. Deferred
Tax Assets are recognised only if there is reasonable certainty that
sufficient future taxable income will be available, against which they
can be realized.
12) Contingent Liabilities
Alt known liabilities are provided for in the accounts except
liabilities of a contingent nature, which are disclosed at their
estimated value in the notes on accounts.
Jun 30, 2012
1] BASIS OF PREPARATION.
These financial statements have been prepared on accrual basis and
under historical cost convention and in compliance, in all material
aspects, with the applicable Accounting Principles in India, the
applicable Accounting Standards notified under Section 211 (3C) and the
relevant provisions of the Companies Act, 1956.
All the assets and liabilities have been classified as current or
non-current as per the normal operating cycle of the Company and other
criteria set out in Schedule VI to the Companies act, 1956. Based on
the nature of products and the time between the acquisition of assets
for processing and their realization in cash and cash equivalents, the
Company has ascertained its operating cycle being a period within 12
months for the purpose of current and non-current classification of
assets and liabilities.
2] USE OF ESTIMATES.
The preparation of financial statements in conformity with generally
accepted accounting principles requires estimates and assumptions to be
made that affect the reported amounts of assets and liabilities on the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Differences between actual
results and estimates are recognized in the period in which the results
are known/ materialized.
3] REVENUE RECOGNITION
[a] Income and Expenditure.
Items of Income and Expenditure are generally recorded on accrual
basis.
[b] Export Incentives
Benefits on account of entitlement to import duty-free raw materials
under the Advance Licence scheme is accounted for in the year of export
calculated on the basis of rate of exchange and import duty prevailing
at the date of the Bal- ance sheet. This is included under the head
"Other Operating Income."
4] FIXED ASSETS AND DEPRECIATION.
[a] Fixed Assets
Fixed Assets except freehold land are valued at cost less depreciation.
Costs comprise of the purchase price and any attributable cost of
bringing the asset to working condition for its intended use.
[b] Depreciation
Depreciation on Fixed Assets except freehold land is provided on
"Straight Line Method" at the rates and in the manner specified in
Schedule XIV to the Companies Act, 1956.
5] INVESTMENTS.
Investments are stated at cost. Temporary diminution in the value of
long term investments, meant to be held for a long period of time is
not recognised.
6] INVENTORIES
Inventories are valued as under :
a. Raw materials (including packing materials) and traded goods
(including in transit) are valued at cost (on moving weighted average
basis) or net realizable value, whichever is lower.
b. Stores and spares are valued at cost (on weighted average basis).
c. Stock in process is valued at cost (on moving weighted average
basis) of raw materials.
d. Finished goods (including in transit) are valued at cost (on moving
weighted average basis) or net realizable value whichever is lower.
Cost for this purpose includes direct materials, direct labour and
appropriate overheads and depreciation.
7] FOREIGN EXCHANGE TRANSACTIONS AND FORWARD CONTRACTS.
i. Foreign currency transactions are accounted for at the exchange
rate prevailing on the date of the transaction. All monetary foreign
currency assets and liabilities are converted at the exchange rates
prevailing at the date of the balance sheet. All exchange differences
other than in relation to acquisition of fixed assets and other long
term foreign currency monetary liabilities are dealt with in the
Statement of Profit and Loss.
ii. In accordance with Accounting Standard 11, "Accounting for the
effects of changes in foreign exchange rates" exchange differences
arising in respect of long term foreign currency monetary items :
- Used for acquisition of depreciable capital asset, are added to or
deducted from the cost of asset and are depreciated over the balance
life of asset.
- Used for the purpose other than the acquisition of depreciable
capital asset, are accumulated in Foreign Currency Monetary Item
Translation Difference Account [FCMITDA] and amortised over the balance
period of such liability.
iii. In respect of Foreign Exchange contracts entered into to hedge
foreign currency risks, the difference between the forward rate and
exchange rate at the inception of the contract is recognized as income
or expense over the life of the contract. Profit or loss on
cancellations/ renewals of forward contracts is recognized during the
year. In case of options contracts, the losses are accounted on mark to
market basis.
