Mar 31, 2023
1. Corporate information
Tata Chemicals Limited (the ''Company'') is a public limited company domiciled in India. Its shares are listed on two stock exchanges in India; the Bombay Stock Exchange (''BSE'') and the National Stock Exchange (''NSE''). The Company is a diversified business dealing in basic chemistry products and specialty products. The Company has a global presence with key subsidiaries in United States of America (''USA''), United Kingdom (''UK'') and Kenya that are engaged in the manufacture and sale of soda ash, industrial salt and related products.
2. Summary of basis of compliance, basis of preparation and presentation, critical accounting estimates, assumptions and judgements and significant accounting policies
The Standalone Financial Statements comply, in all material aspects, with Indian Accounting Standards (''Ind AS'') notified under Section 133 of the Companies Act, 2013 (''the Act'') read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Act.
The Standalone Financial Statements have been prepared on the historical cost basis, except for certain financial instruments and defined benefit plans which are measured at fair value at the end of each reporting period. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in the Schedule III to the Act.
The preparation of the Standalone Financial Statements requires management to make
estimates, assumptions and judgments that affect the reported balances of assets and liabilities and disclosures as at the date of the Standalone Financial Statements and the reported amounts of income and expense for the periods presented.
The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates considering different assumptions and conditions.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods are affected.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying values of assets and liabilities within the next financial year are discussed below.
Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits.
The amount of total deferred tax assets could change if management estimates of projected future taxable income or if tax regulations undergo a change.
Management reviews the estimated useful lives and residual value of PPE and Intangibles at the end of each reporting period. Factors such as changes in the expected level of usage, technological developments and product lifecycle, could significantly impact the economic useful lives and the residual values of these assets. Consequently, the future depreciation charge could be revised and may have an impact on the profit of the future years.
Employee benefit obligations are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments. These include the estimation of the appropriate discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, the employee benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
From time to time, the Company is subject to legal proceedings, the ultimate outcome of each being subject to uncertainties inherent in litigation. A provision for litigation is made when it is considered probable that a payment will be made and the amount can be reasonably estimated. Significant judgement is required when evaluating the provision including, the probability of an unfavourable outcome and the ability to make a reasonable estimate of the amount of potential loss. Litigation provisions are reviewed at each accounting period and revisions made for the changes in facts and circumstances. Contingent liabilities are disclosed in the notes forming part of the Standalone Financial Statements. Contingent assets are not disclosed in the Standalone Financial Statements unless an inflow of economic benefits is probable.
The Company reviews its carrying value of investment in subsidiaries and goodwill carried at cost (net of impairment, if any) annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for in the Standalone Statement of Profit and Loss.
The functional currency of the Company (i.e. the currency of the primary economic environment in which the Company operates) is the Indian Rupee in (''). The financial statements have been rounded off to the nearest '' crore.
On initial recognition, all foreign currency transactions are recorded at exchange rates prevailing on the date of the transaction. Monetary assets and liabilities, denominated in a foreign currency, are translated at the exchange rate prevailing on the balance sheet date and the resultant exchange gains or losses are recognised in the Standalone Statement of Profit and Loss.
An item of property, plant and equipment (''PPE'') is recognised as an asset if it is probable that the future economic benefits associated with the item will flow to the Company and its cost can be measured reliably. These recognition principles are applied to the costs incurred initially to acquire an item of PPE, to the pre-operative and trial run costs incurred (net of sales), if any and also to the costs incurred subsequently to add to, replace part of, or service it and subsequently carried at cost less accumulated depreciation and accumulated impairment losses, if any.
The cost of PPE includes interest on borrowings directly attributable to the acquisition, construction or production of a qualifying asset. A qualifying asset is an asset that necessarily takes a substantial period of time to be made ready for its intended use or sale. Borrowing costs and other directly attributable cost are added to the cost of those assets until such time as the assets are substantially ready for their intended use, which generally coincides with the commissioning date of those assets.
The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision is met.
Machinery spares that meet the definition of PPE are capitalised and depreciated over the useful life of the principal item of an asset.
All other repair and maintenance costs, including regular servicing, are recognised in the Standalone Statement of Profit and Loss as incurred. When a replacement occurs, the carrying value of the replaced part is de-recognised. Where an item of property, plant and equipment comprises major
components having different useful lives, these components are accounted for as separate items.
PPE acquired and put to use for projects are capitalised and depreciation thereon is included in the project cost till the project is ready for commissioning.
Depreciation on PPE (except leasehold improvements) is calculated using the straightline method to allocate their cost, net of their residual values, over their estimated useful lives. However, leasehold improvements are depreciated on a straight-line method over the shorter of their respective useful lives or the tenure of the lease arrangement. Freehold land is not depreciated.
Schedule II to the Act prescribes the useful lives for various class of assets. For certain class of assets, based on technical evaluation and assessment, Management believes that the useful lives adopted by it reflect the periods over which these assets are expected to be used. Accordingly for those assets, the useful lives estimated by the management are different from those prescribed in the Schedule. Management''s estimates of the useful lives for various class of PPE are as given below:
Asset |
Useful life |
Salt Works, Water works, Reservoirs and Pans |
1-30 years |
Plant and Machinery |
1-60 years |
Traction Lines and Railway Sidings |
15 years |
Factory Buildings |
5-60 years |
Other Buildings |
5-60 years |
Furniture and Fittings and Office Equipment (including Computers and Data Processing Equipment) |
1-10 years |
Vehicles |
4-10 years |
Useful lives and residual values of assets are reviewed at the end of each reporting period.
Losses arising from the retirement of, and gains or losses arising from disposal/adjustments of PPE are recognised in the Standalone Statement of Profit and Loss.
I ntangible assets comprise software licenses, product registration fees and rights to use railway wagon.
Intangible assets are measured on initial recognition at cost and subsequently are carried at cost less accumulated amortisation and accumulated impairment losses, if any.
The intangible assets with a finite useful life are amortised using straight line method over their estimated useful lives. The management''s estimates of the useful lives for various class of Intangibles are as given below:
Asset |
Useful life |
Computer software |
5 years |
Other intangible assets |
4- 20 years |
The estimated useful life is reviewed annually by the management.
Gains or losses arising from the retirement or disposal of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset and recognised as income or expense in the Standalone Statement of Profit and Loss.
Projects under commissioning and other CWIP/ intangible assets under development are carried at cost, comprising direct cost, related incidental expenses and attributable borrowing cost.
Subsequent expenditures relating to property, plant and equipment are capitalised only when it is probable that future economic benefit associated with these will flow to the Company and the cost of the item can be measured reliably.
Advances given to acquire property, plant and equipment are recorded as non-current assets and subsequently transferred to CWIP on acquisition of related assets.
I nvestment properties are land and buildings that are held for long term lease rental yields
and/ or for capital appreciation. Investment properties are initially recognised at cost including transaction costs. Subsequently investment properties comprising buildings are carried at cost less accumulated depreciation and accumulated impairment losses, if any.
Depreciation on buildings is provided over the estimated useful lives as specified in note 2.5 above. The residual values, estimated useful lives and depreciation method of investment properties are reviewed, and adjusted on prospective basis as appropriate, at each reporting date. The effects of any revision are included in the Standalone Statement of Profit and Loss when the changes arise.
An investment property is de-recognised when either the investment property has been disposed of or do not meet the criteria of investment property i.e. when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the Standalone Statement of Profit and Loss in the period of de-recognition.
Research expenses are charged to the Standalone Statement of Profit and Loss as expenses in the year in which they are incurred. Development costs are capitalised as an intangible asset under development when the following criteria are met:
⢠the project is clearly defined, and the costs are separately identified and reliably measured;
⢠the technical feasibility of the project is demonstrated;
⢠the ability to use or sell the products created during the project is demonstrated;
⢠the intention to complete the project exists and use or sale of output manufactured during the project;
⢠a potential market for the products created during the project exists or their usefulness, in case of internal use,
is demonstrated, such that the project will generate probable future economic benefits; and
⢠adequate resources are available to complete the project.
These development costs are amortised over the estimated useful life of the projects or the products they are incorporated within. The amortisation of capitalised development costs begins as soon as the related product is released to production.
Non-current assets (including disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable.
Non-current assets classified as held for sale are measured at lower of their carrying amount and fair value less cost to sell.
Non-current assets classified as held for sale are not depreciated or amortised from the date when they are classified as held for sale.
Non-current assets classified as held for sale and the assets and liabilities of a disposal group classified as held for sale are presented separately from the other assets and liabilities in the Standalone Balance Sheet.
A discontinued operation is a component of the entity that has been disposed off or is classified as held for sale and:
⢠represents a separate major line of business or geographical area of operations and;
⢠is part of a single co-ordinated plan to dispose of such a line of business or area of operations.
The results of discontinued operations are presented separately in the Standalone Statement of Profit and Loss.
The Company classifies its financial assets in the following measurement categories:
⢠those to be measured subsequently at fair value (either through OCI, or through profit or loss), and
⢠those measured at amortised cost.
⢠those measured at carrying cost for equity instruments subsidiaries and joint ventures.
The classification depends on the Company''s business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in the Standalone Statement of Profit and Loss or through OCI. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through OCI.
The Company reclassifies debt investments when and only when its business model for managing those assets changes.
A financial asset or financial liability is initially measured at fair value plus, for an item not at fair value through profit and loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. Transaction costs of financial assets carried at fair value through profit or loss are expensed in the Standalone Statement of Profit and Loss.
Subsequent measurement of debt instruments depends on the Company''s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments:
Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortised cost. A gain or loss on a debt investment (unhedged) that is subsequently measured at amortised cost is recognised in the Standalone Statement of Profit and Loss when the asset is derecognised or impaired. Interest income from these financial assets is included in other income using the effective interest rate (''EIR'') method.
Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets'' cash flows represent solely payments of principal and interest, are measured at FVTOCI. Movements in the carrying amount are recorded through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains or losses which are recognised in the Standalone Statement of Profit and Loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to the Standalone Statement of Profit and Loss. Interest income from these financial assets is included in other income using the EIR method.
Assets that do not meet the criteria for amortised cost or FVTOCI are measured at FVTPL. A gain or loss on a debt investment (including current investments) that is subsequently measured at FVTPL (unhedged) is recognised net in the
Standalone Statement of Profit and Loss in the period in which it arises. Interest income from these financial assets is included in other income.
The Company subsequently measures all equity investments at fair value, except investment in subsidiaries and joint ventures which are measured at cost. Where the Company''s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to the Standalone Statement of Profit and Loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified to equity. Dividends from such investments are recognised in the Standalone Statement of Profit and Loss within other income when the Company''s right to receive payments is established. Impairment losses (and reversal of impairment losses) on equity investments measured at FVTOCI are not reported separately from other changes in fair value.
The Company considers all highly liquid investments, which are readily convertible into known amounts of cash, that are subject to an insignificant risk of change in value with a maturity within three months or less from the date of purchase, to be cash equivalents. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage.
Trade receivables that do not contain a significant financing component are measured at transaction price.
A financial asset is derecognised only when the Company
⢠has transferred the rights to receive cash flows from the financial asset; or
⢠retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Where the Company transfers an asset, it evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. Where the Company has transferred substantially all risks and rewards of ownership, the financial asset is derecognised. Where the Company has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised. Where the Company has neither transferred a financial asset nor retained substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognised if the Company has not retained control of the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
The effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts future cash receipts or payments through the expected life of the financial instrument, or where appropriate, a shorter period.
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
The Company''s financial liabilities comprise borrowings, lease liabilities, trade payables and other liabilities. These are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost using
the EIR method. The EIR is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period at effective interest rate. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.
Changes to the carrying amount of a financial liability as a result of renegotiation or modification of terms that do not result in derecognition of the financial liability, is recognised in the Standalone Statement of Profit and Loss.
The Company derecognises financial liabilities when, and only when, its obligations are discharged, cancelled or they expire.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.
Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period.
In the ordinary course of business, the Company uses certain derivative financial instruments to reduce business risks which arise from its exposure to foreign exchange and interest rate fluctuations associated with borrowings (cash flow hedges). When the Company opts to undertake hedge accounting, the Company documents, at the inception of the hedging transaction, the economic relationship between hedging instruments and hedged items including whether the hedging instrument is expected to offset changes in cash flows or fair values of hedged items. The Company documents its risk management objective and strategy for undertaking various hedge transactions at the inception of each hedge relationship.
Derivatives are initially recognised at fair value on the date the derivative contract is entered into and are subsequently remeasured to their fair
value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged and the type of hedge relationship designated.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges, is recognised through OCI and as cash flow hedging reserve within equity, limited to the cumulative change in fair value of the hedged item on a present value basis from the inception of the hedge. The gain or loss relating to the ineffective portion is recognised immediately in the Standalone Statement of Profit and Loss.
Amounts accumulated in equity are reclassified to the Standalone Statement of Profit and Loss on settlement. When the hedged forecast transaction results in the recognition of a nonfinancial asset, the amounts accumulated in equity with respect to gain or loss relating to the effective portion of the spot component of forward contracts, both the deferred hedging gains and losses and the deferred aligned forward points are included within the initial cost of the asset. The deferred amounts are ultimately recognised in the Standalone Statement of Profit and Loss as the hedged item affects profit or loss.
When a hedging instrument expires, is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively and any cumulative deferred gain or loss and deferred costs of hedging in equity at that time remains in equity until the forecast transaction occurs. When the forecast transaction is no longer expected to occur, the cumulative gain or loss and deferred costs of hedging that were reported in equity are immediately transferred to the Standalone Statement of Profit and Loss.
When derivative contracts to hedge risks are not designated as hedges, such contracts are accounted through FVTPL.
As at the year end, there were no designated accounting hedges.
The entire fair value of a hedging derivative is classified as a Non-current asset or liability when the remaining maturity of the hedged item exceeds 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item does not exceed 12 months.
Financial guarantee contracts are recognised as a financial liability at the time of issuance of guarantee. The liability is initially measured at fair value and is subsequently measured at the higher of the amount of loss allowance determined, or the amount initially recognised less, the cumulative amount of income recognised.
Financial assets and financial liabilities are offset when the Company has a legally enforceable right (not contingent on future events) to offset the recognised amounts either to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.
I n determining the fair value of its financial instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each reporting date. The methods used to determine fair value include discounted cash flow analysis, available quoted market prices and dealer quotes. All methods of assessing fair value result in general approximation of value.
Investments in subsidiaries and joint ventures
The Company reviews its carrying value of investment in subsidiaries and joint ventures carried at cost (net of impairment, if any) when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for in the Standalone Statement of Profit and Loss. The recoverable amount requires estimates of operating margin, discount rate, future growth rate, terminal values, etc. based on management''s best estimate.
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and debt instruments carried at FVTOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. In respect of trade receivables the Company applies the simplified approach permitted by Ind AS 109 - Financial Instruments, which requires expected lifetime losses to be recognised upon initial recognition of the receivables. For all other financial assets, expected credit losses are measured at an amount equal to the 12-months expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. Financial assets that are written off could still be subject to enforcement activities in order to comply with the Company''s procedures.
For the purpose of assessing impairment, the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets is considered as a cash generating unit ("CGU"). The carrying values of assets / CGU at each balance sheet date are reviewed to determine whether there is any indication that an asset may be impaired. If any indication of such impairment exists, the recoverable amount of such assets / CGU is estimated and in case the carrying amount of these assets exceeds their recoverable amount, an impairment loss is recognised in the Standalone Statement of Profit and Loss. The recoverable amount is the higher of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor. Assessment is also done at each balance sheet date as to whether there is indication that an impairment loss recognised for an asset in prior accounting periods no longer exists or may have decreased, consequent to which such reversal of impairment loss is recognised in the Standalone Statement of Profit and Loss.
The Company reviews its carrying value of goodwill annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted
for in the Standalone Statement of Profit and Loss. An impairment loss recognised for goodwill is not reversed in a subsequent period.
I nventories are valued at lower of cost (on weighted average basis) and net realisable value after providing for obsolescence and other losses, where considered necessary on an item-by-item basis. Cost includes all charges in bringing the goods to their present location and condition, including other levies, transit insurance and receiving charges. Work-in-progress and finished goods include appropriate proportion of overheads and, where applicable, taxes and duties. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
Revenue is recognised upon transfer of control of promised goods to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those goods.
Revenue from the sale of goods is recognised at the point in time when control is transferred to the customer which is usually on dispatch / delivery of goods, based on contracts with the customers.
Revenue towards satisfaction of performance obligation is measured based on the transaction price, which is the consideration, adjusted for volume discounts, price concessions, incentives, and returns, if any, as specified in the contracts with the customers. Revenue excludes taxes collected from customers on behalf of the government. Accruals for discounts/incentives and returns are estimated (using the most likely method) based on accumulated experience and underlying schemes and agreements with customers. Due to the short nature of credit period given to customers, there is no financing component in the contract.
For all debt instruments measured either at amortised cost or at FVTOCI, interest income is recorded using the EIR method.
Dividend income is accounted for when Company''s right to receive the income is established.
Insurance claims are accounted for on the basis of claims admitted and to the extent that there is no uncertainty in receiving the claims.
The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a define period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified assets, the Company assesses whether: (i) the contact involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
As a lessee, The Company recognises a right-of-use asset and a lease liability at the lease commencement date. The right--of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company''s incremental borrowing rate. For leases with reasonably similar characteristics, the Company, on a lease by lease basis, may adopt either the
interest payable to members at the rate declared by the Government of India in respect of the Trust administered by the Company.
For defined benefit schemes in the form of gratuity fund, provident fund, post-retirement medical benefits, pension liabilities (including directors'') and family benefit scheme, the cost of providing benefits is actuarially determined using the projected unit credit method, with actuarial valuations being carried out at each balance sheet date.
The retirement benefit obligation recognised in the Standalone Balance Sheet represents the present value of the defined benefit obligation as reduced by the fair value of scheme assets.
The present value of the said obligation is determined by discounting the estimated future cash outflows, using market yields of government bonds of equivalent term and currency to the liability.
The interest income / (expense) are calculated by applying the discount rate to the net defined benefit liability or asset. The net interest income / (expense) on the net defined benefit liability is recognised in the Standalone Statement of Profit and Loss.
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling (if any), are recognised immediately in the Standalone Balance Sheet with a corresponding charge or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to the Standalone Statement of Profit and Loss in subsequent periods.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in the Standalone Statement of Profit and Loss as past service cost.
2.16.2 Short-term employee benefits
The short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognised during the period when the employee renders the service. These benefits include compensated absences such as paid
incremental borrowing rate specific to the lease or the incremental borrowing rate for the portfolio as a whole.
Lease payments included in the measurement of the lease liability comprise the fixed payments, including in-substance fixed payments and lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option;
The lease liability is measured at amortised cost using the effective interest method.
The Company has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The Company recognises the lease payments associated with these leases as an expense on a straightline basis over the lease term. The Company applied a single discount rate to a portfolio of leases of similar assets in similar economic environment with a similar end date.
Employee benefits consist of provident fund, superannuation fund, gratuity fund, compensated absences, long service awards, post-retirement medical benefits, directors'' retirement obligations and family benefit scheme.
2.16.1 Post-employment benefit plans Defined contribution plans
Payments to a defined contribution retirement benefit scheme for eligible employees in the form of superannuation fund are charged as an expense as they fall due. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from the contributions made.
Contributions to a Provident Fund are made to Tata Chemicals Limited Employees'' Provident Fund Trust, administered by the Company, and are charged to the Standalone Statement of Profit and Loss as incurred. The Trust invests in specific designated instruments as permitted by Indian law. The remaining portion is contributed to the government administered pension fund. The Company is liable for the contribution and any shortfall in interest between the amount of interest realised by the investments and the
annual leave and performance incentives which are expected to occur within twelve months after the end of the period in which the employee renders the related services.
The cost of compensated absences is accounted as under:
(a) I n case of accumulating compensated absences, when employees render service that increase their entitlement of future compensated absences; and
(b) In case of non - accumulating compensated absence, when the absences occur.
Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognised as a liability. The cost of providing benefits is actuarially determined using the projected unit credit method, with actuarial valuations being carried out at each balance sheet date. Long Service Awards are recognised as a liability at the present value of the obligation at the balance sheet date. All gains/losses due to actuarial valuations are immediately recognised in the Standalone Statement of Profit and Loss.
Compensation paid / payable to employees who have opted for retirement under a Voluntary Retirement Scheme including ex-gratia is charged to the Standalone Statement of Profit and Loss in the year of separation.
Borrowing costs are interest and ancillary costs incurred in connection with the arrangement of borrowings. General and specific borrowing costs attributable to acquisition and construction of qualifying assets is added to the cost of the assets upto the date the asset is ready for its intended use. Capitalisation of borrowing costs is suspended and charged to the Standalone Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted. All other borrowing costs are recognised in the Standalone Statement of Profit and Loss in the period in which they are incurred.
Government grants and subsidies are recognised when there is reasonable assurance that the Company will comply with the conditions attached to them and the grants and subsidies will be received. Government grants whose primary condition is that the Company should purchase, construct or otherwise acquire noncurrent assets are recognised as deferred revenue in the Standalone Balance Sheet and transferred to the Standalone Statement of Profit and Loss on systematic and rational basis over the useful lives of the related asset.
The operating segments are the segments for which separate financial information is available and for which operating profit/loss amounts are evaluated regularly by the Managing Director and Chief Executive Officer (who is the Company''s chief operating decision maker) in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in conformity with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment. Inter segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors. Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on a reasonable basis have been included under ''unallocated revenue / expenses / assets / liabilities''.
Tax expense for the year comprises current and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Standalone Statement of Profit and Loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company''s liability for current tax is calculated using tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to realise the asset or to settle the liability on a net basis.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying values of assets and liabilities in the Standalone Financial Statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the Standalone Balance Sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount, except when the deferred income tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction. In contrast, deferred tax assets are only recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.
The carrying value of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on the tax rates and tax laws that have been enacted or substantially enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to cover or settle the carrying value of its assets and liabilities.
Deferred tax assets and liabilities are offset to the extent that they relate to taxes levied by the same tax authority and there are legally enforceable rights to set off current tax assets and current tax liabilities within that jurisdiction.
Current and deferred tax are recognised as an expense or income in the Standalone Statement of Profit and Loss, except when they relate to items credited or debited either in Other Comprehensive Income or directly in equity, in which case the tax is also recognised in OCI or directly in equity.
A provision is recognised when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required
to settle the obligation, in respect of which a reliable estimate of the amount can be made. Provisions are determined based on best estimate required to settle the obligation at the balance sheet date. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of the money is material). The increase in the provisions due to passage of time is recognised as interest expense.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.
Contingent assets are not disclosed in the Standalone Financial Statements unless an inflow of economic benefits is probable.
Final dividend on shares is recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Company''s Board of Directors.
3. Recent Indian Accounting Standard (Ind AS) pronouncements which are not yet effective
On March 31, 2023, the Ministry of Corporate Affairs (MCA) through notification, notified the amendments to existing standards which are effective for annual periods beginning after 1st April 2023. Key amendments relating to the same where financial statements are required to comply are:
- Amendments to Ind AS 12 Income Taxesâ Deferred Tax related to Assets and Liabilities arising from a Single Transaction:
Under the amendments, an entity does not apply the initial recognition exemption for
transactions that give rise to equal taxable and deductible temporary differences. Equal taxable and deductible temporary differences may arise on initial recognition of an asset and liability in a transaction that is not a business combination and affects neither accounting nor taxable profit. For example, this may arise upon recognition of a lease liability and the corresponding right-of-use asset applying Ind AS 116 Leases at the commencement date of a lease. The amendments should be applied to transactions that occur on or after the beginning of the earliest comparative period presented. In addition, at the beginning of the earliest comparative period presented, a deferred tax asset (provided that sufficient taxable profit is available) and a deferred tax liability should also be recognised for all deductible and taxable temporary differences associated with leases and decommissioning obligations.
Amendments to Ind AS 1 Presentation of Financial Statements - Disclosure of Accounting Policies:
The amendments replace all instances of the term ''significant accounting policies'' with ''material accounting policy information''. Accounting policy information is material if, when considered together with other information included in an entity''s financial statements, it can reasonably be expected to influence decisions that the primary users of general-purpose financial statements make on the basis of those financial statements. The supporting paragraph in Ind AS 1 are also amended to clarify that accounting
policy information that relates to immaterial transactions, other events or conditions is immaterial and need not be disclosed. Accounting policy information may be material because of the nature of the related transactions, other events or conditions, even if the amounts are immaterial. However, not all accounting policy information relating to material transactions, other events or conditions is itself material.
Amendments to Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errorsâ Definition of Accounting Estimates:
The amendments replace the definition of a change in accounting estimates with a definition of accounting estimates. Under the new definition, accounting estimates are "monetary amounts in financial statements that are subject to measurement uncertainty". The amendments clarify the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors. Also, they clarify how entities use measurement techniques and inputs to develop accounting estimates.
These amendments are not expected to have a significant impact on the Company''s Standalone Financial Statements. This assessment is based on currently available information and may be subject to changes arising from further reasonable and supportable information being made available to the company when it will adopt the respective standards.
Mar 31, 2022
1. Corporate information
Tata Chemicals Limited (the ''Company'') is a public limited company domiciled in India. Its shares are listed on two stock exchanges in India; the Bombay Stock Exchange (''BSE'') and the National Stock Exchange (''NSE''). The Company is a diversified business dealing in basic chemistry products and specialty products. The Company has a global presence with key subsidiaries in United States of America (''USA''), United Kingdom (''UK'') and Kenya that are engaged in the manufacture and sale of soda ash, industrial salt and related products.
2. Summary of basis of compliance, basis of preparation and presentation, critical accounting estimates, assumptions and judgements and significant accounting policies
The Standalone Financial Statements comply, in all material aspects, with Indian Accounting Standards (''Ind AS'') notified under Section 133 of the Companies Act, 2013 (''the Act'' or ''the 2013 Act'') read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Act.
The Standalone Financial Statements have been prepared on the historical cost basis, except for certain financial instruments and defined benefit plans which are measured at fair value at the end of each reporting period. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in the Schedule III to the Act.
The preparation of the Standalone Financial Statements requires management to make
estimates, assumptions and judgments that affect the reported balances of assets and liabilities and disclosures as at the date of the Standalone Financial Statements and the reported amounts of income and expense for the periods presented.
The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates considering different assumptions and conditions.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods are affected.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying values of assets and liabilities within the next financial year are discussed below.
Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits.
The amount of total deferred tax assets could change if management estimates of projected future taxable income or if tax regulations undergo a change.
Management reviews the estimated useful lives and residual value of PPE and Intangibles at the end of each reporting period. Factors such as changes in the expected level of usage, technological developments and product life-cycle, could significantly impact the economic useful lives and the residual values of these assets. Consequently, the future depreciation charge could be revised and may have an impact on the profit of the future years.
Employee benefit obligations are determined using actuarial valuations. An actuarial valuation
involves making various assumptions that may differ from actual developments. These include the estimation of the appropriate discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, the employee benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
From time to time, the Company is subject to legal proceedings, the ultimate outcome of each being subject to uncertainties inherent in litigation. A provision for litigation is made when it is considered probable that a payment will be made and the amount can be reasonably estimated. Significant judgement is required when evaluating the provision including, the probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of potential loss. Litigation provisions are reviewed at each accounting period and revisions made for the changes in facts and circumstances. Contingent liabilities are disclosed in the notes forming part of the Standalone Financial Statements. Contingent assets are not disclosed in the Standalone Financial Statements unless an inflow of economic benefits is probable.
The Company reviews its carrying value of investment in subsidiaries and goodwill carried at cost (net of impairment, if any) annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for in the Standalone Statement of Profit and Loss.
The functional currency of the Company (i.e. the currency of the primary economic environment in which the Company operates) is the Indian Rupee ('').
On initial recognition, all foreign currency transactions are recorded at exchange rates prevailing on the date of the transaction. Monetary assets and liabilities, denominated in a foreign currency, are translated at the exchange rate prevailing on the balance sheet date and the resultant exchange gains or losses are recognised in the Standalone Statement of Profit and Loss.
An item of property, plant and equipment (''PPE'') is recognised as an asset if it is probable that the future economic benefits associated with the item will flow to the Company and its cost can be measured reliably. These recognition principles are applied to the costs incurred initially to acquire an item of PPE, to the pre-operative and trial run costs incurred (net of sales), if any and also to the costs incurred subsequently to add to, replace part of, or service it and subsequently carried at cost less accumulated depreciation and accumulated impairment losses, if any.
The cost of PPE includes interest on borrowings directly attributable to the acquisition, construction or production of a qualifying asset. A qualifying asset is an asset that necessarily takes a substantial period of time to be made ready for its intended use or sale. Borrowing costs and other directly attributable cost are added to the cost of those assets until such time as the assets are substantially ready for their intended use, which generally coincides with the commissioning date of those assets.
The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision is met.
Machinery spares that meet the definition of PPE are capitalised and depreciated over the useful life of the principal item of an asset.
All other repair and maintenance costs, including regular servicing, are recognised in the Standalone Statement of Profit and Loss as incurred. When a replacement occurs, the carrying value of the replaced part is de-recognised. Where an item of property, plant and equipment comprises major components having different useful lives, these components are accounted for as separate items.
PPE acquired and put to use for projects are capitalised and depreciation thereon is included in the project cost till the project is ready for commissioning.
Depreciation on PPE (except leasehold improvements) is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives. However, leasehold improvements are depreciated on a straight-line method over the shorter of their respective useful lives or the tenure of the lease arrangement. Freehold land is not depreciated.
Schedule II to the Act prescribes the useful lives for various class of assets. For certain class of assets, based on technical evaluation and assessment, Management believes that the useful lives adopted by it reflect the periods over which these assets are expected to be used. Accordingly for those assets, the useful lives estimated by the management are different from those prescribed in the Schedule. Management''s estimates of the useful lives for various class of PPE are as given below:
Asset |
Useful life |
Salt Works, Water works, Reservoirs and Pans |
1-30 years |
Plant and Machinery |
1-60 years |
Traction Lines and Railway Sidings |
15 years |
Factory Buildings |
5-60 years |
Other Buildings |
5-60 years |
Furniture and Fittings and Office Equipment (including Computers and Data Processing Equipment) |
1-10 years |
Vehicles |
4-10 years |
Useful lives and residual values of assets are reviewed at the end of each reporting period.
Losses arising from the retirement of, and gains or losses arising from disposal/adjustments of PPE are recognised in the Standalone Statement of Profit and Loss.
Intangible assets comprise software licenses, product registration fees and rights to use railway wagon.
Intangible assets are measured on initial recognition at cost and subsequently are carried at cost less accumulated amortisation and accumulated impairment losses, if any.
The intangible assets with a finite useful life are amortised using straight line method over their estimated useful lives. The management''s estimates of the useful lives for various class of Intangibles are as given below:
Asset |
Useful life |
Computer software |
5 years |
Other intangible assets |
4- 20 years |
The estimated useful life is reviewed annually by the management.
Gains or losses arising from the retirement or disposal of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset and recognised as income or expense in the Standalone Statement of Profit and Loss.
Projects under commissioning and other CWIP/ intangible assets under development are carried at cost, comprising direct cost, related incidental expenses and attributable borrowing cost.
Subsequent expenditures relating to property, plant and equipment are capitalised only when it is probable that future economic benefit associated with these will flow to the Company and the cost of the item can be measured reliably.
Advances given to acquire property, plant and equipment are recorded as non-current assets and subsequently transferred to CWIP on acquisition of related assets.
Investment properties are land and buildings that are held for long term lease rental yields and/ or for capital appreciation. Investment properties are initially recognised at cost including transaction costs. Subsequently investment properties comprising buildings are carried at cost less accumulated depreciation and accumulated impairment losses, if any.
Depreciation on buildings is provided over the estimated useful lives as specified in note 2.5 above. The residual values, estimated useful lives and depreciation method of investment properties are reviewed, and adjusted on prospective basis as appropriate, at each reporting date. The effects
of any revision are included in the Standalone Statement of Profit and Loss when the changes arise.
An investment property is de-recognised when either the investment property has been disposed of or do not meet the criteria of investment property i.e. when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the Standalone Statement of Profit and Loss in the period of de-recognition.
Research expenses are charged to the Standalone Statement of Profit and Loss as expenses in the year in which they are incurred. Development costs are capitalised as an intangible asset under development when the following criteria are met:
⢠the project is clearly defined, and the costs are separately identified and reliably measured;
⢠t he technical feasibility of the project is demonstrated;
⢠the ability to use or sell the products created during the project is demonstrated;
⢠the intention to complete the project exists and use or sale of output manufactured during the project;
⢠a potential market for the products created during the project exists or their usefulness, in case of internal use, is demonstrated, such that the project will generate probable future economic benefits; and
⢠adequate resources are available to complete the project.
These development costs are amortised over the estimated useful life of the projects or the products they are incorporated within. The amortisation of capitalised development costs begins as soon as the related product is released to production.
Non-current assets (including disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable.
Non-current assets classified as held for sale are measured at lower of their carrying amount and fair value less cost to sell.
Non-current assets classified as held for sale are not depreciated or amortised from the date when they are classified as held for sale.
Non-current assets classified as held for sale and the assets and liabilities of a disposal group classified as held for sale are presented separately from the other assets and liabilities in the Standalone Balance Sheet.
A discontinued operation is a component of the entity that has been disposed off or is classified as held for sale and:
⢠tepresents a separate major line of business or geographical area of operations and;
⢠i s part of a single co-ordinated plan to dispose of such a line of business or area of operations.
The results of discontinued operations are presented separately in the Standalone Statement of Profit and Loss.
The Company classifies its financial assets in the following measurement categories:
⢠those to be measured subsequently at fair value (either through OCI, or through profit or loss), and
⢠those measured at amortised cost.
⢠those measured at carrying cost for equity instruments subsidiaries and joint ventures.
The classification depends on the Company''s business model for managing the financial assets and the contractual terms of the Cash Flows. For assets measured at fair value, gains and losses will either be recorded in the Standalone Statement of Profit and Loss or through OCI. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through OCI.
The Company reclassifies debt investments when and only when its business model for managing those assets changes.
Measurement
A financial asset or financial liability is initially measured at fair value plus, for an item not at fair value through profit and loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. Transaction costs of financial assets carried at fair value through profit or loss are expensed in the Standalone Statement of Profit and Loss.
Subsequent measurement of debt instruments depends on the Company''s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments:
Assets that are held for collection of contractual Cash Flows, where those Cash Flows represent solely payments of principal and interest, are measured at amortised cost. A gain or loss on a debt investment (unhedged) that is subsequently measured at amortised cost is recognised in the Standalone Statement of Profit and Loss when the asset is derecognised or impaired. Interest income from these financial assets is included in other income using the effective interest rate (''EIR'') method.
Assets that are held for collection of contractual Cash Flows and for selling the financial assets, where the assets'' Cash Flows represent solely payments of principal and interest, are measured at FVTOCI. Movements in the carrying amount are recorded through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains or losses which are recognised in the Standalone Statement of Profit and Loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to the Standalone Statement of Profit and Loss. Interest income from these financial assets is included in other income using the EIR method.
Assets that do not meet the criteria for amortised cost or FVTOCI are measured at FVTPL. A gain or loss on a debt investment (including current investments) that is subsequently measured at FVTPL (unhedged) is recognised net in the Standalone Statement of Profit and Loss in the period in which it arises. Interest income from these financial assets is included in other income.
The Company subsequently measures all equity investments at fair value, except investment in subsidiaries and joint ventures which are measured at cost. Where the Company''s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to the Standalone Statement of Profit and Loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified to equity. Dividends from such investments are recognised in the Standalone
Statement of Profit and Loss within other income when the Company''s right to receive payments is established. Impairment losses (and reversal of impairment losses) on equity investments measured at FVTOCI are not reported separately from other changes in fair value.
The Company considers all highly liquid investments, which are readily convertible into known amounts of cash, that are subject to an insignificant risk of change in value with a maturity within three months or less from the date of purchase, to be cash equivalents. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage.
A financial asset is derecognised only when the Company
⢠has transferred the rights to receive Cash Flows from the financial asset; or
⢠retains the contractual rights to receive the Cash Flows of the financial asset, but assumes a contractual obligation to pay the Cash Flows to one or more recipients.
Where the Company transfers an asset, it evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. Where the Company has transferred substantially all risks and rewards of ownership, the financial asset is derecognised. Where the Company has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised. Where the Company has neither transferred a financial asset nor retained substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognised if the Company has not retained control of the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
The Company''s financial liabilities comprise borrowings, lease liabilities, trade payables and other liabilities. These are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost using the EIR method. The EIR is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period at effective interest rate. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.
Changes to the carrying amount of a financial liability as a result of renegotiation or modification of terms that do not result in derecognition of the financial liability, is recognised in the Standalone Statement of Profit and Loss.
The Company derecognises financial liabilities when, and only when, its obligations are discharged, cancelled or they expire.
Presentation
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.
Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period.
I n the ordinary course of business, the Company uses certain derivative financial instruments to reduce business risks which arise from its exposure to foreign exchange and interest rate fluctuations associated with borrowings (cash flow hedges). When the Company opts to undertake hedge accounting, the Company documents, at the inception of the hedging transaction, the economic relationship between hedging instruments and hedged items including whether the hedging instrument is expected to offset changes in Cash Flows or fair values of hedged items. The Company documents its
risk management objective and strategy for undertaking various hedge transactions at the inception of each hedge relationship.
Derivatives are initially recognised at fair value on the date the derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged and the type of hedge relationship designated.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges, is recognised through OCI and as cash flow hedging reserve within equity, limited to the cumulative change in fair value of the hedged item on a present value basis from the inception of the hedge. The gain or loss relating to the ineffective portion is recognised immediately in the Standalone Statement of Profit and Loss.
Amounts accumulated in equity are reclassified to the Standalone Statement of Profit and Loss on settlement. When the hedged forecast transaction results in the recognition of a non-financial asset, the amounts accumulated in equity with respect to gain or loss relating to the effective portion of the spot component of forward contracts, both the deferred hedging gains and losses and the deferred aligned forward points are included within the initial cost of the asset. The deferred amounts are ultimately recognised in the Standalone Statement of Profit and Loss as the hedged item affects profit or loss.
When a hedging instrument expires, is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively and any cumulative deferred gain or loss and deferred costs of hedging in equity at that time remains in equity until the forecast transaction occurs. When the forecast transaction is no longer expected to occur, the cumulative gain or loss and deferred costs of hedging that were reported in equity are immediately transferred to the Standalone Statement of Profit and Loss.
Derivatives that are not designated as hedges
When derivative contracts to hedge risks are not designated as hedges, such contracts are accounted through FVTPL.
As at the year end, there were no designated accounting hedges.
The entire fair value of a hedging derivative is classified as a Non-current asset or liability when the remaining maturity of the hedged item exceeds 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item does not exceed 12 months.
2.11.5 Financial guarantee contracts
Financial guarantee contracts are recognised as a financial liability at the time of issuance of guarantee. The liability is initially measured at fair value and is subsequently measured at the higher of the amount of loss allowance determined, or the amount initially recognised less, the cumulative amount of income recognised.
2.11.6 Offsetting of financial instruments
Financial assets and financial liabilities are offset when the Company has a legally enforceable right (not contingent on future events) to off-set the recognised amounts either to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.
2.11.7 Fair value of financial instruments
In determining the fair value of its financial instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each reporting date. The methods used to determine fair value include discounted cash flow analysis, available quoted market prices and dealer quotes. All methods of assessing fair value result in general approximation of value.
2.12 Impairment
Investments in subsidiaries and joint ventures
The Company reviews its carrying value of investment in subsidiaries carried at cost (net of impairment, if any) when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for in the Standalone Statement of
Profit and Loss. The recoverable amount requires estimates of operating margin, discount rate, future growth rate, terminal values, etc. based on management''s best estimate.
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and debt instruments carried at FVTOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. In respect of trade receivables the Company applies the simplified approach permitted by Ind AS 109 - Financial Instruments, which requires expected lifetime losses to be recognised upon initial recognition of the receivables. For all other financial assets, expected credit losses are measured at an amount equal to the 12-months expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. Financial assets that are written off could still be subject to enforcement activities in order to comply with the Company''s procedures.
For the purpose of assessing impairment, the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets is considered as a cash generating unit ("CGU"). The carrying values of assets / CGU at each balance sheet date are reviewed to determine whether there is any indication that an asset may be impaired. If any indication of such impairment exists, the recoverable amount of such assets / CGU is estimated and in case the carrying amount of these assets exceeds their recoverable amount, an impairment loss is recognised in the Standalone Statement of Profit and Loss. The recoverable amount is the higher of the net selling price and their value in use. Value in use is arrived at by discounting the future Cash Flows to their present value based on an appropriate discount factor. Assessment is also done at each balance sheet date as to whether there is indication that an
impairment loss recognised for an asset in prior accounting periods no longer exists or may have decreased, consequent to which such reversal of impairment loss is recognised in the Standalone Statement of Profit and Loss.
The Company reviews its carrying value of goodwill annually, or more frequently when there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for in the Standalone Statement of Profit and Loss. An impairment loss recognised for goodwill is not reversed in a subsequent period.
Inventories are valued at lower of cost (on weighted average basis) and net realisable value after providing for obsolescence and other losses, where considered necessary on an item-by-item basis. Cost includes all charges in bringing the goods to their present location and condition, including other levies, transit insurance and receiving charges. Work-in-progress and finished goods include appropriate proportion of overheads and, where applicable, taxes and duties. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
Revenue is recognised upon transfer of control of promised goods to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those goods. Revenue from the sale of goods is recognised at the point in time when control is transferred to the customer which is usually on dispatch / delivery of goods, based on contracts with the customers. Revenue is measured based on the transaction price, which is the consideration, adjusted for volume discounts, price concessions, incentives, and returns, if any, as specified in the contracts with the customers. Revenue excludes taxes collected from customers on behalf of the government. Accruals for discounts/incentives and returns are estimated (using the most likely method) based on accumulated experience and underlying schemes and agreements with customers. Due to the short nature of credit period given to customers, there is no financing component in the contract.
For all debt instruments measured either at amortised cost or at FVTOCI, interest income is recorded using the EIR method.
Dividend income is accounted for when Company''s right to receive the income is established.
Insurance claims are accounted for on the basis of claims admitted and to the extent that there is no uncertainty in receiving the claims.
The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a define period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified assets, the Company assesses whether: (i) the contact involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
As a lessee, The Company recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company''s incremental borrowing rate. For leases with reasonably similar characteristics, the Company, on a lease by lease basis, may adopt either the incremental borrowing rate specific to the lease or the incremental borrowing rate for the portfolio as a whole.
Lease payments included in the measurement of the lease liability comprise the fixed payments, including in-substance fixed payments and lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option;
The lease liability is measured at amortised cost using the effective interest method.
The Company has elected not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The Company recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. The Company applied a single discount rate to a portfolio of leases of similar assets in similar economic environment with a similar end date.
Employee benefits consist of provident fund, superannuation fund, gratuity fund, compensated absences, long service awards, post-retirement medical benefits, directors'' retirement obligations and family benefit scheme.
Payments to a defined contribution retirement benefit scheme for eligible employees in the form of superannuation fund are charged as an expense as they fall due. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from the contributions made.
Contributions to a Provident Fund are made to Tata Chemicals Limited Employees'' Provident Fund Trust, administered by the Company, and are charged to the Standalone Statement of Profit and Loss as incurred. The Trust invests in specific designated instruments as permitted by Indian law. The remaining portion is contributed to the government administered pension fund. The Company is liable for the contribution and any shortfall in interest between the amount of interest realised by the investments and the interest payable to members at the rate declared by the Government of India in respect of the Trust administered by the Company.
For defined benefit schemes in the form of gratuity fund, provident fund, post-retirement medical benefits, pension liabilities (including directors'') and family benefit scheme, the cost of providing benefits is actuarially determined using the projected unit credit method, with actuarial valuations being carried out at each balance sheet date.
The retirement benefit obligation recognised in the Standalone Balance Sheet represents the present value of the defined benefit obligation as reduced by the fair value of scheme assets.
The present value of the said obligation is determined by discounting the estimated future cash outflows, using market yields of government bonds of equivalent term and currency to the liability.
The interest income / (expense) are calculated by applying the discount rate to the net defined benefit liability or asset. The net interest income / (expense) on the net defined benefit liability is recognised in the Standalone Statement of Profit and Loss.
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling (if any), are recognised immediately in the Standalone Balance Sheet with a corresponding charge or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to the Standalone Statement of Profit and Loss in subsequent periods.
Changes in the present value of the defined benefit obligation resulting from plan amendments or
curtailments are recognised immediately in the Standalone Statement of Profit and Loss as past service cost.
The short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognised during the period when the employee renders the service. These benefits include compensated absences such as paid annual leave and performance incentives which are expected to occur within twelve months after the end of the period in which the employee renders the related services.
The cost of compensated absences is accounted as under:
(a) In case of accumulating compensated absences, when employees render service that increase their entitlement of future compensated absences; and
(b) In case of non - accumulating compensated absence, when the absences occur.
Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognised as a liability. The cost of providing benefits is actuarially determined using the projected unit credit method, with actuarial valuations being carried out at each balance sheet date. Long Service Awards are recognised as a liability at the present value of the obligation at the balance sheet date. All gains/losses due to actuarial valuations are immediately recognised in the Standalone Statement of Profit and Loss.
Compensation paid / payable to employees who have opted for retirement under a Voluntary Retirement Scheme including ex-gratia is charged to the Standalone Statement of Profit and Loss in the year of separation.
Borrowing costs are interest and ancillary costs incurred in connection with the arrangement of borrowings. General and specific borrowing costs attributable to acquisition and construction of qualifying assets is added to the cost of the assets upto the date the asset is ready for its intended
use. Capitalisation of borrowing costs is suspended and charged to the Standalone Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted. All other borrowing costs are recognised in the Standalone Statement of Profit and Loss in the period in which they are incurred.
Government grants and subsidies are recognised when there is reasonable assurance that the Company will comply with the conditions attached to them and the grants and subsidies will be received. Government grants whose primary condition is that the Company should purchase, construct or otherwise acquire noncurrent assets are recognised as deferred revenue in the Standalone Balance Sheet and transferred to the Standalone Statement of Profit and Loss on systematic and rational basis over the useful lives of the related asset.
The operating segments are the segments for which separate financial information is available and for which operating profit/loss amounts are evaluated regularly by the Managing Director and Chief Executive Officer (who is the Company''s chief operating decision maker) in deciding how to allocate resources and in assessing performance. The accounting policies adopted for segment reporting are in conformity with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment. Inter segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors. Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on a reasonable basis have been included under ''unallocated revenue / expenses / assets / liabilities''.
Tax expense for the year comprises current and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Standalone Statement of Profit and Loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Company''s liability for current tax is calculated using tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to realise the asset or to settle the liability on a net basis.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying values of assets and liabilities in the Standalone Financial Statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the Standalone Balance Sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount, except when the deferred income tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction. In contrast, deferred tax assets are only recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.
The carrying value of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on the tax rates and tax laws that have been enacted or substantially enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to cover or settle the carrying value of its assets and liabilities.