8] CENVAT CREDIT
Cenvat credit on Raw Materials and Capital Goods has been accounted for
by reducing the purchase cost of Raw Materials and Capital Goods
respectively.
9] EMPLOYEE BENEFITS
[a] Short Term Employee Benefits
Short Term Employee Benefits are recognized as an expense at the
undiscounted amount in the Statement of Profit and Loss of the year in
which the related service is rendered.
[b] Post-employment Benefits
[i] Provident and Family Pension Fund
The employees of the Company are entitled to receive post employment
benefits in respect of provident and family pension funds, in which
both the employees and the Company make monthly contributions at a
specified percentage of the employees eligible salary. The
contributions are made to the provident fund managed by the trust set
up by the Company which are charged to the Statement of Profit and Loss
as incurred. Since the Company is obligated to meet interest shortfall,
if any, with respect to covered employees, such employee benefit plan
is classified as Defined Benefit Plan in accordance with the Guidance
on implementing Accounting Standard (AS) 15 (Revised) on Employee
Benefits. Contributions towards employees pension scheme is deposited
with Regional Provident Fund Commissioner.
[ii] Superannuation
The eligible employees of the Company are entitled to receive post
employment benefits of superannuation under Company's Senior Officers
Superannuation Scheme to which the Company makes annual contribution at
a specified percentage of the employees' salary as defined under the
scheme. The contribution is made to the Life Insurance Corporation of
India (LIC). Superannuation is classified as Defined Contribution Plan
as the Company has no further obligations beyond making the
contribution. The Company's contribution is charged to the Statement
of Profit and Loss as incurred.
[iii] Gratuity
The Company has an obligation towards gratuity - a defined benefit
retirement plan covering eligible employees. The plan provides a lump
sum payment to vested employees at retirement, death while in
employment or on termination of employment of an amount equivalent to
15 days salary payable for each completed year of service or part
thereof in excess of six months. Vesting occurs upon completion of five
years of service and is payable thereafter on occurrence of any of
above events. The Company has obtained insurance policies with the Life
Insurance Corporation of India (LIC) and makes an annual contribution
to LIC for amounts notified by LIC. The Company accounts for gratuity
benefits payable in future based on an independent external actuarial
valuation carried out at the end of the year. Actuarial gains and
losses are recognized in the Statement of Profit and Loss.
[c] Other Long-Term Employee Benefits - Compensated Absences
The Company provided for encashment of leave or leave with pay subject
to certain rules. The employees are entitled to accumulate leave
subject to certain limits for future encashment/ availment. The Company
makes provisions for compensated absences based on an independent
actuarial valuation carried out at the end of the year. Actuarial gains
and losses are recognized in the Statement of Profit and Loss.
10] SEGMENT REPORTING
Styrenics is the primary business segment of the Company. There are no
separate segments within the Company as defined by AS 17 (Segment
Reporting) issued by The Institute of Chartered Accountants of India
except Geographical segment as reportable segment.
11] TAXATION
(a) Current Income Tax and Wealth Tax have been accounted as per
payable method.
(b) Deferred Tax Asset or Liability is recognised for timing
differences between the profit as per financial statements and the
profit offered for Income tax, based on tax rates that have been
enacted or substantively enacted at the Balance Sheet date. Deferred
Tax Assets are recognised only if there is reasonable certainty that
sufficient future taxable income will be available, against which they
can be realized.
12] CONTINGENT LIABILITIES.
All known liabilities are provided for in the accounts except
liabilities of a contingent nature, which are disclosed at their
estimated value in the notes on accounts.
Jun 30, 2011
1. BASIS OF ACCOUNTING
The accounts are prepared on the basis of historical cost convention
and on accrual basis.