Deferred tax assets and liabilities are offset to the extent that they relate to taxes levied by the same tax authority and there are legally enforceable rights to set off current tax assets and current tax liabilities within that jurisdiction.
Current and deferred tax are recognised as an expense or income in the Standalone Statement of Profit and Loss, except when they relate to items credited or debited either in Other Comprehensive Income or directly in equity, in which case the tax is also recognised in OCI or directly in equity.
A provision is recognised when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate of the amount can be made. Provisions are determined based on best estimate required to settle the obligation at the balance sheet date. When a provision is measured using the Cash Flows estimated to settle the present obligation, its carrying amount is the present value of those Cash Flows (when the effect of the time value of the money is material). The increase in the provisions due to passage of time is recognised as interest expense.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed. Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.
Contingent assets are not disclosed in the Standalone Financial Statements unless an inflow of economic benefits is probable.
Final dividend on shares is recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Company''s Board of Directors.
The Company accounts for the common control transactions in accordance with the ''pooling of interest'' method prescribed under Ind AS 103 - Business Combination for common control transactions and as per the provisions of respective
schemes approved by the regulators, where all the assets and liabilities of transferor companies would be recorded at the book value as at the Appointed date.
3. Recent Indian Accounting Standard (Ind AS) pronouncements which are not yet effective
On 23 March 2022, the Ministry of Corporate Affairs ("MCA") through notifications, amended the existing Ind AS. The same shall come into force from annual reporting period beginning on or after April 1 2022. Key Amendments relating to the same where financial statements are required to comply with Companies (Indian Accounting Standards) Rules 2015 are:
- I nd AS 16 Property, Plant and Equipment - For items produced during testing/trial phase, clarification added that revenue generated out of the same shall not be recognised in the Standalone Statement of Profit and Loss and considered as part of cost of PPE.
- Ind AS 37 Provisions, Contingent Liabilities & Contingent Assets - Guidance on what constitutes cost of fulfilling contracts (to determine whether the contract is onerous or not) is included.
- I nd AS 41 Agriculture- This aligns the fair value measurement in Ind AS 41 with the requirements of Ind AS 113 Fair Value Measurement to use internally consistent Cash Flows and discount rates and enables preparers to determine whether to use pre-tax or post-tax Cash Flows and discount rates for the most appropriate fair value measurement.
- Ind AS 101 - First time Adoption of Ind AS -Measurement of Foreign Currency Translation Difference in case of subsidiary/associate/ JV''s date of transition to Ind AS is subsequent to that of Parent - FCTR in the books of subsidiary/associate/ JV can be measured based on Consolidated Financial Statements.
- I nd AS 103 - Business Combination - Reference to revised Conceptual Framework. For contingent liabilities / levies, clarification is added on how to apply the principles for recognition of contingent liabilities from Ind AS 37. Recognition of contingent assets is not allowed.
- Ind AS 109 Financial Instruments - The amendment clarifies which fees an entity includes when it applies the ''10 per cent'' test in assessing whether to derecognise a financial liability.
The amendments are extensive and the Company will evaluate the same to give effect to them as required by
Mar 31, 2019
1. Summary of basis of compliance, basis of preparation and presentation, critical accounting estimates, assumptions and judgements and significant accounting policies
1.1 Basis of compliance
The financial statements comply, in all material aspects, with Indian Accounting Standards (âInd ASâ) notified under Section 133 of the Companies Act, 2013 (âthe 2013 Actâ) read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Act.
1.2 Basis of preparation and presentation
The financial statements have been prepared on the historical cost basis, except for certain financial instruments and defined benefit plans which are measured at fair value at the end of each reporting period. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
All assets and liabilities have been classified as current or non-current as per the Companyâs normal operating cycle and other criteria set out in the Schedule III to the 2013 Act.
1.3 Critical accounting estimates, assumptions and judgements
The preparation of the financial statements requires management to make estimates, assumptions and judgments that affect the reported balances of assets and liabilities and disclosures as at the date of the financial statements and the reported amounts of income and expense for the periods presented.
The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates considering different assumptions and conditions.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods are affected.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying values of assets and liabilities within the next financial year are discussed below.
1.3.1 Deferred income tax assets and liabilities
Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits.
The amount of total deferred tax assets could change if management estimates of projected future taxable income or if tax regulations undergo a change.
1.3.2 Useful lives of property, plant and equipment (âPPEâ) and intangible assets
Management reviews the estimated useful lives and residual value of PPE and Intangibles at the end of each reporting period. Factors such as changes in the expected level of usage, technological developments and product life-cycle, could significantly impact the economic useful lives and the residual values of these assets. Consequently, the future depreciation charge could be revised and may have an impact on the profit of the future years.
1.3.3 Employee benefit obligations
Employee benefit obligations are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments. These include the estimation of the appropriate discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its longterm nature, the employee benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
1.3.4 Provisions and contingencies
From time to time, the Company is subject to legal proceedings, the ultimate outcome of each being subject to uncertainties inherent in litigation. A provision for litigation is made when it is considered probable that a payment will be made and the amount can be reasonably estimated. Significant judgement is required when evaluating the provision including, the probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of potential loss. Litigation provisions are reviewed at each accounting period and revisions made for the changes in facts and circumstances. Contingent liabilities are disclosed in the notes forming part of the financial statements. Contingent assets are not disclosed in the financial statements unless an inflow of economic benefits is probable.
1.4 Foreign currency translation
The functional currency of Tata Chemicals Limited (i.e. the currency of the primary economic environment in which the Company operates) is the Indian Rupee O.
On initial recognition, all foreign currency transactions are recorded at exchange rates prevailing on the date of the transaction. Monetary assets and liabilities, denominated in a foreign currency, are translated at the exchange rate prevailing on the Balance Sheet date and the resultant exchange gains or losses are recognised in the Statement of Profit and Loss.
1.5 Property, plant and equipment
An item of property, plant and equipment is recognised as an asset if it is probable that the future economic benefits associated with the item will flow to the Company and its cost can be measured reliably. This recognition principle is applied to the costs incurred initially to acquire an item of property, plant and equipment and also to costs incurred subsequently to add to, replace part of, or service it and subsequently carried at cost less accumulated depreciation and accumulated impairment losses, if any.
The cost of PPE includes interest on borrowings directly attributable to the acquisition, construction or production of a qualifying asset. A qualifying asset is an asset that necessarily takes a substantial period of time to be made ready for its intended use or sale. Borrowing costs and other directly attributable cost are added to the cost of those assets until such time as the assets are substantially ready for their intended use, which generally coincides with the commissioning date of those assets.
The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision is met.
Machinery spares that meet the definition of PPE are capitalised and depreciated over the useful life of the principal item of an asset.
All other repair and maintenance costs, including regular servicing, are recognised in the Statement of Profit and Loss as incurred. When a replacement occurs, the carrying value of the replaced part is de-recognised. Where an item of property, plant and equipment comprises major components having different useful lives, these components are accounted for as separate items.
PPE acquired and put to use for projects are capitalised and depreciation thereon is included in the project cost till the project is ready for commissioning.
Depreciation methods, estimated useful lives and residual value
Depreciation on PPE (except leasehold improvements and PPE acquired under finance lease) is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives. However, leasehold improvements and PPE acquired under finance lease are depreciated on a straight-line method over the shorter of their respective useful lives or the tenure of the lease arrangement. Freehold land is not depreciated.
Schedule II to the Companies Act 2013 prescribes the useful lives for various class of assets. For certain class of assets, based on technical evaluation and assessment, Management believes that the useful lives adopted by it reflects the periods over which these assets are expected to be used. Accordingly for those assets, the useful lives estimated by the management are different from those prescribed in the Schedule. Managementâs estimates of the useful lives for various class of fixed assets are as given below:
Useful lives and residual values of assets are reviewed at the end of each reporting period.
Losses arising from the retirement of, and gains or losses arising from disposal/adjustments of PPE are recognised in the Statement of Profit and Loss.
1.6 Intangible assets
Goodwill
Goodwill represents the cost of the acquired businesses in excess of the fair value of identifiable tangible and intangible net assets purchased. Goodwill is not amortised; however it is tested annually for impairment and carried at cost less accumulated impairment losses, if any.
Other Intangible assets
Intangible assets comprise software licenses and rights to use railway wagon.
Intangible assets are measured on initial recognition at cost and subsequently are carried at cost less accumulated amortisation and accumulated impairment losses, if any.
The intangible assets with a finite useful life are amortised using straight line method over their estimated useful lives. The managementâs estimates of the useful lives for various class of Intangibles are as given below:
The estimated useful life is reviewed annually by the management.
Gains or losses arising from the retirement or disposal of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset and recognised as income or expense in the Statement of Profit and Loss.
1.7 Capital work-in-progress (âCWIPâ) and intangible assets under development
Projects under commissioning and other CWIP/ intangible assets under development are carried at cost, comprising direct cost, related incidental expenses and attributable borrowing cost.
Subsequent expenditures relating to property, plant and equipment are capitalised only when it is probable that future economic benefit associated with these will flow to the Company and the cost of the item can be measured reliably.
Advances given to acquire property, plant and equipment are recorded as non-current assets and subsequently transferred to CWIP on acquisition of related assets.
1.8 Investment property
Investment properties are land and buildings that are held for long term lease rental yields and/ or for capital appreciation. Investment properties are initially recognised at cost including transaction costs. Subsequently investment properties comprising buildings are carried at cost less accumulated depreciation and accumulated impairment losses, if any.
Depreciation on buildings is provided over the estimated useful lives as specified in note 2.5 above. The residual values, estimated useful lives and depreciation method of investment properties are reviewed, and adjusted on prospective basis as appropriate, at each reporting date. The effects of any revision are included in the Statement of Profit and Loss when the changes arise.
An investment property is de-recognised when either the investment property has been disposed of or do not meet the criteria of investment property i.e. when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the Statement of Profit and Loss in the period of de-recognition.
1.9 Research and development expenses
Research expenses are charged to the Statement of Profit and Loss as expenses in the year in which they are incurred. Development costs are capitalised as an intangible asset under development when the following criteria are met:
the project is clearly defined, and the costs are separately identified and reliably measured;
the technical feasibility of the project is demonstrated;
the ability to use or sell the products created during the project is demonstrated;
the intention to complete the project exists and use or sale of output manufactured during the project;
a potential market for the products created during the project exists or their usefulness, in case of internal use, is demonstrated, such that the project will generate probable future economic benefits; and
adequate resources are available to complete the project.
These development costs are amortised over the estimated useful life of the projects or the products they are incorporated within. The amortisation of capitalised development costs begins as soon as the related product is released to production.
1.10 Non-current assets held for sale and discontinued operations
Non-current assets (including disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable.
Non-current assets classified as held for sale are measured at lower of their carrying amount and fair value less cost to sell.
Non-current assets classified as held for sale are not depreciated or amortised from the date when they are classified as held for sale.
Non-current assets classified as held for sale and the assets and liabilities of a disposal group classified as held for sale are presented separately from the other assets and liabilities in the Balance Sheet.
A discontinued operation is a component of the entity that has been disposed off or is classified as held for sale and:
represents a separate major line of business or geographical area of operations and;
- is part of a single co-ordinated plan to dispose of such a line of business or area of operations.
The results of discontinued operations are presented separately in the Statement of Profit and Loss.
1.11 Financial instruments
1.11.1 Investments and other financial assets: Classification
The Company classifies its financial assets in the following measurement categories:
those to be measured subsequently at fair value (either through OCI, or through profit or loss), and
those measured at amortised cost.
The classification depends on the Companyâs business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in the Statement of Profit and Loss or through OCI. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through OCI. The Company has elected to consider the carrying cost of equity investments in subsidiaries and joint venture at cost.
The Company reclassifies debt investments when and only when its business model for managing those assets changes.
Debt instruments
Measurement
A financial asset or financial liability is initially measured at fair value plus, for an item not at fair value through profit and loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. Transaction costs of financial assets carried at fair value through profit or loss are expensed in the Statement of Profit and Loss.
Subsequent measurement of debt instruments depends on the Companyâs business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments:
- Amortised cost
Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortised cost. A gain or loss on a debt investment (unhedged) that is subsequently measured at amortised cost is recognised in the Statement of Profit and Loss when the asset is derecognised or impaired. Interest income from these financial assets is included in other income using the effective interest rate (âEIRâ) method.
- Fair value through other comprehensive income (âFVTOCIO
Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assetsâ cash flows represent solely payments of principal and interest, are measured at FVTOCI. Movements in the carrying amount are recorded through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains or losses which are recognised in the Statement of Profit and Loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to the Statement of Profit and Loss. Interest income from these financial assets is included in other income using the EIR method.
- Fair value through profit or loss (âFVTPL)
Assets that do not meet the criteria for amortised cost or FVTOCI are measured at FVTPL. A gain or loss on a debt investment that is subsequently measured at FVTPL (unhedged) is recognised net in the Statement of Profit and Loss in the period in which it arises. Interest income from these financial assets is included in other income.
Equity instruments
The Company subsequently measures all equity investments at fair value. Where the Companyâs management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to the Statement of Profit and Loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified to equity. Dividends from such investments are recognised in the Statement of Profit and Loss within other income when the Companyâs right to receive payments is established. Impairment losses (and reversal of impairment losses) on equity investments measured at FVTOCI are not reported separately from other changes in fair value.
Cash and cash equivalents
The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of cash, that are subject to an insignificant risk of change in value with a maturity within three months or less from the date of purchase, to be cash equivalents. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage.
Derecognition of financial assets
A financial asset is derecognised only when the Company has transferred the rights to receive cash flows from the financial asset; or
retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Where the Company transfers an asset, it evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. Where the Company has transferred substantially all risks and rewards of ownership, the financial asset is derecognised. Where the Company has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised. Where the Company has neither transferred a financial asset nor retained substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognised if the Company has not retained control of the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
1.11.2 Debt and equity instruments
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
1.11.3 Financial liabilities
The Companyâs financial liabilities comprise borrowings, trade payables and other liabilities. These are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost using the EIR method. The EIR is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period at effective interest rate. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.
Changes to the carrying amount of a financial liability as a result of renegotiation or modification of terms that do not result in derecognition of the financial liability, is recognised in the Statement of Profit and Loss.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, its obligations are discharged, cancelled or they expire.
Presentation
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.
Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period.
1.11.4 Derivatives and hedging activities
I n the ordinary course of business, the Company uses certain derivative financial instruments to reduce business risks which arise from its exposure to foreign exchange and interest rate fluctuations associated with borrowings (cash flow hedges). When the Company opts to undertake hedge accounting, the Company documents, at the inception of the hedging transaction, the economic relationship between hedging instruments and hedged items including whether the hedging instrument is expected to offset changes in cash flows or fair values of hedged items. The Company documents its risk management objective and strategy for undertaking various hedge transactions at the inception of each hedge relationship.
Derivatives are initially recognised at fair value on the date the derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged and the type of hedge relationship designated.
Cash flow hedges that qualify for hedge accounting
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges, is recognised through OCI and as cash flow hedging reserve within equity, limited to the cumulative change in fair value of the hedged item on a present value basis from the inception of the hedge. The gain or loss relating to the ineffective portion is recognised immediately in the Statement of Profit and Loss.
Amounts accumulated in equity are reclassified to the Statement of Profit and Loss on settlement.
When the hedged forecast transaction results in the recognition of a non-financial asset, the amounts accumulated in equity with respect to gain or loss relating to the effective portion of the spot component of forward contracts, both the deferred hedging gains and losses and the deferred aligned forward points are included within the initial cost of the asset. The deferred amounts are ultimately recognised in the Statement of Profit and Loss as the hedged item affects profit or loss.
When a hedging instrument expires, is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively and any cumulative deferred gain or loss and deferred costs of hedging in equity at that time remains in equity until the forecast transaction occurs. When the forecast transaction is no longer expected to occur, the cumulative gain or loss and deferred costs of hedging that were reported in equity are immediately transferred to the Statement of Profit and Loss.
Derivatives that are not designated as hedges
When derivative contracts to hedge risks are not designated as hedges, such contracts are accounted through FVTPL.
As at the year end, there were no designated accounting hedges.
The entire fair value of a hedging derivative is classified as a noncurrent asset or liability when the remaining maturity of the hedged item exceeds 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item does not exceeRs. 12 months.
1.11.5 Financial guarantee contracts
Financial guarantee contracts are recognised as a financial liability at the time of issuance of guarantee. The liability is initially measured at fair value and are subsequently measured at the higher of the amount of loss allowance determined, or the amount initially recognised less, the cumulative amount of income recognised.
1.11.6 Offsetting of financial instruments
Financial assets and financial liabilities are offset when the Company has a legally enforceable right (not contingent on future events) to off-set the recognised amounts either to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.
1.11.7 Fair value of financial instruments
In determining the fair value of its financial instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each reporting date. The methods used to determine fair value include discounted cash flow analysis, available quoted market prices and dealer quotes. All methods of assessing fair value result in general approximation of value.
1.12 Impairment
Financial assets (other than at fair value)
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and debt instruments carried at FVTOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. In respect of trade receivables the Company applies the simplified approach permitted by Ind AS 109 - Financial Instruments, which requires expected lifetime losses to be recognised upon initial recognition of the receivables.
PPE, CWIP and intangible assets
The carrying values of assets / cash generating units (âCGUâ) at each Balance Sheet date are reviewed to determine whether there is any indication that an asset may be impaired. If any indication of such impairment exists, the recoverable amount of such assets / CGU is estimated and in case the carrying amount of these assets exceeds their recoverable amount, an impairment loss is recognised in the Statement of Profit and Loss. The recoverable amount is the higher of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor. Assessment is also done at each Balance Sheet date as to whether there is indication that an impairment loss recognised for an asset in prior accounting periods no longer exists or may have decreased, consequent to which such reversal of impairment loss is recognised in the Statement of Profit and Loss.
Goodwill
Goodwill is tested for impairment, at least annually and whenever circumstances indicate that it may be impaired. For the purpose of impairment testing, the Goodwill is allocated to a CGU or group of CGUs, which are expected to benefit from the synergies arising from the business combination in which the said Goodwill arose.
I f the estimated recoverable amount of the CGU including the Goodwill is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to the other assets of the CGU on a pro-rata basis of the carrying amount of each asset in the unit.
1.13 Inventories
Inventories are valued at lower of cost (on weighted average basis) and net realisable value after providing for obsolescence and other losses, where considered necessary. Cost includes all charges in bringing the goods to their present location and condition, including other levies, transit insurance and receiving charges. Work-in-progress and finished goods include appropriate proportion of overheads and, where applicable, taxes and duties. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
1.14 Revenue recognition
1.14.1 Sale of goods
Revenue is recognised upon transfer of control of promised goods to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those goods.
Revenue from the sale of goods is recognised at the point in time when control is transferred to the customer which is usually on dispatch / delivery of goods, based on contracts with the customers.
Revenue is measured based on the transaction price, which is the consideration, adjusted for volume discounts, price concessions, incentives, and returns, if any, as specified in the contracts with the customers. Revenue excludes taxes collected from customers on behalf of the government. Accruals for discounts/incentives and returns are estimated (using the most likely method) based on accumulated experience and underlying schemes and agreements with customers. Due to the short nature of credit period given to customers, there is no financing component in the contract.
The Company has adopted Ind AS 115 Revenue from contracts with customers, with effect from April 1, 2018. Ind AS 115 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenues and cash flows arising from the contracts with its customers and replaces Ind AS 18 Revenue and Ind AS 11 Construction Contracts.
The Company has adopted Ind AS 115 using the cumulative effect method whereby the effect of applying this standard is recognised at the date of initial application (i.e. April 1, 2018). Accordingly, the comparative information in the statement of profit and loss is not restated. The impact of the adoption of the standard on the financial statements of the Company is given in note 24.
1.14.2 Interest income
For all debt instruments measured either at amortised cost or at FVTOCI, interest income is recorded using the EIR method.
1.14.3 Dividend income
Dividend income is accounted for when Companyâs right to receive the income is established.
1.14.4 Insurance claims
I nsurance claims are accounted for on the basis of claims admitted / expected to be admitted and to the extent that there is no uncertainty in receiving the claims.
1.15 Leases
The determination of whether an agreement is, or contains, a lease is based on the substance of the agreement at the date of inception.
Finance Leases:
Lease arrangements in which substantially all risks and rewards of ownership of the under-lying assets are transferred to the Company, are classified as finance lease.
Assets held under finance leases are initially recognised at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the Balance Sheet as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.
Operating leases:
The leases which are not classified as finance lease are operating leases.
Lease arrangements where the risks and rewards of ownership of an asset substantially vest with the lessor are recognised as operating leases. Lease rentals under operating leases are recognised in the Statement of Profit and Loss on a straight-line basis over the lease term unless the payments are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases.
1.16 Employee benefits plans
Employee benefits consist of provident fund, superannuation fund, gratuity fund, compensated absences, long service awards, post-retirement medical benefits, directorsâ retirement obligations and family benefit scheme.
1.16.1 Post-employment benefit plans
Defined contribution plans
Payments to a defined contribution retirement benefit scheme for eligible employees in the form of superannuation fund are charged as an expense as they fall due. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from the contributions made.
Defined benefit plans
Contributions to a Provident Fund are made to Tata Chemicals Limited Employeesâ Provident Fund Trust, administered by the Company, and are charged to the Statement of Profit and Loss as incurred. The Trust invests in specific designated instruments as permitted by Indian law. The remaining portion is contributed to the government administered pension fund. The Company is liable for the contribution and any shortfall in interest between the amount of interest realised by the investments and the interest payable to members at the rate declared by the Government of India in respect of the Trust administered by the Company.
For defined benefit schemes in the form of gratuity fund, provident fund, post-retirement medical benefits, pension liabilities (including directorsâ) and family benefit scheme, the cost of providing benefits is actuarially determined using the projected unit credit method, with actuarial valuations being carried out at each Balance Sheet date.
The retirement benefit obligation recognised in the Balance Sheet represents the present value of the defined benefit obligation as reduced by the fair value of scheme assets.
The present value of the said obligation is determined by discounting the estimated future cash outflows, using market yields of government bonds of equivalent term and currency to the liability.
The interest income / (expense) are calculated by applying the discount rate to the net defined benefit liability or asset. The net interest income / (expense) on the net defined benefit liability is recognised in the Statement of Profit and loss.
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling (if any), are recognised immediately in the Balance Sheet with a corresponding charge or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to the Statement of Profit and Loss in subsequent periods.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in the Statement of Profit and Loss as past service cost.
1.16.2 Short-term employee benefits
The short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognised during the period when the employee renders the service. These benefits include compensated absences such as paid annual leave and performance incentives which are expected to occur within twelve months after the end of the period in which the employee renders the related services.
The cost of compensated absences is accounted as under:
(a) In case of accumulating compensated absences, when employees render service that increase their entitlement of future compensated absences; and
(b) In case of non - accumulating compensated absence, when the absences occur.
1.16.3 Other long-term employee benefits
Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognised as a liability. The cost of providing benefits is actuarially determined using the projected unit credit method, with actuarial valuations being carried out at each Balance Sheet date. Long Service Awards are recognised as a liability at the present value of the obligation at the Balance Sheet date. All gains/losses due to actuarial valuations are immediately recognised in the Statement of Profit and Loss.
1.17 Employee separation compensation
Compensation paid / payable to employees who have opted for retirement under a Voluntary Retirement Scheme including ex-gratia is charged to the Statement of Profit and Loss in the year of separation.
1.18 Borrowing costs
Borrowing costs are interest and ancillary costs incurred in connection with the arrangement of borrowings. General and specific borrowing costs attributable to acquisition and construction of qualifying assets is added to the cost of the assets upto the date the asset is ready for its intended use. Capitalisation of borrowing costs is suspended and charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted. All other borrowing costs are recognised in the Statement of Profit and Loss in the period in which they are incurred.