2. REVENUE RECOGNITION
a. Income and Expenditure
Items of Income and Expenditure are generally recorded on accrual
basis.
b. Export Incentives
Benefits on account of entitlement to import duty-free raw materials
under the Advance Licence scheme is accounted for in the year of export
calculated on the basis of rate of exchange and import duty prevailing
at the date of the Balance sheet. This is included under the head
"Other Operating Income."
3. FIXED ASSETS AND DEPRECIATION
a. Fixed Assets
Fixed Assets are valued at cost less depreciation. Costs comprise of
the purchase price and any attributable cost of bringing the asset to
working condition for its intended use.
b. Depreciation
Depreciation on Fixed Assets is provided on "Straight Line Method" at
the rates and in the manner specified in Schedule XIV to the Companies
Act, 1956.
4. INVESTMENTS
Investments are stated at cost. Temporary diminution in the value of
long term investments, meant to be held for a long period of time is
not recognised.
5. INVENTORIES
Inventories are valued as under :
a. Raw materials (including packing materials) and traded goods are
valued at cost (on moving weighted average basis) or net realizable
value whichever is lower.
b. Stores and spares are valued at cost (on weighted average basis).
c. Stock in process is valued at cost (on moving weighted average
basis) of raw materials.
d. Finished goods are valued at cost (on moving weighted average
basis) or net realizable value whichever is lower. Cost for this
purpose includes direct materials, direct labour and appropriate
overheads and depreciation.
6. FOREIGN CURRENCY TRANSACTIONS
a. Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing on the date of the transaction.
b. In case of items which are covered by forward exchange contracts,
the premium or discount arising at the inception of such contract is
amortised as expense or income over the life of the contract. Any
profit or loss arising on cancellation or renewal of such contract is
recognized as income or expense of the period in which it arises.
c. Any income or expense on account of exchange difference either on
settlement or on translation is recognised in the Profit & Loss account
except as mentioned in para (d) below.
d. Exchange differences on translation or settlement of long term
foreign currency monetary items (i.e whose terms of settlement exceeds
twelve months from date of its origination) at rates different from
those at which they were initially recorded or reported in the previous
financial statements, in so far as it relates to acquisition of
depreciable assets are adjusted to the cost of the assets and to be
depreciated as per 3 (b) above. In other cases, these are accumulated
in "Foreign Currency Monetary Item Translation Difference Account" and
amortised by recognition as income or expense in each period over the
balance term of such items till settlement occurs but not beyond March
31, 2012. (Refer Note 7 in Notes to Accounts à Schedule 13).
7. CENVAT CREDIT
CENVAT credit on Raw Materials and Capital Goods has been accounted for
by reducing the purchase cost of Raw Materials and Capital Goods
respectively.
8. EMPLOYEE BENEFITS
Contributions to Provident and Superannuation Funds are accounted on
actual liability basis. Contribution to Group Gratuity Fund based on
actuarial valuation is made to and administered by the Life Insurance
Corporation of India. Provision for Leave encashment benefits is made
on actuarial valuation basis.
9. SEGMENT REPORTING
Styrenics is the primary business segment of the Company. There are no
separate segments within the Company as defined by AS 17 (Segment
Reporting) issued by The Institute of Chartered Accountants of India
except Geographical segment as reportable segment.
10. TAXATION
a. Current Income Tax and Wealth Tax have been accounted as per
payable method.
b. Deferred tax Asset or Liability is recognised for timing
differences between the profit as per financial statements and the
profit offered for Income tax, based on tax rates that have been
enacted or substantively enacted at the Balance Sheet date. Deferred
Tax assets are recognised only if there is reasonable certainty that
sufficient future taxable income will be available, against which they
can be realized.
11. CONTINGENT LIABILITIES
All known liabilities are provided for in the accounts except
liabilities of a contingent nature, which are disclosed at their
estimated value in the notes on accounts.
Jun 30, 2010
1. BASIS OF ACCOUNTING
The accounts are prepared on the basis of historical cost convention
and on accrual basis.