1.19 Government grants
Government grants and subsidies are recognised when there is reasonable assurance that the Company will comply with the conditions attached to them and the grants and subsidies will be received. Government grants whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets are recognised as deferred revenue in the Balance sheet and transferred to the Statement of Profit and Loss on systematic and rational basis over the useful lives of the related asset.
1.20 Segment reporting
The operating segments are the segments for which separate financial information is available and for which operating profit/loss amounts are evaluated regularly by the Managing Director and Chief Executive Officer (who is the Companyâs chief operating decision maker) in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in conformity with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment. Inter segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors. Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on a reasonable basis have been included under âunallocated revenue / expenses / assets / liabilities.
1.21 Income tax
Tax expense for the year comprises current and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Statement of Profit or Loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Companyâs liability for current tax is calculated using tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to realise the asset or to settle the liability on a net basis.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying values of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount, except when the deferred income tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction. In contrast, deferred tax assets are only recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.
The carrying value of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on the tax rates and tax laws that have been enacted or substantially enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to cover or settle the carrying value of its assets and liabilities.
Deferred tax assets and liabilities are offset to the extent that they relate to taxes levied by the same tax authority and there are legally enforceable rights to set off current tax assets and current tax liabilities within that jurisdiction.
Current and deferred tax are recognised as an expense or income in the statement of profit and loss, except when they relate to items credited or debited either in other comprehensive income or directly in equity, in which case the tax is also recognised in OCI or directly in equity.
Deferred tax assets include a credit for the Minimum Alternate Tax (âMATâ) paid in accordance with the tax laws, which is likely to give future economic benefits in the form of availability of set off against future income tax liability. MAT asset is recognised as deferred tax assets in the Balance Sheet when the asset can be measured reliably, and it is probable that the future economic benefit associated with the asset will be realised.
1.22 Provisions and contingencies
A provision is recognised when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate of the amount can be made. Provisions are determined based on best estimate required to settle the obligation at the Balance Sheet date. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of the money is material). The increase in the provisions due to passage of time is recognised as interest expense. Provisions are reviewed as at each reporting date and adjusted to reflect the current estimate.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.
Contingent assets are not disclosed in the financial statements unless an inflow of economic benefits is probable.
1.23 Dividend
Final dividend on shares is recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Companyâs Board of Directors.
Mar 31, 2018
1.1 Basis of compliance
The financial statements comply, in all material aspects, with Indian Accounting Standards (âInd ASâ) notified under Section 133 of the Companies Act, 2013 (âthe 2013 Actâ) read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Act.
1.2 Basis of preparation and presentation
The financial statements have been prepared on the historical cost basis, except for certain financial instruments and defined benefit plans which are measured at fair value at the end of each reporting period. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
All assets and liabilities have been classified as current or non-current as per the Companyâs normal operating cycle and other criteria set out in the Schedule III to the 2013 Act.
The Companyâs opening Balance Sheet was prepared as at 1 April, 2015 (âTransition Dateâ), the Companyâs date of transition to Ind-AS.
1.3 Critical accounting estimates, assumptions and judgements
The preparation of the financial statements requires management to make estimates, assumptions and judgments that affect the reported balances of assets and liabilities and disclosures as at the date of the financial statements and the reported amounts of income and expense for the periods presented.
The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates considering different assumptions and conditions.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and future periods are affected.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying values of assets and liabilities within the next financial year are discussed below.
1.3.1 Deferred income tax assets and liabilities
Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits.
The amount of total deferred tax assets could change if management estimates of projected future taxable income or if tax regulations undergo a change.
1.3.2 Useful lives of property, plant and equipment (âPPEâ) and intangible assets
Management reviews the estimated useful lives and residual value of PPE and Intangibles at the end of each reporting period. Factors such as changes in the expected level of usage, technological developments and product life-cycle, could significantly impact the economic useful lives and the residual values of these assets. Consequently, the future depreciation charge could be revised and may have an impact on the profit of the future years.
1.3.3 Employee benefit obligations
Employee benefit obligations are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments. These include the estimation of the appropriate discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, the employee benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
1.3.4 Provisions and contingencies
From time to time, the Company is subject to legal proceedings, the ultimate outcome of each being subject to uncertainties inherent in litigation. A provision for litigation is made when it is considered probable that a payment will be made and the amount can be reasonably estimated. Significant judgement is required when evaluating the provision including, the probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of potential loss. Litigation provisions are reviewed at each accounting period and revisions made for the changes in facts and circumstances. Contingent liabilities are disclosed in the notes forming part of the financial statements. Contingent assets are not disclosed in the financial statements unless an inflow of economic benefits is probable.
1.4 Foreign currency translation
The functional currency of Tata Chemicals Limited (i.e. the currency of the primary economic environment in which the Company operates) is the Indian Rupee (Rs.).
On initial recognition, all foreign currency transactions are recorded at exchange rates prevailing on the date of the transaction. Monetary assets and liabilities, denominated in a foreign currency, are translated at the exchange rate prevailing on the Balance Sheet date and the resultant exchange gains or losses are recognised in the Statement of Profit and Loss.
1.5 Property, plant and equipment
An item of property, plant and equipment is recognised as an asset if it is probable that the future economic benefits associated with the item will flow to the Company and its cost can be measured reliably. This recognition principle is applied to the costs incurred initially to acquire an item of property, plant and equipment and also to costs incurred subsequently to add to, replace part of, or service it and subsequently carried at cost less accumulated depreciation and accumulated impairment losses, if any.
The cost of PPE includes interest on borrowings directly attributable to the acquisition, construction or production of a qualifying asset. A qualifying asset is an asset that necessarily takes a substantial period of time to be made ready for its intended use or sale. Borrowing costs and other directly attributable cost are added to the cost of those assets until such time as the assets are substantially ready for their intended use, which generally coincides with the commissioning date of those assets.
The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision is met.
Machinery spares that meet the definition of PPE are capitalised and depreciated over the useful life of the principal item of asset.
All other repair and maintenance costs, including regular servicing, are recognised in the Statement of Profit and Loss as incurred. When a replacement occurs, the carrying value of the replaced part is derecognised. Where an item of property, plant and equipment comprises major components having different useful lives, these components are accounted for as separate items.
PPE acquired and put to use for projects are capitalised and depreciation thereon is included in the project cost till the project is ready for commissioning.
Depreciation methods, estimated useful lives and residual value
Depreciation on PPE (except leasehold improvements and PPE acquired under finance lease) is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives. However, leasehold improvements and PPE acquired under finance lease are depreciated on a straight-line method over the shorter of their respective useful lives or the tenure of the lease arrangement. Freehold land is not depreciated.
Schedule II to the Companies Act, 2013 prescribes the useful lives for various class of assets. For certain class of assets, based on technical evaluation and assessment, Management believes that the useful lives adopted by it reflects the periods over which these assets are expected to be used. Accordingly for those assets, the useful lives estimated by the management are different from those prescribed in the Schedule. Managementâs estimates of the useful lives for various class of fixed assets are as given below:
Useful lives and residual values of assets are reviewed at the end of each reporting period.
Losses arising from the retirement of, and gains or losses arising from disposal/adjustments of PPE are recognised in the Statement of Profit and Loss.
1.6 Intangible assets
Intangible assets generally comprise software licenses and rights to use railway wagon.
Intangible assets are measured on initial recognition at cost and subsequently are carried at cost less accumulated amortisation and accumulated impairment losses, if any.
The intangible assets with a finite useful life are amortised using straight line method over their estimated useful lives. The managementâs estimates of the useful lives for various class of Intangibles are as given below:
The estimated useful life is reviewed annually by the management.
Gains or losses arising from the retirement or disposal of an intangible asset are determined as the difference between the net disposal proceeds and the carrying amount of the asset and recognised as income or expense in the Statement of Profit and Loss.
1.7 Capital work-in-progress (âCWIPâ) and intangible assets under development
Projects under commissioning and other CWIP/ intangible assets under development are carried at cost, comprising direct cost, related incidental expenses and attributable borrowing cost.
Subsequent expenditures relating to property, plant and equipment are capitalised only when it is probable that future economic benefit associated with these will flow to the Company and the cost of the item can be measured reliably.
1.8 Investment property
Investment properties are land and buildings that are held for long term lease rental yields and/or for capital appreciation. Investment properties are initially recognised at cost including transaction costs. Subsequently investment properties comprising buildings are carried at cost less accumulated depreciation and accumulated impairment losses, if any.
Depreciation on buildings is provided over the estimated useful lives as specified in note 2.5 above. The residual values, estimated useful lives and depreciation method of investment properties are reviewed, and adjusted on prospective basis as appropriate, at each reporting date. The effects of any revision are included in the Statement of Profit and Loss when the changes arise.
An investment property is de-recognised when either the investment property has been disposed of or do not meet the criteria of investment property i.e. when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the Statement of Profit and Loss in the period of de-recognition.
1.9 Research and development expenses
Research expenses are charged to the Statement of Profit and Loss as expenses in the year in which they are incurred. Development costs are capitalised as an intangible asset under development when the following criteria are met:
- the project is clearly defined, and the costs are separately identified and reliably measured;
- the technical feasibility of the project is demonstrated;
- the ability to use or sell the products created during the project is demonstrated;
- the intention to complete the project exists and use or sale of output manufactured during the project;
- a potential market for the products created during the project exists or their usefulness, in case of internal use, is demonstrated, such that the project will generate probable future economic benefits; and
- adequate resources are available to complete the project.
These development costs are amortised over the estimated useful life of the projects or the products they are incorporated within. The amortisation of capitalised development costs begins as soon as the related product is released to production.
1.10 Non-current assets held for sale and discontinued operations
Non-current assets (including disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable.
Non-current assets classified as held for sale are measured at lower of their carrying amount and fair value less cost to sell.
Non-current assets classified as held for sale are not depreciated or amortised from the date when they are classified as held for sale.
Non-current assets classified as held for sale and the assets and liabilities of a disposal group classified as held for sale are presented separately from the other assets and liabilities in the Balance Sheet.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and:
- represents a separate major line of business or geographical area of operations and;
- is part of a single co-ordinated plan to dispose of such a line of business or area of operations.
The results of discontinued operations are presented separately in the Statement of Profit and Loss.
1.11 Financial instruments
1.11.1 Investments and other financial assets: Classification
The Company classifies its financial assets in the following measurement categories:
- those to be measured subsequently at fair value (either through OCI, or through profit or loss), and
- those measured at amortised cost.
The classification depends on the Companyâs business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in the Statement of Profit and Loss or through OCI. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through OCI. The Company has elected to consider the carrying cost of equity investments in subsidiaries and joint venture at cost.
The Company reclassifies debt investments when and only when its business model for managing those assets changes.
Debt instruments
Measurement
At initial recognition, the Company measures a financial asset at its fair value (other than financial asset at fair value through profit or loss). Transaction costs that are directly attributable to the acquisition of the financial assets are added to the fair value measured on initial recognition. Transaction costs of financial assets carried at fair value through profit or loss are expensed in the Statement of Profit and Loss.
Subsequent measurement of debt instruments depends on the Companyâs business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments:
- Amortised cost
Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortised cost. A gain or loss on a debt investment (unhedged) that is subsequently measured at amortised cost is recognised in the Statement of Profit and Loss when the asset is derecognised or impaired. Interest income from these financial assets is included in finance income using the effective interest rate (âEIRâ) method.
- Fair value through other comprehensive income (âFVTOCIâ)
Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assetsâ cash flows represent solely payments of principal and interest, are measured at FVTOCI. Movements in the carrying amount are recorded through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains or losses which are recognised in the Statement of Profit and Loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to the Statement of Profit and Loss. Interest income from these financial assets is included in other income using the EIR method.
- Fair value through profit or loss (âFVTPLâ)
Assets that do not meet the criteria for amortised cost or FVTOCI are measured at FVTPL. A gain or loss on a debt investment that is subsequently measured at FVTPL (unhedged) is recognised net in the Statement of Profit and Loss in the period in which it arises. Interest income from these financial assets is included in other income.
Equity instruments
The Company subsequently measures all equity investments at fair value. Where the Companyâs management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to the Statement of Profit and Loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified to equity. Dividends from such investments are recognised in the Statement of Profit and Loss within other income when the Companyâs right to receive payments is established. Impairment losses (and reversal of impairment losses) on equity investments measured at FVTOCI are not reported separately from other changes in fair value.
Cash and cash equivalents
The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of cash, that are subject to an insignificant risk of change in value with a maturity within three months or less from the date of purchase, to be cash equivalents. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage.
Derecognition of financial assets
A financial asset is derecognised only when the Company
- has transferred the rights to receive cash flows from the financial asset; or
- retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Where the Company transfers an asset, it evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. Where the Company has transferred substantially all risks and rewards of ownership, the financial asset is derecognised. Where the Company has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised. Where the Company has neither transferred a financial asset nor retained substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognised if the Company has not retained control of the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.
1.11.2 Debt and equity instruments
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
1.11.3 Financial liabilities
The Companyâs financial liabilities comprise borrowings, trade payables and other liabilities. These are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost using the EIR method. The EIR is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period at effective interest rate. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.
Changes to the carrying amount of a financial liability as a result of renegotiation or modification of terms that do not result in derecognition of the financial liability, is recognised in the Statement of Profit and Loss.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, its obligations are discharged, cancelled or they expire.
Presentation
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.
Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period.
1.11.4 Derivatives and hedging activities
In the ordinary course of business, the Company uses certain derivative financial instruments to reduce business risks which arise from its exposure to foreign exchange and interest rate fluctuations associated with borrowings (cash flow hedges). When the Company opts to undertake hedge accounting, the Company documents, at the inception of the hedging transaction, the economic relationship between hedging instruments and hedged items including whether the hedging instrument is expected to offset changes in cash flows or fair values of hedged items. The Company documents its risk management objective and strategy for undertaking various hedge transactions at the inception of each hedge relationship.
Derivatives are initially recognised at fair value on the date the derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged and the type of hedge relationship designated.
Cash flow hedges that qualify for hedge accounting
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges, is recognised through OCI and as cash flow hedging reserve within equity, limited to the cumulative change in fair value of the hedged item on a present value basis from the inception of the hedge. The gain or loss relating to the ineffective portion is recognised immediately in the Statement of Profit and Loss.
Amounts accumulated in equity are reclassified to the Statement of Profit and Loss on settlement. When the hedged forecast transaction results in the recognition of a non-financial asset, the amounts accumulated in equity with respect to gain or loss relating to the effective portion of the spot component of forward contracts, both the deferred hedging gains and losses and the deferred aligned forward points are included within the initial cost of the asset. The deferred amounts are ultimately recognised in the Statement of Profit and Loss as the hedged item affects profit or loss.
When a hedging instrument expires, is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively and any cumulative deferred gain or loss and deferred costs of hedging in equity at that time remains in equity until the forecast transaction occurs. When the forecast transaction is no longer expected to occur, the cumulative gain or loss and deferred costs of hedging that were reported in equity are immediately transferred to the Statement of Profit and Loss.
Derivatives that are not designated as hedges
When derivative contracts to hedge risks are not designated as hedges, such contracts are accounted through FVTPL.
As at the year end, there were no designated accounting hedges.
The entire fair value of a hedging derivative is classified as a noncurrent asset or liability when the remaining maturity of the hedged item exceeds 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item does not exceed 12 months.
1.11.5 Financial guarantee contracts
Financial guarantee contracts are recognised as a financial liability at the time of issuance of guarantee. The liability is initially measured at fair value and are subsequently measured at the higher of the amount of loss allowance determined, or the amount initially recognised less, the cumulative amount of income recognised.
1.11.6 Offsetting of financial instruments
Financial assets and financial liabilities are offset when the Company has a legally enforceable right (not contingent on future events) to off-set the recognised amounts either to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.
1.11.7 Fair value of financial instruments
In determining the fair value of its financial instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each reporting date. The methods used to determine fair value include discounted cash flow analysis, available quoted market prices and dealer quotes. All methods of assessing fair value result in general approximation of value.
1.12 Impairment
Financial assets (other than at fair value)
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and debt instruments carried at FVTOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. In respect of trade receivables the Company applies the simplified approach permitted by Ind AS 109 - Financial Instruments, which requires expected lifetime losses to be recognised upon initial recognition of the receivables.
PPE, CWIP and intangible assets
The carrying values of assets / cash generating units (âCGUâ) at each Balance Sheet date are reviewed to determine whether there is any indication that an asset may be impaired. If any indication of such impairment exists, the recoverable amount of such assets / CGU is estimated and in case the carrying amount of these assets exceeds their recoverable amount, an impairment loss is recognised in the Statement of Profit and Loss. The recoverable amount is the higher of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor. Assessment is also done at each Balance Sheet date as to whether there is indication that an impairment loss recognised for an asset in prior accounting periods no longer exists or may have decreased, consequent to which such reversal of impairment loss is recognised in the Statement of Profit and Loss.
1.13 Inventories
Inventories are valued at lower of cost (on weighted average basis) and net realisable value after providing for obsolescence and other losses, where considered necessary. Cost includes all charges in bringing the goods to their present location and condition, including other levies, transit insurance and receiving charges. Work-in-progress and finished goods include appropriate proportion of overheads and, where applicable, taxes and duties. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
1.14 Revenue recognition
1.14.1 Sale of goods
Revenue from the sale of goods is recognised at the fair value of the consideration received or receivable, net of returns, including estimated returns where applicable, and trade discounts, rebates and related taxes, when all significant risks and rewards of ownership of the goods have been passed to the buyer, either on despatch or delivery of goods, based on the contracts.
In respect of Urea, sales are recognised based on concession rates as notified under the New Pricing Scheme. Equated freight claims and escalation claims for Urea sales are estimated by Management based on the norms prescribed or notified under the said Scheme. In case of Complex Fertilisers, sales include price concessions, as notified under the Nutrient Based Subsidy policy, or as estimated by the Management based on the norms prescribed.
1.14.2 Interest income
For all debt instruments measured either at amortised cost or at FVTOCI, interest income is recorded using the EIR method.
1.14.3 Dividend income
Dividend income is accounted for when Companyâs right to receive the income is established.
1.14.4 Insurance claims
Insurance claims are accounted for on the basis of claims admitted / expected to be admitted and to the extent that there is no uncertainty in receiving the claims.
1.15 Leases
The determination of whether an agreement is, or contains, a lease is based on the substance of the agreement at the date of inception.
Finance Leases:
Lease arrangements in which substantially all risks and rewards of ownership of the under-lying assets are transferred to the Company, are classified as finance lease.
Assets held under finance leases are initially recognised at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the Balance Sheet as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.
Operating leases:
The leases which are not classified as finance lease are operating leases.
Lease arrangements where the risks and rewards of ownership of an asset substantially vest with the lessor are recognised as operating leases. Lease rentals under operating leases are recognised in the Statement of Profit and Loss on a straight-line basis over the lease term unless the payments are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases.
1.16 Employee benefits plans
Employee benefits consist of provident fund, superannuation fund, gratuity fund, compensated absences, long service awards, post-retirement medical benefits, directorsâ retirement obligations and family benefit scheme.
1.16.1 Post-employment benefit plans
Defined contribution plans
Payments to a defined contribution retirement benefit scheme for eligible employees in the form of superannuation fund are charged as an expense as they fall due. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from the contributions made.
Defined benefit plans
Contributions to a Provident Fund are made to Tata Chemicals Limited Employeesâ Provident Fund Trust, administered by the Company, and are charged to the Statement of Profit and Loss as incurred. The Trust invests in specific designated instruments as permitted by Indian law. The remaining portion is contributed to the government administered pension fund. The Company is liable for the contribution and any shortfall in interest between the amount of interest realised by the investments and the interest payable to members at the rate declared by the Government of India in respect of the Trust administered by the Company.
For defined benefit schemes in the form of gratuity fund, post-retirement medical benefits, pension liabilities (including directorsâ) and family benefit scheme, the cost of providing benefits is actuarially determined using the projected unit credit method, with actuarial valuations being carried out at each Balance Sheet date.
The retirement benefit obligation recognised in the Balance Sheet represents the present value of the defined benefit obligation as reduced by the fair value of scheme assets.
The present value of the said obligation is determined by discounting the estimated future cash outflows, using market yields of government bonds of equivalent term and currency to the liability.
The interest income/(expense) are calculated by applying the discount rate to the net defined benefit liability or asset. The net interest income/(expense) on the net defined benefit liability is recognised in the Statement of Profit and loss.
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling (if any), are recognised immediately in the Balance Sheet with a corresponding charge or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to the Statement of Profit and Loss in subsequent periods.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in the Statement of Profit and Loss as past service cost.
1.16.2 Short-term employee benefits
The short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognised during the period when the employee renders the service. These benefits include compensated absences such as paid annual leave and performance incentives which are expected to occur within twelve months after the end of the period in which the employee renders the related services.
The cost of compensated absences is accounted as under:
(a) In case of accumulating compensated absences, when employees render service that increase their entitlement of future compensated absences; and
(b) In case of non-accumulating compensated absence, when the absences occur.
1.16.3 Other long-term employee benefits
Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognised as a liability. The cost of providing benefits is actuarially determined using the projected unit credit method, with actuarial valuations being carried out at each Balance Sheet date. Long Service Awards are recognised as a liability at the present value of the obligation at the Balance Sheet date. All gains/losses due to actuarial valuations are immediately recognised in the Statement of Profit and Loss.
1.17 Employee separation compensation
Compensation paid/payable to employees who have opted for retirement under a Voluntary Retirement Scheme including ex-gratia is charged to the Statement of Profit and Loss in the year of separation.
1.18 Borrowing costs
Borrowing costs are interest and ancillary costs incurred in connection with the arrangement of borrowings. General and specific borrowing costs attributable to acquisition and construction of qualifying assets is added to the cost of the assets upto the date the asset is ready for its intended use. Capitalisation of borrowing costs is suspended and charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted. All other borrowing costs are recognised in the Statement of Profit and Loss in the period in which they are incurred.
1.19 Government grants
Government grants and subsidies are recognised when there is reasonable assurance that the Company will comply with the conditions attached to them and the grants and subsidies will be received. Government grants whose primary condition is that the Company should purchase, construct or otherwise acquire noncurrent assets are recognised as deferred revenue in the Balance sheet and transferred to the Statement of Profit and Loss on systematic and rational basis over the useful lives of the related asset.
1.20 Segment reporting
The operating segments are the segments for which separate financial information is available and for which operating profit/loss amounts are evaluated regularly by the Managing Director and Chief Executive Officer (who is the Companyâs chief operating decision maker) in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in conformity with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment. Inter segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors. Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on a reasonable basis have been included under âunallocated revenue / expenses / assets / liabilities.
1.21 Income tax
Tax expense for the year comprises current and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of profit and loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Companyâs liability for current tax is calculated using tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to realise the asset or to settle the liability on a net basis.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying values of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences arising between the tax base of assets and liabilities and their carrying amount, except when the deferred income tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction. In contrast, deferred tax assets are only recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.
The carrying value of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on the tax rates and tax laws that have been enacted or substantially enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to cover or settle the carrying value of its assets and liabilities.
Deferred tax assets and liabilities are offset to the extent that they relate to taxes levied by the same tax authority and there are legally enforceable rights to set off current tax assets and current tax liabilities within that jurisdiction.
Current and deferred tax are recognised as an expense or income in the statement of profit and loss, except when they relate to items credited or debited either in other comprehensive income or directly in equity, in which case the tax is also recognised in OCI or directly in equity.
Deferred tax assets include a credit for the Minimum Alternate Tax (âMATâ) paid in accordance with the tax laws, which is likely to give future economic benefits in the form of availability of set off against future income tax liability. MAT asset is recognised as deferred tax assets in the Balance Sheet when the asset can be measured reliably, and it is probable that the future economic benefit associated with the asset will be realised.
1.22 Provisions and contingencies
A provision is recognised when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate of the amount can be made. Provisions are determined based on best estimate required to settle the obligation at the Balance Sheet date. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of the money is material). The increase in the provisions due to passage of time is recognised as interest expense. Provisions are reviewed as at each reporting date and adjusted to reflect the current estimate.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.
Contingent assets are not disclosed in the financial statements unless an inflow of economic benefits is probable.
1.23 Dividend
Final dividend on shares is recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Companyâs Board of Directors.
Mar 31, 2017
1. CORPORATE INFORMATION
Tata Chemicals Limited (the ''Company'') is a public limited company domiciled in India. Its shares are listed on two stock exchanges in India viz, the Bombay Stock Exchange (''BSE'') and the National Stock Exchange (''NSE''). The Company is engaged in diversified businesses dealing in inorganic chemicals, fertilizers, other agri inputs, consumer and nutritional solutions business. The Company has a global presence with key subsidiaries in United States of America (USA), United Kingdom (UK) and Kenya that are engaged in the manufacture and sale of soda ash, industrial salt and related products.
2. SUMMARY OF BASIS OF COMPLIANCE, BASIS OF PREPARATION AND PRESENTATION, CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGMENTS AND SIGNIFICANT ACCOUNTING POLICIES
2.1. Basis of compliance
The financial statements comply in all material aspects with Indian Accounting Standards (''Ind AS'') notified under Section 133 of the Companies Act, 2013 (''the 2013 Act'') read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Act.
Until the adoption ofInd AS, for all periods up to and including the year ended 31 March, 2016, the Company prepared its financial statements in accordance with Section 133 of the 2013 Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 (''Previous GAAP'').
Reconciliation and description of the effects of the transition has been summarized in note 4.
2.2. Basis of preparation and presentation
The financial statements have been prepared under the historical cost convention using the accrual method of accounting basis, except for certain financial instruments that are measured at fair values at the end of each reporting period as explained in the significant accounting polices below.
All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle and other criteria set out in the Schedule III to the 2013 Act.
2.3. Critical accounting estimates, assumptions and judgments
The preparation of the financial statements requires management to make estimates, assumptions and judgments that affect the reported balances of assets and liabilities and disclosures as at the date of the financial statements and the reported amounts of income and expense for the periods presented.
The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates considering different assumptions and conditions.
Estimates and underlying assumptions are reviewed on an ongoing basis. Impact on account of revisions to accounting estimates are recognized in the period in which the estimates are revised and future periods are affected.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying values of assets and liabilities within the next financial year are discussed below.
2.3.1. Deferred income tax assets and liabilities
Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits.
The amount of total deferred tax assets could change if estimates of projected future taxable income or if tax regulations undergo a change.
2.3.2. Useful lives of Property, plant and equipment (''PPE'')
The Management reviews the estimated useful lives and residual value of PPE at the end of each reporting period. The factors such as changes in the expected level of usage, number of shifts of production, technological developments and product life-cycle, could significantly impact the economic useful lives and the residual values of these assets. Consequently, the future depreciation charge could be revised and thereby could have an impact on the profit of the future years.
2.3.3. Impairment of investments
The Company reviews its carrying value of investments carried at amortized cost annually, or more frequently when there is an indication for impairment. If the recoverable amount is less than its carrying amount, the impairment loss is accounted for.
2.3.4. Employee benefit obligations
Employee benefit obligations are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, employee benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
2.3.5. Litigation
From time to time, the Company is subject to legal proceedings, the ultimate outcome of each being always subject to many uncertainties inherent in litigation. A provision for litigation is made when it is considered probable that a payment will be made and the amount of the loss can be reasonably estimated. Significant judgment is made when evaluating, among other factors, the probability of unfavorable outcome and the ability to make a reasonable estimate of the amount of potential loss. Litigation provisions are reviewed at each accounting period and revisions made for the changes in facts and circumstances.
2.4. Foreign currency translation
The functional currency of Tata Chemicals Limited (i.e. the currency of the primary economic environment in which the Company operates) is Indian Rupee (Rs,).
On initial recognition, all foreign currency transactions are translated into the functional currency using the exchange rates prevailing on the date of the transaction. As at the reporting date, foreign currency monetary assets and liabilities are translated at the exchange rate prevailing on the Balance Sheet date and the exchange gains or losses are recognized in the Statement of Profit and Loss.
2.5. Property, plant and equipment
PPE is measured on initial recognition at cost net of taxes / duties, credits availed, if any, and subsequently carried at cost less accumulated depreciation and accumulated impairment losses, if any. The cost of PPE includes interest on borrowings directly attributable to acquisition, construction or production of qualifying assets. Qualifying assets are assets which necessarily take a substantial period of time to get ready. Borrowing cost and other directly attributable cost are added to the cost of those assets until such time as the assets are substantially ready for their intended use which generally coincides with the commissioning date of those assets.
The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision is met.
Machinery spares that meet the definition of PPE are capitalized and depreciated over the useful life of the principal item of asset.
PPE acquired and put to use for projects are capitalized and depreciation thereon is included in the project cost till the project is ready for commissioning.
Depreciation methods, estimated useful lives and residual value
Depreciation on PPE (except leasehold improvements and PPE acquired under finance lease) is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives. However, leasehold improvements and PPE acquired under finance lease are depreciated on a straight-line method over the shorter of their respective useful lives or the tenure of the lease arrangement. Freehold land is not depreciated.
Useful lives and residual values of assets are reviewed at the end of each reporting period.
Losses arising from the retirement of, and gains or losses arising from disposal of PPE are recognized in the Statement of Profit and Loss.
2.6. Intangible assets
Intangibles generally comprise of software license and rights to use railway wagon.
Intangible assets are measured on initial recognition at cost and subsequently are carried at cost less accumulated amortization and accumulated impairment losses, if any.
The estimated useful life is reviewed annually by the management.
2.7. Capital work-in-progress and intangible assets under development
Projects under commissioning and other capital work-in-progress/intangible assets under development are carried at cost, comprising direct cost, related incidental expenses and attributable borrowing cost.
2.8. Research and development expenses
Research expenses are charged to the Statement of Profit and Loss as expenses in the year in which they are incurred. Development costs are capitalized as an intangible asset under development when the following criteria are met:
- the project is clearly defined, and the costs are separately identified and reliably measured;
- the technical feasibility of the project is demonstrated;
- the ability to use or sell the products created during the project is demonstrated;
- the intention exists to finish the project and use or sell the products created during the project;
- a potential market for the products created during the project exists or their usefulness, in case of internal use, is demonstrated, leading one to believe that the project will generate probable future economic benefits; and
- adequate resources are available to complete the project.
These development costs are amortized over the estimated useful life of the projects or the products they are incorporated within. The amortization of capitalized development costs begins as soon as the related product is released.
2.9. Non-current assets held for sale and discontinued operation
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable.
Non-current assets and disposal group classified as held for sale are measured at lower of their carrying amount and fair value less cost to sell.
Non-current assets classified as held for sale are not depreciated or amortized from the date when they are classified as held for sale.
Non-current assets classified as held for sale and the assets and liabilities of a disposal group classified as held for sale are presented separately from the other assets and liabilities in the Balance Sheet.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations and is part of a single co-ordinate plan to dispose of such a line of business or area of operations.
The results of discontinued operation are presented separately in the Statement of Profit and Loss from continuing operations.
2.10 Financial instruments
2.10.1 Investments and other financial assets:
Classification
The Company classifies its financial assets in the following measurement categories:
- those to be measured subsequently at fair value (either through OCI, or through profit or loss), and
- those measured at amortized cost.
The classification depends on the Company''s business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through OCI.
The Company reclassifies debt investments when and only when its business model for managing those assets changes.
Debt instruments Measurement
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
Subsequent measurement of debt instruments depends on the Company''s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments:
Amortized cost
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. A gain or loss on a debt investment that is subsequently measured at amortized cost and is not part of a hedging relationship is recognized in profit or loss when the asset is derecognized or impaired. Interest income from these financial assets is included in finance income using the effective interest rate method.
Fair value through other comprehensive income (''FVTOCI'')
Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets'' cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income (''FVTOCI''). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue
and foreign exchange gains or losses which are recognized in Statement of Profit and Loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to profit or loss and recognized as gains/ (losses) within other income or other expense. Interest income from these financial assets is included in other income using the effective interest rate method.
Fair value through profit or loss (''FVTPL'')
Assets that do not meet the criteria for amortized cost or FVTOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at FVTPL and is not part of a hedging relationship is recognized in profit or loss and presented net in the Statement of Profit and Loss as gains/(losses) within other income or other expense in the period in which it arises. Interest income from these financial assets is included in other income.
Equity instruments
The Company subsequently measures all equity investments at fair value. Where the Company''s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to the Statement of Profit and Loss. Dividends from such investments are recognized in the Statement of Profit and Loss as Other Income when the Company''s right to receive payments is established. Changes in the fair value of financial assets at FVTPL are recognized as gains/(losses) within other income or other expense in the Statement of Profit and Loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVTOCI are not reported separately from other changes in fair value.
Cash and cash equivalents
The Company considers all highly liquid financial instruments, which are readily convertible into known amounts of cash that are subject to an insignificant risk of change in value and having original maturities of three months or less from the date of purchase, to be cash equivalents. Cash and cash equivalents consist of balances with banks which are unrestricted for withdrawal and usage.
De-recognition of financial assets
A financial asset is derecognized only when the Company
- has transferred the rights to receive cash flows from the financial asset; or
- retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more recipients.
Where the Company transfers an asset, it evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. Where the Company has transferred substantially all risks and rewards of ownership, the financial asset is derecognized. Where the Company has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognized. Where the Company has neither transferred a financial asset nor retained substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognized if the Company has not retained control of the financial asset. Where the Company retains control of the financial asset, the asset is continued to be recognized to the extent of continuing involvement in the financial asset.
2.10.2 Debt and equity instruments
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
2.10.3 Financial liabilities
The Company''s financial liabilities comprise borrowings, trade payables and other liabilities. These are initially measured at fair value, net of transaction costs, and are subsequently measured at amortized cost using the effective interest method.
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.
Changes to the carrying amount of a financial liability as a result of renegotiation or modification of terms that do not result in derecognition of the financial liability, is recognized in the Statement of Profit and Loss.
De-recognition of financial liabilities
The Company derecognizes financial liabilities when, and only when, its obligations are discharged, cancelled or they expire.
Presentation
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.
Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period.
2.10.4 Derivatives and hedging activities
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently premeasured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged and the type of hedge relationship designated.
Derivatives are designated as hedges of foreign exchange risk associated with the cash flows of highly probable forecast transactions and variable interest rate risk or foreign exchange risk associated with borrowings (cash flow hedges). When the
Company opts to undertake hedge accounting, the Company documents at the inception of the hedging transaction, the economic relationship between hedging instruments and hedged items including whether the hedging instrument is expected to offset changes in cash flows or fair values of hedged items. The Company documents its risk management objective and strategy for undertaking various hedge transactions at the inception of each hedge relationship.
Cash flow hedges that qualify for hedge accounting
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges, is recognized in the OCI and in cash flow hedging reserve within equity, limited to the cumulative change in fair value of the hedged item on a present value basis from the inception of the hedge. The gain or loss relating to the ineffective portion is recognized immediately in the Statement of Profit and Loss as Finance Costs.
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss. When the hedged forecast transaction results in the recognition of a non-financial asset, the amounts accumulated in equity with respect to gain or loss relating to the effective portion of the spot component of forward contracts, both the deferred hedging gains and losses and the deferred aligned forward points are included within the initial cost of the asset. The deferred amounts are ultimately recognized in Statement of Profit and Loss as the hedged item affects profit or loss.
When a hedging instrument expires, or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative deferred gain or loss and deferred costs of hedging in equity at that time remains in equity until the forecast transaction occurs. When the forecast transaction is no longer expected to occur, the cumulative gain or loss and deferred costs of hedging that were reported in equity are immediately reclassified to profit or loss.
Derivatives that are not designated as hedges
When derivative contracts to hedge risks are not designated as hedges, such contracts are accounted for at fair value through profit or loss and are included in Finance Costs.
As at the year end, there were no designated accounting hedges.
The entire fair value of a hedging derivative is classified as a noncurrent asset or liability when the remaining maturity of the hedged item exceeds 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item does not exceed 12 months.
2.10.5 Financial guarantee contracts
Financial guarantee contracts are recognized as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value and subsequently at the higher of the amount of loss allowance determined as per impairment requirements of Ind-AS 109 - Financial Instruments and the amount initially recognized less cumulative amortization, where appropriate.
2.10.6 Offsetting of financial instruments
Financial assets and financial liabilities are offset when it currently has a legally enforceable right (not contingent on future events) to off-set the recognized amounts and the Company intends either to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.
2.10.7 Fair value of financial instruments
In determining the fair value of its financial instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each reporting date. The methods used to determine fair value include discounted cash flow analysis, available quoted market prices and dealer quotes. All methods of assessing fair value result in general approximation of value, and such value may never actually be realized.
2.11 Impairment
Financial assets (other than at fair value)
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried at amortized cost and FVTOCI debt instruments. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables only, the Company applies the simplified approach permitted by Ind AS 109 -Financial Instruments, which requires expected lifetime losses to be recognized from initial recognition of the receivables.
PPE and intangible assets
The carrying values of assets / cash generating units at each Balance Sheet date are reviewed to determine whether there is any indication that an asset may be impaired. If any indication of such impairment exists, the recoverable amount of such assets / cash generating unit is estimated and in case the carrying amount of these assets exceeds their recoverable amount, an impairment is recognized. The recoverable amount is the higher of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor. Assessment is also done at each Balance Sheet date as to whether there is indication that an impairment loss recognized for an asset in prior accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognized in the Statement of Profit and Loss.
2.12 Inventories
Inventories are valued at lower of cost (on weighted average basis) and net realizable value after providing for obsolescence and other losses, where considered necessary. Cost includes all charges in bringing the goods to their present location and condition, including other levies, transit insurance and receiving charges. Work-in-progress and finished goods include appropriate proportion of overheads and, where applicable, excise duty. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
2.13 Revenue recognition
2.13.1 Sale of goods
Revenue from sale of goods is recognized at the fair value of the consideration received or receivable, net of returns including estimated returns where applicable, and trade discounts, rebates, sales tax and value added tax, when all significant risks and rewards of ownership of the goods have been passed to the buyer, usually on delivery of goods.
I n respect of Urea, sales are recognized based on concession rates as notified under the New Pricing Scheme. Equated freight claims and escalation claims for Urea sales are estimated by the Management based on the norms prescribed or notified under the said Scheme. In case of complex fertilizers, sales include price concession, as notified under the Nutrient Based Subsidy policy, or as estimated by the Management based on the norms prescribed.
2.13.2 Interest income
For all debt instruments measured either at amortized cost or at FTVOCI, interest income is recorded using the effective interest rate.
2.13.3 Dividend income
Dividend income is accounted for when Company''s right to receive income is established.
2.13.4 Insurance claims
Insurance claims are accounted for on the basis of claims admitted / expected to be admitted and to the extent that there is no uncertainty in receiving the claims.
2.14 Leases
The Company as lessee
Lease arrangements in which substantially all risks and rewards of ownership of the under-lying assets are transferred to the Company, are classified as finance lease.
Assets held under finance leases are initially recognized at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the less or is included in the Balance Sheet as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.
Lease arrangements where the risks and rewards of ownership of an asset substantially vest with the less or are recognized as operating leases. Lease rentals under operating leases are recognized in the Statement of Profit and Loss on a straight-line basis over the lease term unless the payments are structured to increase in line with expected general inflation to compensate for the less orâs expected inflationary cost increases.
2.15 Employee benefits plans
Employee benefits consist of provident fund, superannuation fund, gratuity fund, compensated absences, long service awards, post-retirement medical benefits, directors'' retirement obligations and family benefit scheme.
2.15.1 Post-employment benefit plans Defined contribution plans
Payments to defined contribution retirement benefit scheme for eligible employees in the form of superannuation fund are charged as an expense as they fall due. Such benefits are classified as Defined Contribution Schemes as the Company does not carry any further obligations, apart from the contributions made.
The Company makes contribution towards provident fund, in substance a defined contribution retirement benefit plan. The provident fund is administered by the Trustees of the Tata Chemicals Limited Provident Fund. The rules of the Company''s provident fund administered by the Trust, require that if the Board of Trustees are unable to pay interest at the rate declared by the Employees'' Provident Fund by the Government under para 60 of the Employees'' Provident Fund Scheme, 1952 for the reason that the return on investment is less or for any other reason, then the deficiency shall be made good by the Company. Having regard to the assets of the fund and the return on the investments, the Company does not expect any deficiency as at the year end.
Defined benefit plans
For defined benefit schemes in the form of gratuity fund, post retirement medical benefits, directors'' pension liabilities and family benefit scheme, the cost of providing benefits is actuarially determined using the projected unit credit method, with actuarial valuations being carried out at each Balance Sheet date. The retirement benefit obligation recognized in the Balance Sheet represents the present value of the defined benefit obligation as reduced by the fair value of scheme assets.
The present value of the said obligation is determined by discounting the estimated future cash outflows, using market yields of government bonds of equivalent term and currency to the liability.
The interest income / (expense) are calculated by applying the discount rate to the net defined benefit liability or asset. The net interest income / (expense) on the net defined benefit liability is recognized in the Statement of Profit and loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in OCI. They are included in retained earnings in the Statement of Changes in Equity and in the Balance Sheet.
Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognized immediately in profit or loss as past service cost
2.15.2 Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognized during the period when the employee renders the service. These benefits include compensated absences such as paid annual leave and performance incentives which are expected to occur within twelve months after the end of the period in which the employee renders the related services.
The cost of compensated absences is accounted as under:
(a) In case of accumulated compensated absences, when employees render service that increase their entitlement of future compensated absences; and
(b) In case of non - accumulating compensated absence, when the absences occur.
2.15.3 Other long-term employee benefits
Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognized as a liability at the present value of the defined benefit obligation at the Balance Sheet date. Long Service Awards are recognized as a liability at the present value of the obligation at the Balance Sheet date.
2.16 Employee separation compensation
Compensation paid / payable to employees who have opted for retirement under a Voluntary Retirement Scheme including ex-gratia is charged to Statement of Profit and Loss in the year of separation.
2.17 Borrowing costs
Borrowing costs are interest and ancillary costs incurred in connection with the arrangement of borrowings. General and specific borrowing costs attributable to acquisition and construction of qualifying assets is added to the cost of the assets unto the date the asset is ready for its intended use. Capitalization of borrowing costs is suspended and charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted. All other borrowing costs are recognized in the Statement of Profit and Loss in the period in which they are incurred.
2.18 Government grants
Government grants and subsidies are recognized when there is reasonable assurance that the Company will comply with the conditions attached to them and the grants and subsidies will be received. Government grants whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets are recognized as deferred revenue in the Balance sheet and transferred to profit or loss on systematic and rational basis over the useful lives of the related asset. Other government grants and subsidies are recognized as income over the periods necessary to match them with the costs which they are intended to compensate on a systematic basis.
2.19 Segment reporting
The Company identifies operating segments based on the dominant source, nature of risks and returns and the internal organization. The operating segments are the segments for which separate financial information is available and for which operating profit/loss amounts are evaluated regularly by the Managing Director and Chief Executive Officer (who is the Company''s chief operating decision maker) in deciding how to allocate resources and in assessing performance
The accounting policies adopted for segment reporting are in conformity with the accounting policies of the Company. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment. Inter segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors. Revenue, expenses, assets and liabilities which relate to the Company as a whole and are not allocable to segments on a reasonable basis have been included under ''unallocated revenue / expenses / assets / liabilities''.
2.20 Income tax
Income tax expense comprises current tax expense and the net change in the deferred tax asset or liability during the year. Current and deferred taxes 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
Current tax is measured at the amount of tax expected to be payable on the taxable income for the year as determined in accordance with the provisions of the Income Tax Act,1961 that have been enacted or subsequently enacted at the end of the reporting period.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle the asset and the liability on a net basis.
Deferred tax
Deferred income 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, except when the deferred income tax arises from the initial recognition of an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction.
Deferred tax assets are recognized only to the extent that it is probable that either future taxable profits or reversal of deferred tax liabilities 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 a deferred tax asset is reviewed at the end of 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 income tax asset to be utilized.
Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred tax asset is realized or the deferred tax liability is settled.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when it relates to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities simultaneously.
2.21 Provisions
A provision is recognized when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate of the amount can be made. Provisions are determined based on best estimate required to settle the obligation at the Balance Sheet date. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of the money is material). The increase in the provisions due to passage of time is recognized as interest expense. Provisions are reviewed as at each reporting date and adjusted to reflect the current best estimate.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made. Contingent assets are not disclosed in the financial statements unless an inflow of economic benefits is probable.
2.22 Dividend
Final dividend on shares are recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Company''s Board of Directors.
Mar 31, 2015
(a) Basis of Accounting and Preparation of the Financial Statements
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards specified under
section 133 of the Companies Act, 2013 ("the 2013 Act") and the
relevant provisions of the 1956 Act / 2013 Act, as applicable. The
financial statements of the Company are prepared under the historical
cost convention using the accrual method of accounting. The accounting
policies adopted in the preparation of financial statements are
consistent with those of the previous year. All assets and liabilities
have been classified as current or non-current as per the Company''s
normal operating cycle and other criteria set out in Schedule III to
the 2013 Act. b) Use of Estimates
The presentation of the financial statements, in conformity with Indian
GAAP, requires the Management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, revenues and
expenses and disclosure of contingent liabilities. Management believes
that the estimates used in the preparation of the financial statements
are prudent and reasonable, future results could differ, the
differences between the actual results and the estimates are recognised
in the period in which the results are known / materialise.
(c) Tangible Fixed Assets
Fixed Assets are carried at original cost net of taxes / duties,
credits availed, if any, less accumulated depreciation and accumulated
impairment losses, if any. The cost of fixed assets includes interest
on borrowings (borrowing cost) directly attributable to acquisition,
construction or production of qualifying assets. Borrowing cost and
other incidental expenses are added to the cost of those assets until
such time as the assets are substantially ready for their intended use
which generally coincides with the commissioning date of those assets.
Machinery spares whose use is expected to be irregular are capitalised
and depreciated over the useful life of the principal item of asset.
Subsequent expenditure relating to the fixed asset is capitalised only
if such expenditure results in an increase in the future benefits from
such existing asset beyond its previously assessed standard of
performance.
Fixed Assets acquired and put to use for projects are capitalised and
depreciation thereon is included in the project cost till the project
is ready for commissioning.
Fixed Assets held for sale are stated at lower of their net book value
and net realisable value and are disclosed separately in the financial
statements. Any expected loss is recognised immediately in the
Statement of Profit and Loss.
Losses arising from the retirement of, and gains or losses arising from
disposal of fixed assets are recognised in the Statement of Profit and
Loss.
(d) Capital Work-in-progress and Intangible Assets under Development
Projects under commissioning and other capital
work-in-progress/intangible assets under development are carried at
cost, comprising direct cost, related incidental expenses and
attributable borrowing cost.