2. FIXED ASSETS
Fixed Assets are valued at cost less depreciation. Costs comprise of
the purchase price and any attributable cost of bringing the asset to
working condition for its intended use.
3. DEPRECIATION
Depreciation on Fixed Assets is provided on "Straight Line Method" at
the rates and in the manner specified in Schedule XIV to the Companies
Act, 1956.
4. INVESTMENTS
Investments are stated at cost. Temporary diminution in the value of
long term investments, meant to be held for a long period of time is
not recognised.
5. INVENTORIES
Inventories are valued as under:
(a) Raw materials (including packing materials) and traded goods are
valued at cost (on weighted average basis) or net realizable value
whichever is lower.
(b) Stores and spares are valued at cost (on weighted average basis).
(c) Stock in process is valued at cost (on weighted average basis) of
raw materials.
(d) Finished goods are valued at cost (on weighted average basis) or
net realizable value whichever is lower. Cost for this purpose includes
direct materials, direct labour and appropriate overheads.
6. FOREIGN CURRENCY TRANSACTIONS
a) Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing on the date of the transaction.
b) In case of items which are covered by forward exchange contracts,
the premium or discount arising at the inception of such contract is
amortised as expense or income over the life of the contract. Any
profit or loss arising on cancellation or renewal of such contract is
recognized as income or expense of the period in which it arises.
c) Any income or expense on account of exchange difference either on
settlement or on translation is recognised in the Profit & Loss account
except as mentioned in para (d) below.
d) Exchange differences on translation or settlement of long term
foreign currency monetary items (i.e whose terms of settlement exceeds
twelve months from date of its origination) at rates different from
those at which they were initially recorded or reported in the previous
financial statements, jn so far as it relates to acquisition of
depreciable assets are adjusted to the cost of the assets and to be
depreciated as per 3 above. In other cases, these are accumulated in
"Foreign Currency Monetary Item Translation Difference Account" and
amortised by recognition as income or expense in each period over the
balance term of such items till settlement occurs but not beyond March
31, 2011. (Refer Note 8 in Notes to Accounts - Schedule 14).
7. CENVAT CREDIT
CENVAT credit on Raw Materials and Capital Goods has been accounted for
by reducing the purchase cost of Raw Materials and Capital Goods
respectively.
8. RECOGNITION OF INCOME AND EXPENDITURE
Items of Income and Expenditure are generally recorded on accrual
basis.
9. EXPORT BENEFITS
Benefits on account of entitlement to import duty-free raw materials
under the Advance Licence scheme is accounted for in the year of export
calculated on the basis of rate of exchange and import duty prevailing
at the date of the Balance sheet. This is included under the head
"Other Operating Income."
10. RETIREMENT BENEFITS
Contributions to Provident and Superannuation Funds are accounted on
actual liability basis. Provisions for Gratuity and Leave encashment
benefit on retirement, are made on actuarial valuation basis.
11. MISCELLANEOUS EXPENDITURE
Loan restructuring fees is amortised over a period of seven years.
12. SEGMENT REPORTING
Styrenics is the primary business segment of the Company. There are no
separate segments within the Company as defined by AS 17 (Segment
Reporting) issued by The Institute of Chartered Accountants of India
except Geographical segment as reportable segment.
13. TAXATION:
(a) Current Income Tax and Wealth Tax have been accounted as per
payable method.
(b) Deferred Tax Asset or Liability is recognised for timing
differences between the profit as per financial statements and the
profit offered for Income Tax, based on tax rates that have been
enacted or substantively enacted at the Balance Sheet date. Deferred
Tax Assets are recognised only if there is reasonable certainty that
sufficient future taxable income will be available, against which they
can be realized.
14. CONTINGENT LIABILITIES
All known liabilities are provided for in the accounts except
liabilities of a contingent nature, which are disclosed at their
estimated value in the notes on accounts.
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