(e) Depreciation and Amortisation
(i) Depreciation has been provided as per Section 123 of the 2013 Act
on a straight line method basis ("SLM") over the
estimated useful lives. Management believes based on a technical
evaluation that the revised useful lives of the assets reflect the
periods over which these assets are expected to be used, which are as
follows:
Asset Useful life based on SLM adopted
Leasehold Land 99 years
Salts works, Reservoirs and Pans 1-30 years
Plant and Machinery 1-60 years
Traction lines, Railway Slidings and Wagons 15 years
Factory Buildings (Works) 5-60 years
Other Buildings 5-60 years
Water Works 15 years
Furniture and Fittings 1-10 years
Office Equipments (including Computers
and Data Processing Equipments) 2-10 years
Vehicles 4-10 years
(ii) Leasehold land is amortised over the duration of the lease.
(f) Impairment of Tangible Fixed Assets
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed to determine whether there is any indication
that an asset may be impaired. If any indication of such impairment
exists, the recoverable amount of such assets / cash generating unit is
estimated and in case the carrying amount of these assets exceeds their
recoverable amount, an impairment is recognised. The recoverable amount
is the higher of the net selling price and their value in use. Value in
use is arrived at by discounting the future cash flows to their present
value based on an appropriate discount factor. Assessment is also done
at each Balance Sheet date as to whether there is indication that an
impairment loss recognised for an asset in prior accounting periods no
longer exists or may have decreased, such reversal of impairment loss
is recognised in the Statement of Profit and Loss.
(g) Investments
Long term investments are carried individually at cost. Provision for
diminution is made to recognise a decline, other than temporary, in the
value of such investments. Current investments are carried
individually, at lower of cost and fair value. Cost of investments
includes acquisition charges such as brokerage, fees and duties.
Investments that are readily realisable and are 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.
On disposal of investment, the difference between its carrying amount
and net disposal proceeds is charged or credited to the Statement of
Profit and Loss.
(h) Inventories
Inventories are valued at lower of cost (on weighted average basis) and
net realisable value after providing for obsolescence and other losses,
where considered necessary. Cost includes all charges in bringing the
goods to their present location and condition, including octroi and
other levies, transit insurance and receiving charges. Work-in-progress
and finished goods include appropriate proportion of overheads and,
where applicable, excise duty. Net realisable value is the estimated
selling price in the ordinary course of business, less the estimated
costs of completion and the estimated costs necessary to make the sale.
(i) Revenue Recognition Sale of goods
Revenue from Sale of Goods is recognised, net of returns including
estimated returns where applicable, and trade discounts, rebates, sales
tax and value added tax, when all significant risks and rewards of
ownership of the goods have been passed to the buyer, usually on
delivery of goods. In respect of Urea, sales are recognised based on
provisional concession rates as notified under the New Pricing Scheme.
Equated freight claims and escalation claims for Urea sales are
estimated by the Management based on the norms prescribed or notified
under the said Scheme. In case of complex fertilisers, sales include
price concession, as notified under the Nutrient Based Subsidy policy,
or as estimated by the Management based on the norms prescribed.
Income from services
Revenues from contracts priced on a time and material basis are
recognised when services are rendered and related costs are incurred.
Foreseeable losses on such contracts are recognised when probable.
(j) Other Income
Interest income is recognised on a time proportion basis taking into
account the amount outstanding and the rate applicable. Dividend income
is accounted for when the right to receive income is established.
(k) Insurance Claims
Insurance claims are accounted for on the basis of claims admitted /
expected to be admitted and to the extent that there is no uncertainty
in receiving the claims.
(l) Research and Development Expenses
Research expenditure is charged to the Statement of Profit and Loss.
Development costs of products are also charged to the Statement of
Profit and Loss unless a product''s technical feasibility has been
established, in which case such expenditure is capitalised. Expenditure
on tangible fixed assets used in research and development is
capitalised.
(m) Leases
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor are recognised as
operating leases. Lease rentals under operating leases are recognised
in the Statement of Profit and Loss on a straight-line basis.
(n) Debenture Issues Expenses
Debenture issue expenses and redemption premium are adjusted against
the Securities Premium Account as permissible under Section 52(2) of
the Companies Act, 2013.
(o) Employee Benefits
Employee benefits consist of provident fund, superannuation fund,
gratuity fund, compensated absences, long service awards, post
retirement medical benefits, directors'' retirement obligations and
family benefit scheme.
(i) Post-employment benefit plans
Payments to defined contribution retirement benefit scheme for eligible
employees in the form of superannuation fund are charged as an expense
as they fall due. Such benefits are classified as Defined Contribution
Schemes as the Company does not carry any further obligations, apart
from the contributions made.
For defined benefit schemes in the form of gratuity fund, post
retirement medical benefits, directors'' pension liabilities and family
benefit scheme, the cost of providing benefits is actuarially
determined using the projected unit credit method, with actuarial
valuations being carried out at each Balance Sheet date. Actuarial
gains and losses are recognised in the Statement of Profit and Loss for
the period in which they occur. Past service cost is recognised
immediately to the extent that the benefits are already vested,
otherwise it is amortised on a straight-line basis over the average
period until the benefits become vested. The retirement benefit
obligation recognised in the Balance Sheet represents the present value
of the defined benefit obligation as adjusted for unrecognised past
service cost and as reduced by the fair value of scheme assets. Any
asset resulting from this calculation is limited to past service cost
plus the present value of available refunds and reductions in future
contributions to the schemes.
The Company makes contribution towards provident fund, in substance a
defined contribution retirement benefit plan. The provident fund is
administered by the Trustees of the Tata Chemicals Limited Provident
Fund. The rules of the Company''s provident fund administered by the
Trust, require that if the Board of Trustees are unable to pay interest
at the rate declared by the Employees'' Provident Fund by the Government
under para 60 of the Employees'' Provident Fund Scheme, 1952 for the
reason that the return on investment is less or for any other reason,
then the deficiency shall be made good by the Company. Having regard to
the assets of the fund and the return on the investments, the Company
does not expect any deficiency as at the year end.
(ii) Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees is recognised
during the period when the employees render the service. These benefits
include compensated absences such as paid annual leave and performance
incentives which are expected to occur within twelve months after the
end of the period in which the employee renders the related service.
The cost of compensated absences is accounted as under :
(a) in case of accumulated compensated absences, when employees render
the services that increase their entitlement of future compensated
absences; and
(b) in case of non-accumulating compensated absences, when the absences
occur.
(iii) Long-term employee benefits
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related services are recognised as a liability at the present value of
the defined benefit obligation at the Balance Sheet date. Long Service
Awards are recognised as a liability at the present value of the
defined benefit obligation at the Balance Sheet date.
(p) Employee Separation Compensation
(i) Compensation payable to employees who have opted for retirement
under "Early Separation Scheme" is amortised over the period for which
benefit is expected. The liability has been calculated on the basis of
net present value of the future payments of pension.
(ii) Compensation paid / payable to employees who have opted for
retirement under a Voluntary Retirement Scheme including ex-gratia is
charged to Statement of Profit and Loss in the year of separation.
(q) Finance Costs
Costs in connection with the borrowing of funds to the extent not
directly related to the acquisition of qualifying assets, are charged
to the Statement of Profit and Loss, over the tenure of the loan. Fees
and other transaction costs incurred on origination of the loan are
amortised over the tenure of the loan on a straight-line basis.
Borrowing costs, allocated to and utilised for qualifying fixed assets,
pertaining to the period from commencement of activities relating to
construction/ development of the qualifying assets upto the date the
assets are substantially ready for their intended use which generally
coincides with the date of capitalisation, is added to the cost of the
assets. Capitalisation of borrowing costs is suspended and charged to
the Statement of Profit and Loss during extended periods when active
development activity on the qualifying assets is interrupted.
Borrowing cost includes interest and amortisation of ancillary costs
incurred in connection with the arrangement of borrowings.
(r) Foreign Currency Transactions and Translation
(i) On initial recognition, all foreign currency transactions are
converted and recorded at exchange rates prevailing on the date of the
transaction. As at the reporting date, foreign currency monetary assets
and liabilities are translated at the exchange rate prevailing on the
Balance Sheet date and the exchange gains or losses are recognised in
the Statement of Profit and Loss. Non-monetary items which are carried
in terms of historical cost denominated in a foreign currency are
reported using the exchange rate at the date of the transaction.
Exchange difference arising on a monetary item that, in substance,
forms part of the Company''s net investments in a non-integral foreign
operation are accumulated in a Foreign Currency Translation Reserve
until disposal / recovery of the net investment.
During the year ended 31st March, 2012, the Company had exercised the
option granted vide notification F.No.17/133/2008/CL-V dated 29th
December, 2011 issued by the Ministry of Corporate Affairs and
accordingly, the exchange differences arising on revaluation of long
term foreign currency monetary items is accumulated in a Foreign
Currency Monetary Item Translation Difference Account and recognised
over the shorter of the loan repayment period and 31st March, 2020. The
unamortised balance is presented as "Foreign Currency Monetary item
Translation Difference Account" net of tax effect thereon.
(ii) Premium / discount on forward exchange contracts, related to
monetary items which are not intended for trading or speculation
purposes, are amortised over the period of the contract. Any profit or
loss arising on cancellation or renewal of such a forward exchange
contract is recognised as income or as expense in the period in which
such cancellation or renewal is made.
(s) Derivative Contracts
The Company enters into derivative contracts in the nature of full
currency swaps, currency options, forward contracts with an intention
to hedge firm commitments and highly probable transactions. Derivative
contracts with critical terms matching that of the underlying hedged
item (foreign currency loan) are accounted as per the policy stated for
foreign currency transaction and translation resulting in the foreign
currency loan being treated as Indian rupee loan. All other contracts
are marked-to-market and losses are recognised in the Statement of
Profit and Loss. Gains arising on the aforesaid contracts are not
recognised on grounds of prudence in accordance with the announcement
of The Institute of Chartered Accountants of India on ''Accounting for
Derivatives'' issued in March 2008.
(t) Government Grants
Government grants and subsidies are recognised when there is reasonable
assurance that the Company will comply with the conditions attached to
them and the grant/subsidy will be received. Government grants whose
primary condition is that the company should purchase, construct or
otherwise acquire capital assets are presented by deducting them from
the carrying value of the assets. The grant is recognised over the life
of the depreciable assets by way of a reduced depreciation charge.
Other government grants and subsidies are recognised as income over the
periods necessary to match them with the costs for which they are
intended to compensate on a systematic basis.
(u) Segment Reporting
The Company identifies primary segments based on the dominant source
and nature of risks and returns and the internal organisation. The
operating segments are the segments for which separate financial
information is available and for which operating profit/loss amounts
are evaluated regularly by the Executive Management in deciding how to
allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in conformity
with the accounting policies of the Company. Segment revenue, segment
expenses, segment assets and segment liabilities have been identified
to segments on the basis of their relationship to the operating
activities of the segment. Inter segment revenue is accounted on the
basis of transactions which are primarily determined based on market /
fair value factors. Revenue, expenses, assets and liabilities which
relate to the Company as a whole and are not allocable to segments on a
reasonable basis have been included under "unallocated revenue /
expenses / assets / liabilities".
(v) Taxes on Income
Ta x expense for the period, comprising current tax and deferred tax,
are included in the determination of the net profit or loss for the
period.
Current tax is measured at the amount of tax expected to be payable on
the taxable income for the year as determined in accordance with the
provisions of the Income Tax Act,1961.
Deferred tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods. Deferred tax assets and liabilities are measured using the tax
rates and tax laws that have been enacted or substantively enacted by
the Balance Sheet date.
Deferred tax assets in respect of unabsorbed depreciation and carry
forward of losses are recognised if there is virtual certainty that
there will be sufficient future taxable income available to realise
such assets. Other deferred tax assets are recognised if there is
reasonable certainty that there will be sufficient future taxable
income to realise such assets. Deferred tax assets recognised are
carried forward only to the extent that there is a reasonable certainty
that sufficient future taxable income will be available against which
such deferred tax assets can be realised.
Current tax assets and current tax liabilities are offset when there is
a legally enforceable right to set off the recognised amounts and there
is an intention to settle the asset and the liability on a net basis.
Deferred tax assets and deferred tax liabilities are offset when there
is a legally enforceable right to set off assets against liabilities
representing current tax and where the deferred tax assets and the
deferred tax liabilities relate to taxes on income levied by the same
governing taxation laws.
(w) Provisions, Contingent Liabilities and Contingent Assets
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on best estimate required to settle the obligation at the Balance
Sheet date. These are reviewed at each Balance Sheet date and adjusted
to reflect the current best estimates. Contingent liabilities are
disclosed when there is a possible obligation arising from past events,
the existence of which will be confirmed only by the occurrence or
non-occurrence of one or more uncertain future events not wholly within
the control of the company or a present obligation that arises from
past events where it is either not probable that an outflow of
resources will be required to settle or a reliable estimate of the
amount cannot be made. A contingent asset is neither recognised nor
disclosed in the financial statements.
(x) Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit /
(loss) before extraordinary items and tax is adjusted for the effects
of transactions of non-cash nature and any deferrals or accruals of
past or future cash receipts or payments. The cash flows from
operating, investing and financing activities of the Company are
segregated based on the available information.
(y) Cash and Cash Equivalents
Cash comprises cash on hand and demand deposits with banks. Cash
equivalents are short-term balances (with an original maturity of three
months or less from the date of acquisition), highly liquid time
deposits that are readily convertible into known amounts of cash and
which are subject to insignificant risk of changes in value.
(a) Reconciliation of the number of shares and amount outstanding at
the beginning and at the end of the year:
(b) The Company has issued one class of ordinary shares having a par
value of Rs 10 per share. Each shareholder is eligible for one
vote per share held. The dividend proposed by the Board of Directors is
subject to the approval of the shareholders in the ensuing Annual
General Meeting except in the case of interim dividend. In the event of
liquidation, the equity shareholders are eligible to receive the
remaining assets of the Company, after distribution of all preferential
accounts, in proportion to their shareholding.
(d) There are no shares reserved for issue under any employee stock
option schemes or under agreements or contracts.
(e) Information regarding shares in last five years.
(i) The Company has not issued any shares pursuant to contracts without
payment being received in cash.
(ii) There has been no issue of bonus shares.
(iii) The Company has not undertaken any buy-back of shares.
(iv) The Company has not issued any shares as fully paid-up pursuant to
scheme of amalgamation.
(a) 10% Unsecured Redeemable Non-convertible Debentures of a face value
Rs 10 lakh each redeemable at par on 2 July, 2019. Interest is payable
annually.
(b) The external commercial borrowings are due for repayments on 21st
October, 2016 Rs 319.54 crore (USD 60 million), on 23rd October,
2017Rs389.78 crore (USD 63.27 million), on 22nd October, 2018Rs390.06
crore (USD 63.27 million) and on 21st October, 2019Rs389.93 crore (USD
63.46 million) along with interest at Libor spread ranging from 1.65%
to 1.95% payable half yearly.
(c) The Company has entered into an agreement with Department of
Biotechnology (DBT) for a project on boosting crop health and yield.
DBT has approved a loan of Rs 0.15 crore (previous year Rs 0.15 crore).
The Company has received three installments of this loan aggregating to
Rs 0.11 crore (previous year Rs 0.08 crore). The loan is repayable in
10 equal half yearly installments beginning from 1st July, 2015.
Current portion has been disclosed in note 11.
* Foreign exchange gain of Rs 73.19 crore (previous year Rs 12.45
crore) on full currency swaps and forwards with critical terms
matching that of the external commercial borrowings have been netted
off, resulting in the foreign currency loan being treated as an Indian
rupee loan.
(a) Loans from banks on cash credit, working capital demand loan from
bank and buyer''s credit are secured by hypothecation of stocks of raw
materials, finished products, stores and work-in-progress as well as
book debts.
(b) The Department of Fertilizers, Government of India, has notified
"Special Banking Arrangement" scheme to address the concern of delay in
subsidy disbursement. This arrangement has been made by the Government
with State Bank of India Consortium (SBI Consortium). Loans under this
scheme are secured by hypothecation of subsidy receivables.
Footnote:
(a) According to information available with the Management, on the
basis of intimation received from suppliers regarding their status
under the Micro, Small and Medium Enterprises Development Act, 2006
(MSMED Act), the Company has amounts due to Micro and Small Enterprises
under the said Act as at 31st March, 2015 as follows:
(a) The Company had entered into an agreement with Department of
Science and Technology for creation of capital assets for
Sulphate of Potash (SOP) Project. For the above Project, the Company
has received three installments of Government grant aggregating Rs
14.40 crore (previous year Rs 14.40 crore) and earned a cumulative
amount of Rs 0.55 crore (previous year Rs 0.54 crore) as interest on
unutilised grant. The Company has spent an amount of Rs 14.98 crore
(previous year Rs 14.85 crore) and the net balance of Rs 0.03 crore
(previous year Rs 0.09 crore) has been disclosed in Note 22 under the
head others within Other Current Assets.
Footnote:
(a) The Board of Directors has recommended a dividend of 100% for the
financial year 2014-15 and a special dividend of 25% on the occasion of
the Platinum Jubilee year of the Company, aggregating to Rs 12.50 per
share.
(a) The Company has extended an unsecured subordinate loan to Tata
Power Renewable Energy Limited (TPREL) for the purpose of setting up a
25 MW photovoltaic solar power plant and associate infrastructure at
Mithapur, Gujarat. The loan carries an interest rate based on State
Bank of India base rate plus 1.25%. The principal amount of the loan is
mandatorily convertible to equity of TPREL.
(a) Trade receivables include Rs 1,971.64 crore (previous year Rs
1,800.23 crore) on account of subsidy receivable from the Government.
Of this an amount of Rs 546.83 crore (previous year Rs 620.53 crore) is
due for more than six months.
(a) Advances to employees include Rs * crore (previous year Rs 0.01
crore) due from officer of the Company. Maximum balance outstanding
during the year Rs 0.01 crore (previous year Rs 0.01 crore).
value below Rs 50,000
Footnotes:
(a) Sales includes subsidy income of Rs 2,942.24 crore (previous year
Rs 2,429.32 crore)
(b) Miscellaneous income primarily includes sales of scrap Rs 20.19
crore (previous year Rs 24.35 crore) and market development and support
fees Rs 33.18 crore (previous year Rs 34.61 crore)
The above figures do not include provision for compensated absences and
contribution to gratuity fund, as separate figures are not available
for the Managing Director and Whole-time Directors other than disclosed
above.
@ The above figures are based on the separate accounts for the research
and development (R&D) centres recognised by the Department of
Scientific and Industrial Research, Ministry of Science and Technology
(DSIR) for in-house research. Consonance with the DSIR Guidelines for
in-house R&D Centres will be evaluated at the time of filing the return
with the DSIR.
(d) Amount required to be spent by the Company during the year on CSR
is Rs 11.66 crore of which the Company has spent Rs 10.20 crore. The
Company has spent the following amounts during the year @.
@ Expenditure incurred on CSR in the previous year prior to
introduction of Section 135 of the Companies Act, 2013 is included in
donations and contributions and have not been reclassified/regrouped as
there was no requirement for disclosure of such expenses in the
previous year.
Mar 31, 2014
(a) Basis of Accounting
The financial statements of the Company have been prepared in
accordance with the Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
Section 211(3C) of the Companies Act, 1956 ("the 1956 Act") (which
continue to be applicable u/s 133 of the Companies Act, 2013 ("the 2013
Act") in terms of General Circular 15/2013 dated 13 September, 2013 of
the Ministry of Corporate Affairs) and the relevant provisions of the
1956 Act / 2013 Act, as applicable. The financial statements of the
Company are prepared under the historical cost convention using the
accrual method of accounting. The accounting policies adopted in the
preparation of Financial Statements are consistent with those of the
previous year.
(b) Use of Estimates
The presentation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, revenues and
expenses and disclosure of contingent liabilities. Management believes
that the estimates used in the preparation of the financial statements
are prudent and reasonable, future results could differ, the
differences between the actual results and the estimates are recognised
in the period in which the results are known / materialise.
(c) Tangible Fixed Assets
Fixed Assets are carried at original cost net of taxes / duties,
credits availed, if any, less depreciation, amortisation and impairment
loss. The cost of fixed assets includes interest on borrowings
attributable to acquisition of qualifying fixed assets up to the date
of commissioning of the assets and other incidental expenses incurred
up to that date. Machinery spares whose use is expected to be irregular
are capitalised and depreciated over the useful life of the principal
item of asset. Subsequent expenditure relating to the fixed assets is
capitalised only if such expenditure results in an increase in the
future Benefits from such assets beyond its previously assessed
standard of performance.
Fixed Assets acquired and put to use for projects are capitalised and
depreciation thereon is included in project cost till the project is
ready for commissioning.
Fixed Assets held for sale are stated at lower of their net book value
and net realisable value and are disclosed separately in the financial
statements.
(d) Capital Work-in-Progress
Projects under commissioning and other capital work-in-progress are
carried at cost, comprising direct cost, related incidental expenses
and attributable interest.
(ii) Leasehold land is amortised over the duration of the lease.
(iii) Capital assets whose ownership does not vest in the Company are
depreciated over their estimated useful life.
(f) Impairment of Tangible Fixed Assets
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed for impairment of assets. If any indication of
such impairment exists, the recoverable amount of such assets is
estimated and impairment is recognised, if the carrying amount of these
assets exceeds their recoverable amount. The recoverable amount is the
greater of the net selling price and their value in use. Value in use
is arrived at by discounting the future cash flows to their present
value based on an appropriate discount factor. When there is indication
that an impairment loss recognised for an asset in prior accounting
periods no longer exists or may have decreased, such reversal of
impairment loss is recognised in the Statement of Profit and Loss.
(g) Investments
Long-term investments are carried individually at cost less provision
for diminution, other than temporary, in the value of such investments.
Current investments are carried individually, at lower of cost and fair
value. Cost of investments includes acquisition charges such as
brokerage, fees and duties.
(h) Inventories
Inventories are valued at lower of cost (on weighted average basis) and
net realisable value after providing for obsolescence and other losses,
where considered necessary. Cost includes all charges in bringing the
goods to their present location and condition, including octroi and
other levies, transit insurance and receiving charges. Work-in-process
and finished goods include appropriate proportion of overheads and,
where applicable, excise duty.
(i) Revenue Recognition
Sales of Goods
Sales are recognised, net of returns including estimated returns where
applicable, and trade discounts, Sales Tax and Value Added Tax, on
dispatch of goods to customers. In respect of Urea, sales are
recognised based on provisional rates of group concession as notified
under the New Pricing Scheme. Equated freight claims and escalation
claims for Urea sales are estimated by the Management based on the
norms prescribed or notified under the said Scheme. In case of complex
fertilisers, sales include price concession, as notified under the
Concession Scheme, or as estimated by the Management based on the norms
prescribed.
Income from Services
Revenues from contracts priced on a time and material basis are
recognised when services are rendered and related costs are incurred.
Foreseeable losses on such contracts are recognised when probable.
(j) Other Income
Interest income is accounted on accrual basis. Dividend income is
accounted for when the right to receive income is established.
(k) Insurance Claims
Insurance claims are accounted for on the basis of claims admitted /
expected to be admitted and to the extent that there is no uncertainty
in receiving the claims.
(l) Research and Development Expenses
Revenue expenditure pertaining to research and development is charged
to the Statement of Profit and Loss. Expenditure on tangible fixed
assets used in research and development is capitalised.
(m) Leases
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor are recognised as
operating leases. Lease rentals under operating leases are recognised
in the Statement of Profit and Loss on a straight-line basis.
(n) Debenture Issues Expenses
Debenture issue expenses and redemption premium are adjusted against
the Securities Premium Account as permissible under Section 78(2) of
the Companies Act, 1956.
(o) Employee Benefits
Employee Benefits consist of provident fund, superannuation fund,
gratuity fund, compensated absences, long service awards, post
retirement medical Benefits, directors'' retirement obligations and
family benefit scheme. (i) Post-employment benefit plans
Payments to defined contribution retirement benefit scheme for eligible
employees in the form of superannuation fund are charged as an expense
as they fall due.
For defined benefit schemes in the form of gratuity fund, post
retirement medical Benefits, directors'' pension liabilities and family
benefit scheme, the cost of providing Benefits is determined using the
projected unit credit method, with actuarial valuations being carried
out at each Balance Sheet date. Actuarial gains and losses are
recognised in the Statement of Profit and Loss for the period in which
they occur. Past service cost is recognised immediately to the extent
that the Benefits are already vested, and otherwise is amortised on a
straight-line basis over the average period until the Benefits become
vested. The retirement benefit obligation recognised in the Balance
Sheet represents the present value of the defined benefit obligation as
adjusted for unrecognised past service cost and as reduced by the fair
value of scheme assets. Any asset resulting from this calculation is
limited to past service cost plus the present value of available
refunds and reductions in future contributions to the schemes.
The Company makes contribution towards provident fund, in substance a
defined contribution retirement benefit plan. The provident fund is
administered by the Trustees of the Tata Chemicals Limited Provident
Fund. The rules of the Company''s provident fund administered by a
Trust, require that if the Board of Trustees are unable to pay interest
at the rate declared by the Employees'' Provident Fund by the Government
under para 60 of the Employees'' Provident Fund Scheme, 1952 for the
reason that the return on investment is less or for any other reason,
then the deficiency shall be made good by the Company. Having regard to
the assets of the fund and the return on the investments, the Company
does not expect any deficiency as at the year end.
Other defined benefit scheme like family benefit scheme is an unfunded
defined benefit plan. The Benefits of the plan accrue to eligible
employees at the time of death or permanent disablement while in
service, either as a result of an injury or as certified by the
Company''s Medical Board. The monthly payment to dependents of the
deceased / disabled employee under the plan equals 100% of the last
drawn basic salary in case of Management and Officer cadre employees and
100% of the last drawn basic salary plus dearness allowance and fixed
additional dearness allowance for employees in the workmen category.
The Company accounts for the liability for family benefit scheme
payable in future based on the cost of providing Benefits is determined
using the projected unit credit method by an independent actuarial
valuation carried out at each Balance Sheet date.
(ii) Short-term employee Benefits
The undiscounted amount of short-term employee Benefits expected to be
paid in exchange for the services rendered by employees is recognised
during the period when the employees render the service. These Benefits
include compensated absences such as paid annual leave and performance
incentives.
The cost of compensated absences is accounted as under:
(a) in case of accumulated compensated absences, when employees render
the services that increase their entitlement of future compensated
absences; and
(b) in case of non-accumulating compensated absences, when the absences
occur.
(iii) Long-term employee Benefits
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related services are recognised as a liability at the present value of
the defined benefit obligation at the Balance Sheet date. Long Service
Awards are recognised as a liability at the present value of the
defined benefit obligation at the Balance Sheet date.
(p) Employee Separation Compensation
(i) Compensation payable to employees who have opted for retirement
under "Early Separation Scheme" is amortised over the period for which
benefit is expected. The liability has been calculated on the basis of
net present value of the future payments of pension.
(ii) Liability under "Early Separation Scheme" is computed and
accounted at the Net Present Value.
(iii) Compensation paid / payable to employees who have opted for
retirement under Voluntary Retirement Scheme including ex-gratia is
charged to statement of Profit and Loss in the year of separation.
(q) Finance Costs
Costs in connection with the borrowing of funds to the extent not
directly related to the acquisition of fixed assets are amortised and
charged to Statement of Profit and Loss, over the tenure of the loan.
Interest on borrowed money, allocated to and utilised for qualifying
fixed assets, pertaining to the period upto the date of capitalisation is
added to the cost of the assets.
Borrowing cost includes interest and amortisation of ancillary costs
incurred in connection with the arrangement of borrowings.
(r) Foreign Currency Transactions and Translation
(i) Foreign currency transactions (other than derivatives) of the
Company and its net investment in non-integral foreign operations are
recorded on initial recognition in the reporting currency, using the
exchange rate at the date of the transaction. Foreign currency monetary
assets and liabilities (other than derivatives) of the company and its
net investment in non-integral foreign operations as at the Balance
Sheet date are restated at the year end rates and the resultant net
gains or losses are recognised as income or expense in the Statement of
Profit and Loss in the year in which they arise. The exchange
differences on long term loans to non-integral foreign operations are
accumulated in a Foreign Currency Translation Reserve, until disposal /
recovery of the net investment.
During the year ended 31st March, 2012, the Company had exercised the
option granted vide notification F.No.17/133/2008/ CL-V dated 29th
December, 2011 issued by the Ministry of Corporate Affairs and
accordingly, the exchange differences arising on revaluation of long
term foreign currency monetary items have been recognised over the
shorter of the loan repayment period and 31st March, 2020. The
unamortised balance is presented as "Foreign Currency Monetary Item
Translation Difference Account" net of tax effect thereon.
(ii) Premium / discount on forward exchange contracts, related to
monetary items which are not intended for trading or speculation
purposes, are amortised over the period of the contract.
(s) Derivative Contracts
The Company enters into derivative contracts in the nature of full
currency swaps, currency options, forward contracts with an intention
to hedge its existing assets and liabilities, firm commitments and
highly probable transactions. Derivative contracts which are closely
linked to the underlying transactions are recognised in accordance with
the contract terms and accounted as per the policy stated for foreign
currency transaction and translation. All other contracts are
marked-to-market and losses are recognised in the Statement of Profit
and Loss. Gains arising on the same are not recognised on grounds of
prudence.
(t) Government Grants
Government grants and subsidies are recognised when there is reasonable
assurance that the Company will comply with the conditions attached to
them and the grants/subsidy will be received. Government grants whose
primary condition is that the company should purchase, construct or
otherwise acquire capital assets are presented by deducting them from
the carrying value of the assets. The grant is recognised as income
over the life of the depreciable assets by way of a reduced
depreciation charge. Other government grants and subsidies are
recognised as income over the periods necessary to match them with the
costs for which they are intended to compensate on a systematic basis.
(u) Segment Reporting
The Company identifies primary segments based on the dominant source,
nature of risks and returns and the internal organisation. The
operating segments are the segments for which separate financial
information is available and for which operating profit/ loss amounts
are evaluated regularly by the executive Management in deciding how to
allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company. Segment revenue, segment
expenses, segment assets and segment liabilities have been identified
to segments on the basis of their relationship to the operating
activities of the segment. Inter Segment revenue is accounted on the
basis of transactions which are primarily determined based on market /
fair value factors. Revenue, expenses, assets and liabilities which
relate to the Company as a whole and are not allocable to segments on
reasonable basis have been included under "unallocated revenue /
expenses / assets / liabilities".
(v) Taxes on Income
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the Income Tax
Act,1961.
Deferred fax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods.
Deferred tax assets in respect of unabsorbed depreciation and carry
forward of losses are recognised if there is virtual certainty that
there will be sufficient future taxable income available to realise such
losses. Other deferred tax assets are recognised if there is reasonable
certainty that there will be sufficient future taxable income to realise
such assets.
(w) Provisions and Contingencies
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on best estimate required to settle the obligation at the Balance
Sheet date. These are reviewed at each Balance Sheet date and adjusted
to reflect the current best estimates. Contingent liabilities are
disclosed in notes forming part of the financial statements.
Mar 31, 2013
(a) Basis of Accounting
The financial statements of the Company have been prepared in
accordance with Generally Accepted Accounting Principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
the Companies (Accounting Standards) Rules, 2006, (as amended) and the
relevant provisions of the Companies Act, 1956. The financial
statements of the Company are prepared under the historical cost
convention using the accrual method of accounting. The accounting
policies adopted in the preparation of financial statements are
consistent with those of the previous year.
(b) Use of Estimates
The presentation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, revenues and
expenses and disclosure of contingent liabilities. Management believes
that the estimates used in the preparation of the financial statements
are prudent and reasonable, future results could differ, the
differences between the actual results and the estimates are recognised
in the period in which the results are known / materialise.
(c) Tangible Fixed Assets
Fixed Assets are carried at original cost net of taxes / duties,
credits availed, if any, less depreciation, amortisation and impairment
loss. The cost of fixed assets includes interest on borrowings
attributable to acquisition of qualifying fixed assets up to the date
of commissioning of the assets and other incidental expenses incurred
up to that date. Machinery spares whose use is expected to be
irregular are capitalised and depreciated over the useful life of the
principal item of asset. Subsequent expenditure relating to the fixed
assets is capitalised only if such expenditure results in an increase
in the future benefits from such assets beyond its previously assessed
standard of performance.
Fixed Assets acquired and put to use for projects are capitalised and
depreciation thereon is included in project cost till the project is
ready for commissioning.
Fixed Assets held for sale are stated at lower of their net book value
and net realisable value and are disclosed separately in the Balance
Sheet.
(d) Capital Work-in-Progress
Projects under commissioning and other capital work-in-progress are
carried at cost, comprising direct cost, related incidental expenses
and attributable interest.
(e) Depreciation and Amortisation
(i) Depreciation has been provided on the straight line method as per
Section 205(2)(b) of the Companies Act, 1956 as follows:
(a) In respect of assets acquired on or after 1st April, 1987, at the
rates and in the manner prescribed in Schedule XIV of the Companies
Act, 1956 as amended, except in respect of the following categories of
assets, in which case the life of the assets has been assessed as
under:
Membrane Cells 4 years
Catalyst 5-7 years
Vehicles 4 years
Computers and data processing equipments 4 years
High Pressure Boiler 4 and Turbine 12 8 years
RO Water Plant 4 years
Railway wagons procured under Wagon Investment scheme 15 years
Moulds for Water Purifiers and Bulbs 3 years
(ii) Leasehold land is amortised over the duration of the lease.
(iii) Capital assets whose ownership does not vest in the Company are
depreciated over their estimated useful life.
(f) Impairment of Tangible Fixed Assets
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed for impairment of assets. If any indication of
such impairment exists, the recoverable amount of such assets is
estimated and impairment is recognised, if the carrying amount of these
assets exceeds their recoverable amount. The recoverable amount is the
greater of the net selling price and their value in use. Value in use
is arrived at by discounting the future cash flows to their present
value based on an appropriate discount factor. When there is indication
that an impairment loss recognised for an asset in prior accounting
periods no longer exists or may have decreased, such reversal of
impairment loss is recognised in the Statement of Profit and Loss.
(g) Investments
Long-term investments are carried individually at cost less provision
for diminution, other than temporary, in the value of such investments.
Current investments are carried individually, at lower of cost and fair
value. Cost of investments includes acquisition charges such as
brokerage, fees and duties.
(h) Inventories
Inventories are valued at lower of cost (on weighted average basis) and
net realisable value after providing for obsolescence and other losses,
where considered necessary. Cost includes all charges in bringing the
goods to their present location and condition, including octroi and
other levies, transit insurance and receiving charges. Work-in- process
and finished goods include appropriate proportion of overheads and,
where applicable, excise duty.
(i) Revenue Recognition Sale of Goods
Sales are recognised, net of returns and trade discounts, Sales Tax and
Value Added Tax, on dispatch of goods to customers. In respect of Urea,
sales are recognised based on provisional rates of group concession as
notified under the New Pricing Scheme. Equated freight claims and
escalation claims for Urea sales are estimated by the Management based
on the norms prescribed or notified under the said Scheme. In case of
complex fertilisers, sales include price concession, as notified under
the Concession Scheme, or as estimated by the Management based on the
norms prescribed.
Income from Services
Revenue from contracts, priced on a time and material basis, are
recognised when services are rendered and related costs are incurred.
Foreseeable losses on such contracts are recognised when probable.
(j) Other Income
Interest income is accounted on accrual basis. Dividend income is
accounted for, when the right to receive income is established.
(k) Insurance Claims
Insurance claims are accounted for on the basis of claims admitted /
expected to be admitted and to the extent that there is no uncertainty
in receiving the claims.
(l) Research and Development Expenses
Revenue expenditure pertaining to research and development is charged
to the Statement of Profit and Loss. Expenditure on tangible fixed
assets used in research and development is capitalised.
(m) Leases
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor are recognised as
operating leases. Lease rentals under operating leases are recognised
in the Statement of Profit and Loss on a straight-line basis.
(n) Debenture Issues Expenses
Debenture issue expenses and redemption premium are adjusted against
the Securities Premium Account as permissible under section 78(2) of
the Companies Act, 1956.
(o) Employee Benefits
Employee benefits consist of provident fund, superannuation fund,
gratuity fund, compensated absences, long service awards, post
retirement medical benefits, directors'' retirement obligations and
family benefit scheme.
(i) Post-employment benefit plans
Payments to defined contribution retirement benefit scheme for eligible
employees in the form of superannuation fund are charged as an expense
as they fall due.
For defined benefit schemes in the form of gratuity fund, post
retirement medical benefits, directors'' pension liabilities and family
benefit scheme, the cost of providing benefits is determined using the
projected unit credit method, with actuarial valuations being carried
out at each Balance Sheet date. Actuarial gains and losses are
recognised in the Statement of Profit and Loss for the period in which
they occur. Past service cost is recognised immediately to the extent
that the benefits are already vested, and otherwise is amortised on a
straight-line basis over the average period until the benefits become
vested. The retirement benefit obligation recognised in the Balance
Sheet represents the present value of the defined benefit obligation as
adjusted for unrecognised past service cost and as reduced by the fair
value of scheme assets. Any asset resulting from this calculation is
limited to past service cost plus the present value of available
refunds and reductions in future contributions to the schemes.
The Company makes contribution towards provident fund, in substance a
defined contribution retirement benefit plan. The provident fund is
administered by the Trustees of the Tata Chemicals Limited Provident
Fund. The rules of the Company''s provident fund administered by a
Trust, require that if the Board of Trustees are unable to pay interest
at the rate declared by the Employees'' Provident Fund by the Government
under para 60 of the Employees'' Provident Fund Scheme, 1952 for the
reason that the return on investment is less or for any other reason,
then the deficiency shall be made good by the Company. Having regard to
the assets of the fund and the return on the investments, the Company
does not expect any deficiency as at the year end.
Family Benefit Scheme is an unfunded defined benefit plan. The benefits
of the plan accrue to eligible employees at the time of death or
permanent disablement while in service, either as a result of an injury
or as certified by the Company''s Medical Board. The monthly payment to
dependents of the deceased / disabled employee under the plan equals
100% of the last drawn basic salary in case of Management and Officer
cadre employees and 100% of the last drawn basic salary plus dearness
allowance and fixed additional dearness allowance for employees in the
workmen category. The Company accounts for the liability for family
benefit scheme payable in future based on an independent actuarial
valuation carried out at each Balance Sheet date.
(ii) Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees is recognised
during the period when the employees render the service. These benefits
include compensated absences such as paid annual leave and performance
incentives.
The cost of compensated absences is accounted as under:
(a) in case of accumulated compensated absences, when employees render
the services that increase their entitlement of future compensated
absences; and
(b) in case of non-accumulating compensated absences, when the absences
occur.
(iii) Long-term employee benefits
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related services are recognised as a liability at the present value of
the defined benefit obligation at the Balance Sheet date. Long service
awards are recognised as a liability at the present value of the
defined benefit obligation at the Balance Sheet date.
(p) Employee Separation Compensation
(i) Compensation paid / payable to employees who have opted for
retirement under "Early Separation Scheme" is amortised over the period
for which benefit is expected.
(ii) Liability under "Early Separation Scheme" is computed and
accounted at the net present value.
(iii) Compensation paid / payable to employees who have opted for
retirement under Voluntary Retirement Scheme including ex-gratia is
charged to statement of Profit and Loss in the year of separation.
(q) Finance Costs
Costs in connection with the borrowing of funds to the extent not
directly related to the acquisition of fixed assets are amortised and
charged to Statement of Profit and Loss, over the tenure of the loan.
Interest on borrowed money, allocated to and utilised for qualifying
fixed assets, pertaining to the period upto the date of capitalisation
is added to the cost of the assets.
Borrowing cost includes interest and amortisation of ancillary costs
incurred in connection with the arrangement of borrowings.
(r) Foreign Currency Transactions and Translation
(i) Foreign currency transactions (other than derivatives) of the
Company and its net investment in non-integral foreign operations are
recorded on initial recognition in the reporting currency, using the
exchange rate at the date of the transaction. Foreign currency monetary
assets and liabilities (other than derivatives) of the company and its
net investment in non-integral foreign operations as at the Balance
Sheet date are restated at the year end rates and the resultant net
gains or losses are recognised as income or expense in the Statement of
Profit and Loss in the year in which they arise. The exchange
differences on long-term loans to non-integral foreign operations are
accumulated in a Foreign Currency Translation Reserve, until disposal /
recovery of the net investment.
During the year ended 31st March, 2012, the Company had exercised the
option granted vide notification F.No.17/133/2008/CL-V dated 29th
December, 2011 issued by the Ministry of Corporate Affairs and
accordingly, the exchange differences arising on revaluation of
long-term foreign currency monetary items for the year ended 31st
March, 2012 and 31st March, 2013 have been recognised over the shorter
of the loan repayment period and 31st March, 2020. The unamortised
balance is presented as "Foreign Currency Monetary item Translation
Difference Account" net of tax effect thereon.
(ii) Premium / discount on forward exchange contracts, related to
monetary items which are not intended for trading or speculation
purposes, are amortised over the period of the contract.
(s) Derivative Contracts
The Company enters into derivative contracts in the nature of full
currency swaps, currency options, forward contracts with an intention
to hedge its existing assets and liabilities, firm commitments and
highly probable transactions. Derivative contracts which are closely
linked to the underlying transactions are recognised in accordance with
the contract terms and accounted as per the policy stated for foreign
currency transaction and translation. All other contracts are
marked-to-market and losses are recognised in the Statement of Profit
and Loss. Gains arising on the same are not recognised on the grounds
of prudence.
(t) Government Grants
Government grants and subsidies are recognised when there is reasonable
assurance that the Company will comply with the conditions attached to
them and the grants / subsidy will be received. Government grants whose
primary condition is that the Company should purchase, construct or
otherwise acquire capital assets are presented by deducting them from
the carrying value of the assets. The grant is recognised as income
over the life of the depreciable assets by way of a reduced
depreciation charge. Other government grants and subsidies are
recognised as income over the periods necessary to match them with the
costs for which they are intended to compensate on a systematic basis.
(u) Segment Reporting
The Company identifies primary segments based on the dominant source,
nature of risks and returns and the internal organisation. The
operating segments are the segments for which separate financial
information is available and for which operating profit / loss amounts
are evaluated regularly by the Executive Management in deciding how to
allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company. Segment revenue, segment
expenses, segment assets and segment liabilities have been identified
to segments on the basis of their relationship to the operating
activities of the segment. Inter Segment revenue is accounted on the
basis of transactions which are primarily determined based on market /
fair value factors. Revenue, expenses, assets and liabilities which
relate to the Company as a whole and are not allocable to segments on
reasonable basis have been included under "unallocated revenue /
expenses / assets / liabilities".
Segment information has been presented in the Consolidated Financial
Statements as permitted by Accounting Standard (AS-17) on Segment
Reporting as notified under the Companies (Accounting Standards) Rules,
2006.
(v) Taxes on Income
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the Income Tax
Act,1961.
Deferred tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods.
Deferred tax assets in respect of unabsorbed depreciation and carry
forward of losses are recognised if there is virtual certainty that
there will be sufficient future taxable income available to realise
such losses. Other deferred tax assets are recognised if there is
reasonable certainty that there will be sufficient future taxable
income to realise such assets.
(w) Provisions and Contingencies
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on best estimate required to settle the obligation at the Balance
Sheet date. These are reviewed at each Balance Sheet date and adjusted
to reflect the current best estimates. Contingent liabilities are
disclosed in notes forming part of the financial statements.
Mar 31, 2012
(a) Basis of Accounting
The financial statements of the company have been prepared in
accordance with generally accepted accounting principles in India
(Indian GAAP) to comply with the Accounting Standards notified under
the Companies (Accounting Standards) Rules, 2006, (as amended) and the
relevant provisions of the Companies Act, 1956. The accounts of the
Company are prepared under the historical cost convention using the
accrual method of accounting. The accounting policies adopted in the
preparation of financial statements are consistent with those of the
previous year.
(b) Use of Estimates
The presentation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, revenues and
expenses and disclosure of contingent liabilities. Management believes
that the estimates used in the preparation of the financial statements
are prudent and reasonable, future results could differ, the
differences between the actual results and the estimates are recognised
in the period in which the results are known / materialise.
(c) Tangible Fixed Assets
Fixed Assets are carried at original cost net of taxes / duties,
credits availed if any, less depreciation and impairment loss. The cost
of fixed assets includes interest on borrowings attributable to
acquisition of qualifying fixed assets up to the date of commissioning
of the assets and other incidental expenses incurred up to that date.
Machinery spares whose use is expected to be irregular are capitalised
and depreciated over the useful life of the principal item of asset.
Subsequent expenditure relating to the fixed assets is capitalised only
if such expenditure results in an increase in the future benefits from
such assets beyond its previously assessed standard of performance.
Fixed Assets acquired and put to use for projects are capitalised and
depreciation thereon is included in project cost till commissioning of
the project.
Fixed Assets retired from active use and held for sale are stated at
lower of their net book value and net realisable value and are
disclosed separately in the Balance Sheet.
(d) Capital Work-in-Progress
Projects under commissioning and other Capital Work-in-Progress are
carried at cost, comprising direct cost, related incidental expenses
and attributable interest.
(e) Depreciation
(i) Depreciation has been provided on the straight line method as per
Section 205(2)(b) of the Companies Act, 1956 as follows :
(a) In respect of assets acquired on or after 1st April, 1987, at the
rates and in the manner prescribed in Schedule XIV of the Companies
Act, 1956 as amended, except in respect of the following categories of
assets, in which case the life of the assets has been assessed as under
:
Membrane Cells 4 years
Catalyst 5-7 years
Vehicles 4 years
Computers and data processing equipments 4 years
High Pressure Boiler 4 & Turbine 12 8 years
RO Water Plant 4 years
Railway wagons procured under Wagon Investment scheme 15 years
Moulds for Water Purifiers and Bulbs 3 years
(ii) Leasehold land is amortised over the duration of the lease.
(iii) Capital assets whose ownership does not vest in the Company are
depreciated over their estimated useful life.
(f) Impairment of Tangible Fixed Assets
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed for impairment of assets. If any indication of
such impairment exists, the recoverable amount of such assets is
estimated and impairment is recognised, if the carrying amount of these
assets exceeds their recoverable amount. The recoverable amount is the
greater of the net selling price and their value in use. Value in use
is arrived at by discounting the future cash flows to their present
value based on an appropriate discount factor. When there is indication
that an impairment loss recognised for an asset in prior accounting
periods no longer exists or may have decreased, such reversal of
impairment loss is recognised in the Statement of Profit and Loss.
(g) Investments
Long term investments are carried individually at cost less provision
for diminution, other than temporary, in the value of such investments.
Current investments are carried individually, at lower of cost and fair
value. Cost of investments includes acquisition charges such as
brokerage, fees and duties.
(h) Inventories
Inventories are valued at lower of cost (on weighted average basis) and
net realisable value after providing for obsolescence and other losses,
where considered necessary. Cost includes all charges in bringing the
goods to their present location and condition, including Octroi and
other levies, transit insurance and receiving charges. Work- in-
process and finished goods include appropriate proportion of overheads
and where applicable, excise duty.
(i) Revenue Recognition
Sales of Goods
Sales are recognised, net of returns and trade discounts, Sales Tax and
Value Added Tax, on dispatch of goods to customers. In respect of
Urea, sales are recognised based on provisional rates of group
concession as notified under the New Pricing Scheme. Equated freight
claims and escalation claims for Urea sales are estimated by the
Management based on the norms prescribed or notified under the said
Scheme. In case of complex fertilisers, sales include price concession,
as notified under the Concession Scheme, or as estimated by the
Management based on the norms prescribed.
Income from Services
Revenues from contracts priced on a time and material basis are
recognised when services are rendered and related costs are incurred.
Foreseeable losses on such contracts are recognised when probable.
(j) Other Income
Interest income is accounted on accrual basis. Dividend income is
accounted for when the right to receive income is established.
(k) Insurance claims
Insurance claims are accounted for on the basis of claims admitted /
expected to be admitted and to the extent that there is no uncertainty
in receiving the claims.
(l) Research and Development Expenses
Revenue expenditure pertaining to Research and Development is charged
to the Statement of Profit and Loss. Expenditure on Tangible fixed
assets used in Research and Development is capitalised.
(m) Leases
Lease arrangements where the risks and rewards incidental to ownership
of an asset substantially vest with the lessor are recognised as
operating leases. Lease rentals under operating leases are recognised
in the Statement of Profit and Loss on a straight-line basis.
(n) Debenture Issues Expenses
Debenture issue expenses and redemption premium are adjusted against
the Securities Premium Account as permissible under Section 78(2) of
the Companies Act, 1956.
(o) Employee Benefits
Employee benefits consist of Provident Fund, Superannuation Fund,
Gratuity Fund, Compensated absences, Long service awards, Post
retirement medical benefits, Directors' retirement obligations and
Family Benefit Scheme.
(i) Post-employment benefit plans
Payments to defined contribution retirement benefit scheme for eligible
employees in the form of Superannuation Fund are charged as an expense
as they fall due.
For defined benefit schemes in the form of gratuity fund, post
retirement medical benefits, Directors' Pension Liabilities and Family
Benefit Scheme, the cost of providing benefits is determined using the
Projected Unit Credit Method, with actuarial valuations being carried
out at each Balance Sheet date. Actuarial gains and losses are
recognised in the Statement of Profit and Loss for the period in which
they occur. Past service cost is recognised immediately to the extent
that the benefits are already vested, and otherwise is amortised on a
straight-line basis over the average period until the benefits become
vested. The retirement benefit obligation recognised in the Balance
Sheet represents the present value of the defined benefit obligation as
adjusted for unrecognised past service cost and as reduced by the fair
value of scheme assets. Any asset resulting from this calculation is
limited to past service cost plus the present value of available
refunds and reductions in future contributions to the schemes.
The Company makes contribution towards provident fund in substance a
defined contribution retirement benefit plan. The provident fund is
administered by the Trustees of the Tata Chemicals Limited Provident
Fund. The Rules of the Company's Provident Fund administered by a
Trust, require that if the Board of Trustees are unable to pay
interest at the rate declared by the Employees' Provident Fund by the
Government under para 60 of the Employees' Provident Fund Scheme, 1952
for the reason that the return on investment is less or for any other
reason, then the deficiency shall be made good by the Company. Having
regard to the assets of the Fund and the return on the investments, the
Company does not expect any deficiency as at the year end.
Family Benefit Scheme is an unfunded defined benefit plan. The benefits
of the plan accrue to eligible employees at the time of death or
permanent disablement while in service, either as a result of an injury
or as certified by the Company's Medical Board. The monthly payment to
dependents of the deceased / disabled employee under the plan equals
100% of the last drawn basic salary in case of Management and Officer
cadre employees and 100% of the last drawn basic salary plus Dearness
Allowance & Fixed Additional Dearness Allowance for employees in the
workmen category. The Company accounts for the liability for Family
Benefit Scheme payable in future based on an independent actuarial
valuation carried out at each Balance Sheet date.
(ii) Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees is recognised
during the period when the employees render the service. These benefits
include compensated absences such as paid annual leave and performance
incentives.
The cost of compensated absences is accounted as under :
(a) in case of accumulated compensated absences, when employees render
the services that increase their entitlement of future compensated
absences; and
(b) in case of non-accumulating compensated absences, when the absences
occur.
(iii) Long-term employee benefits
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related services are recognised as a liability at the present value of
the defined benefit obligation at the Balance Sheet date. Long Service
Awards are recognised as a liability at the present value of the
defined benefit obligation at the Balance Sheet date.
(p) Employee Separation Compensation
(i) Compensation paid / payable to employees who have opted for
retirement under "Early Separation Scheme" is amortised over the period
for which benefit is expected.
(ii) Liability under "Early Separation Scheme" is computed and
accounted at the Net Present Value.
(iii) Compensation paid / payable to employees who have opted for
retirement under Voluntary Retirement Scheme including ex-gratia is
charged to statement of Profit and Loss in the year of separation.
(q) Finance Costs
Costs in connection with the borrowing of funds to the extent not
directly related to the acquisition of fixed assets are amortised and
charged to Statement of Profit and Loss, over the tenure of the loan.
Interest on borrowed money, allocated to and utilised for qualifying
fixed assets, pertaining to the period upto the date of capitalisation
is added to the cost of the assets.
Borrowing cost includes interest and amortisation of ancillary costs
incurred in connection with the arrangement of borrowings.
(r) Foreign Currency Transactions and Translation
(i) Foreign currency transactions (other than derivatives) of the
Company and its net investment in non-integral foreign operations are
recorded on initial recognition in the reporting currency, using the
exchange rate at the date of the transaction. Foreign currency monetary
assets and liabilities (other than derivatives) of the company and its
net investment in non-integral foreign operations as at the Balance
Sheet date are restated at the year end rates and the resultant net
gains or losses are recognised as income or expense in the Statement of
Profit and Loss in the year in which they arise. The exchange
differences on long term loans to non-integral foreign operations are
accumulated in a Foreign Currency Translation Reserve, until disposal /
recovery of the net investment.
The exchange differences arising on revaluation of long term foreign
currency monetary items for the year ended 31st March, 2008 to 2011 had
been amortised over the shorter of the maturity period or 31st March
2011.
During the current year, the company has exercised the option granted
vide notification F.No.17/133/2008/CL-V dated 29th December, 2011
issued by the Ministry of Corporate Affairs and accordingly, the
exchange differences arising on revaluation of long term foreign
currency monetary items for the year ended 31st March, 2012 have been
recognised over the shorter of the loan repayment period and 31st
March, 2020. The unamortised balance is presented as "Foreign Currency
Monetary item Translation Difference Account" net of tax effect
thereon. For the period upto 31st March, 2011, such exchange loss was
amortised upto 31st March, 2011 from the period of incurrence
(ii) Premium / discount on forward exchange contracts, related to
monetary items which are not intended for trading or speculation
purposes, are amortised over the period of the contract,
(s) Derivative Contracts
The Company enters into derivative contracts in the nature of full
currency swaps, currency options, forward contracts with an intention
to hedge its existing assets and liabilities, firm commitments and
highly probable transactions. Derivative contracts which are closely
linked to the underlying transactions are recognised in accordance with
the contract terms and accounted as per the policy stated for foreign
currency transaction and translation. All other contracts are
marked-to- market and losses are recognised in the Statement of Profit
and Loss. Gains arising on the same are not recognised on grounds of
prudence.
(t) Government Grants
Government grants and subsidies are recognised when there is reasonable
assurance that the company will comply with the conditions attached to
them and the grants/subsidy will be received. Government grants whose
primary condition is that the company should purchase, construct or
otherwise acquire capital assets are presented by deducting them from
the carrying value of the assets. The grant is recognised as income
over the life of the depreciable assets by way of a reduced
depreciation charge. Other government grants and subsidies are
recognised as income over the periods necessary to match them with the
costs for which they are intended to compensate on a systematic basis.
(u) Segment Reporting
The Company identifies primary segments based on the dominant source,
nature of risks, returns and the internal organisation. The operating
segments are the segments for which separate financial information is
available and for which operating profit/loss amounts are evaluated
regularly by the executive Management in deciding how to allocate
resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company. Segment revenue, segment
expenses, segment assets and segment liabilities have been identified
to segments on the basis of their relationship to the operating
activities of the segment. Inter Segment revenue is accounted on the
basis of transactions which are primarily determined based on market/
fair value factors. Revenue, expenses, assets and liabilities which
relate to the Company as a whole and are not allocable to segments on
reasonable basis have been included under "unallocated revenue /
expenses / assets / liabilities".'
Segment information has been presented in the Consolidated Financial
Statements as permitted by Accounting Standards (AS-17) on Segment
Reporting as notified under the Companies (Accounting Standards) Rules,
2006.
(v) Taxes on Income
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the Income Tax
Act,1961.
Deferred Tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods.
Deferred Tax Assets in respect of unabsorbed depreciation and carry
forward of losses are recognised if there is virtual certainty that
there will be sufficient future taxable income available to realise
such losses. Other Deferred Tax Assets are recognised if there is
reasonable certainty that there will be sufficient future taxable
income to realise such assets.
(w) Provisions and Contingencies
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on best estimate required to settle the obligation at the Balance
Sheet date. These are reviewed at each Balance Sheet date and adjusted
to reflect the current best estimates. Contingent liabilities are
disclosed in Notes forming part of the financial statements.
Mar 31, 2011
(a) Basis of Accounting
The accounts of the Company are prepared under the historical cost
convention using the accrual method of accounting.
(b) Use of Estimates
The presentation of the financial statements in conformity with the
generally accepted accounting principles requires the Management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities, revenues and expenses and disclosure of
contingent liabilities. Such estimates and assumptions are based on the
Managements evaluation of relevant facts and circumstances as on the
date of the financial statements. The actual outcome may diverge from
these estimates.
(c) Fixed Assets
Fixed Assets are carried at cost less depreciation and impairment loss.
The cost of fixed assets includes interest on borrowings attributable
to acquisition of fixed assets up to the date of commissioning of the
assets and other incidental expenses incurred up to that date.
Machinery spares whose use is expected to be irregular are capitalised
and depreciated over the useful life of the principal item of asset.
Fixed Assets acquired and put to use for project purpose are
capitalised and depreciation thereon is included in project cost till
commissioning of the project.
(d) Capital Work-in-Progress
Projects under commissioning and other Capital Work-in-Progress are
carried at cost, comprising direct cost, related incidental expenses
and attributable interest.
(e) Foreign Currency Transactions
(i) Purchases and sales in foreign currencies are accounted at exchange
rates prevailing on the date of transaction. Short term monetary
assets and liabilities in foreign currencies as at the Balance Sheet
date are translated at the rates prevailing at the year end and the
resultant net gains or losses are recognised as income or expense in
the year in which they arise. The exchange differences on long term
loans to non-integral foreign operations are accumulated in a Foreign
Currency Translation Reserve, until disposal / recovery of the net
investment.
The exchange differences arising on revaluation of long term foreign
currency monetary items for the year ended 31 March, 2008, 2009 and
2010 have been amortised over the shorter of the maturity period or
31st March, 2011. The unamortised balance is presented as "Foreign
Currency Monetary item Translation Difference Account" net of tax
effect thereon.
(ii) Premium / discount on forward exchange contracts, which are not
intended for trading or speculation purposes, are amortised over the
period of the contract. Forward exchange contracts outstanding at the
Balance Sheet date are stated at fair value and any gains or losses are
recognised in the Profit and Loss Account.
(f) Investments
Long term investments are carried at cost less provision for
diminution, other than temporary, in the value of such investments.
Current investments are carried individually, at lower of cost and fair
value.
(g) Inventories
Inventories are valued at lower of cost (on weighted average basis) and
net realisable value after providing for obsolescence and other losses,
where considered necessary. Work in process and finished goods include
appropriate proportion of overheads and, where applicable, excise duty.
(h) Employee Separation Compensation
(i) Compensation paid / payable to employees who have opted for
retirement under "Early Separation Scheme" is amortised over the period
for which benefit is expected.
(ii) Liability under "Early Separation Scheme" is computed and
accounted at the Net Present Value.
(ii) Compensation paid/payable to employees who have opted for
retirement under Voluntary Retirement Scheme including ex-gratia is
charged to Profit and Loss Account in the year of separation.
(i) Sales
Sales are recognised, net of returns and trade discounts, on dispatch
of goods to customers. Sales Tax and Value Added Tax are excluded. In
respect of Urea, sales are recognised based on provisional rates of
group concession as notified under the New Pricing Scheme. Equated
freight claims and escalation claims for Urea sales are estimated by
the Management based on the norms prescribed or notified under the said
Scheme. In case of complex fertilisers, other than traded goods, sales
include price concession, as notified under the Concession Scheme, or
as estimated by the Management based on the norms prescribed. Equated
freight claims for complex fertilisers are estimated by the Management
based on the norms prescribed or notified under the uniform freight
policy.
(j) Other Income
Interest income is accounted on accrual basis. Dividend income is
accounted for when the right to receive income is established.
(k) Research and Development Expenses
Revenue expenditure pertaining to Research and Development is charged
to the Profit and Loss Account. Expenditure on fixed assets used in
Research and Development is capitalised.
(l) Depreciation
(i) Depreciation has been provided on the straight line method as per
Section 205(2)(b) of the Companies Act, 1956 as follows :
(a) in respect of assets acquired on or after 1st April, 1987, at the
rates and in the manner prescribed in Schedule XIV of the Companies
Act, 1956 as amended, except in respect of the following categories of
assets, in whose case the life of the assets has been assessed as under
:
Membrane Cells 4 years
Catalyst 5-7 years
Vehicles 4 years
Computers and data processing equipments 4 years
High Pressure Boiler 4 & Turbine 12 8 years
RO Water Plant 4 years
Railway wagon procured under Wagon Investment scheme 15 years
Moulds for Water Purifiers and Bulbs 3 years
(ii) Leasehold land is amortised over the duration of the lease.
(m) Impairment of Assets
The carrying values of assets / cash generating units at each Balance
Sheet date are reviewed for impairment of assets. If any indication of
such impairment exists, the recoverable amount of such assets is
estimated and impairment is recognised, if the carrying amount of these
assets exceeds their recoverable amount. The recoverable amount is the
greater of the net selling price and their value in use. Value in use
is arrived at by discounting the future cash flows to their present
value based on an appropriate discount factor. When there is indication
that an impairment loss recognised for an asset in prior accounting
periods no longer exists or may have decreased, such reversal of
impairment loss is recognised.
(n) Employee Benefits
Employee benefits consist of Provident Fund, Superannuation Fund,
Gratuity Fund, compensated absences, long service awards, post
retirement medical benefits, Directors retirement obligations and
Family Benefit Scheme. Provident fund is considered as a defined
benefit plan.
(i) Post-employment benefit plans
Payments to defined contribution retirement benefit schemes for
eligible employees in the form of Superannuation Fund are charged as an
expense as they fall due.
For defined benefit schemes in the form of gratuity fund, post
retirement medical benefits, Directors Pension Liabilities and Family
Benefit Scheme, the cost of providing benefits is determined using the
Projected Unit Credit Method, with actuarial valuations being carried
out at each Balance Sheet date. Actuarial gains and losses are
recognised in the Profit and Loss Account for the period in which they
occur. Past service cost is recognised immediately to the extent that
the benefits are already vested, and otherwise is amortised on a
straight-line basis over the average period until the benefits become
vested. The retirement benefit obligation recognised in the Balance
Sheet represents the present value of the defined benefit obligation as
adjusted for unrecognised past service cost, and as reduced by the fair
value of scheme assets. Any asset resulting from this calculation is
limited to past service cost, plus the present value of available
refunds and reductions in future contributions to the schemes.
The Company makes contribution towards provident fund, a defined
retirement benefit plan. The provident fund is administered by the
Trustees of the Tata Chemicals Limited Provident Fund. The Rules of the
Companys Provident Fund administered by a Trust require that if the
Board of Trustees are unable to pay interest at the rate declared by
the Employees Provident Fund by the Government under para 60 of the
Employees Provident Fund Scheme, 1952 for the reason that the return
on investment is less or for any other reason, then the deficiency
shall be made good by the Company. Having regard to the assets of the
Fund and the return on the investments, the Company does not expect any
deficiency as at the year end.
Family Benefit Scheme is an unfunded defined benefit plan. The benefits
of the plan accrue to eligible employees at the time of death or
permanant disablement while in service, either as a result of an injury
or as certified by the Companys Medical Board. The monthly payment to
dependents of the deceased / disabled employee under the plan equals to
100% of the last drawn basic salary in case of Management and Officer
cadre employees and 100% of the last drawn basic salary plus Dearness
Allowance & Fixed Additional Dearness Allowance for employees in the
workmen category. The Company accounts for the liability for Family
Benefit Scheme payable in future based on an independent actuarial
valuation carried out at each Balance Sheet date. (ii) Short-term
employee benefits
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees is recognised
during the period when the employees renders the service. These
benefits include compensated absences such as paid annual leave and
performance incentives. The cost of compensated absences is accounted
as under :
(a) in case of accumulated compensated absences, when employees render
the services that increase their entitlement of future compensated
absences; and
(b) in case of non - accumulating compensated absences, when the
absences occur.
(iii) Long-term employee benefits
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related services are recognised as a liability at the present value of
the defined benefit obligation at the Balance Sheet date. Long Service
Awards are recognised as a liability at the present value of the
defined benefit obligation at the Balance Sheet date.
(o) Taxes on Income
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the Income Tax
Act,1961.
Deferred Tax is recognised on timing differences, being the differences
between the taxable income and the accounting income that originate in
one period and are capable of reversal in one or more subsequent
periods.
Deferred Tax Assets in respect of unabsorbed depreciation and carry
forward of losses are recognised if there is virtual certainty that
there will be sufficient future taxable income available to realise
such losses. Other Deferred Tax Assets are recognised if there is
reasonable certainty that there will be sufficient future taxable
income to realise such assets.
(p) Derivative Contracts
The Company enters into derivative contracts in the nature of full
currency swaps, currency options, forward contracts with an intention
to hedge its existing assets and liabilities, firm commitments and
highly probable transactions.
Derivative contracts which are closely linked to the underlying
transactions are recognised in accordance with the contract terms. All
other contracts are marked-to-market and losses are recognised in the
Profit and Loss Account. Gains arising on the same are not recognised
on grounds of prudence.
(q) Provisions and Contingencies
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions (excluding retirement
benefits) are not discounted to their present value and are determined
based on best estimate required to settle the obligation at the Balance
Sheet date. These are reviewed at each Balance Sheet date and adjusted
to reflect the current best estimates. Contingent liabilities are
disclosed in Notes to Accounts.
(r) Segment Reporting
The accounting policies adopted for segment reporting are in line with
the accounting policies of the - Company. Segment revenue, segment
expenses, segment assets and segment liabilities have been identified
to segments on the basis of their relationship to the operating
activities of the segment. Revenue, expenses, assets and liabilities
which relate to the Company as a whole and are not allocable to
segments on reasonable basis have been included under "unallocated
revenue / expenses / assets / liabilities".
(s) Borrowing costs
Costs in connection with the borrowing of funds to the extent not
directly related to the acquisition of fixed assets are amortised and
charged to Profit and Loss Account, over the tenure of the loan.
Interest on borrowed money, allocated to and utilised for qualifying
fixed assets, pertaining to the period upto the date of capitalisation
is added to the cost of the assets.
(t) Debenture Issues Expenses
Debenture issue expenses and redemption premium are adjusted against
the Securities Premium Account as permissible under Section 78(2) of
the Companies Act, 1956.
Mar 31, 2010
(a) Basis of Accounting
The accounts of the Company are prepared under the Historical Cost
Convention using the accrual method of accounting.
(b) Use of Estimates
The presentation of the financial statements in conformity with the
generally accepted accounting principles requires the Management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities, revenues and expenses and disclosure of
contingent liabilities. Such estimates and assumptions are based on the
ManagementÃs evaluation of relevant facts and circumstances as on the
date of the financial statements. The actual outcome may diverge from
these estimates.
(c) Fixed Assets
Fixed Assets are carried at cost less depreciation and impairment loss.
The cost of fixed assets includes interest on borrowings attributable
to acquisition of fixed assets up to the date of commissioning of the
assets and other incidental expenses incurred up to that date.
Machinery spares whose use is expected to be irregular are capitalised
and depreciated over the useful life of the principal item of asset.
Fixed Assets acquired and put to use for project purpose are
capitalised and depreciation thereon is included in project cost till
commissioning of the project.
(d) Capital Work-in-Progress
Projects under commissioning and other Capital Work-in-Progress are
carried at cost, comprising direct cost, related incidental expenses
and attributable interest.
(e) Foreign Currency Transactions
(i) Purchases and sales in foreign currencies are accounted at exchange
rates prevailing on the date of transaction. Short term monetary
assets and liabilities in foreign currencies as at the Balance Sheet
date are translated at the rates prevailing at the year end and the
resultant net gains or losses are recognised as income or expense in
the year in which they arise. The exchange difference on long term
loans to non-integral foreign operations, are accumulated in a Foreign
Currency Translation Reserve, until disposal / recovery of the net
investment.
The exchange differences arising on revaluation of long term foreign
currency monetary items for the year ended 31 March, 2008, 2009 and
2010 are being amortised over the shorter of the maturity period or
31st March, 2011. The unamortised balance is presented as ÃForeign
Currency Monetary item Translation Difference Accountà net of tax
effect thereon.
(ii) Premium / discount on forward exchange contracts, which are not
intended for trading or speculation purposes, are amortised over the
period of the contract. Forward exchange contracts outstanding at the
Balance Sheet date are stated at fair value and any gains or losses are
recognised in the Profit and Loss Account.
(f) Investments
Long term investments are carried at cost less provision for
diminution, other than temporary, in the value of such investments.
Current investments are carried individually, at lower of cost and fair
value.
(g) Inventories
Inventories are valued at lower of cost (on weighted average basis) and
net realisable value after providing for obsolescence and other losses,
where considered necessary. Work in process and finished goods include
appropriate proportion of overheads and, where applicable, excise duty.
(h) Employee Separation Compensation
(i) Compensation paid / payable to employees who have opted for
retirement under ÃVoluntary Retirement Schemeà / ÃEarly Separation
Schemeà is amortised over the period for which benefit is expected.
(ii) Liability under ÃEarly Separation Schemeà is computed and
accounted at the Net Present Value.
(i) Sales
Sales are recognised, net of returns and trade discounts, on dispatch
of goods to customers. Sales Tax and Value Added Tax are excluded. In
respect of Urea, sales are recognised based on provisional rates of
group concession as notified under the New Pricing Scheme. Equated
freight claims and escalation claims for Urea sales are estimated by
the Management based on the norms prescribed or notified under the said
Scheme. In case of complex fertilisers, other than traded goods, sales
include price concession, as notified under the Concession Scheme, or
as estimated by the Management based on the norms prescribed. Equated
freight claims for complex fertilisers are estimated by the Management
based on the norms prescribed or notified under the uniform freight
policy.
(j) Other Income
Interest income is accounted on an accrual basis. Dividend income is
accounted for when the right to receive income is established.
(k) Research and Development Expenses
Revenue expenditure pertaining to Research and Development is charged
to the Profit and Loss Account. Expenditure on fixed assets used in
Research and Development is capitalised.
(l) Depreciation
(i) Depreciation has been provided on the straight line method as per
Section 205(2)(b) of the Companies Act, 1956 as follows :
(a) in respect of assets acquired on or after 1st April, 1987, at the
rates and in the manner prescribed in Schedule XIV of the Companies
Act, 1956 as amended, except in respect of the following categories of
assets, in whose case the life of the assets has been assessed as under
:
Membrane Cells 4 years
Catalyst 5-7 years
Vehicles 4 years
Computers and data processing equipments 4 years
High Pressure Boiler 4 & Turbine 12 8 years
RO Water Plant 4 years
Railway wagon procured under Wagon Investment scheme 15 years
(b) for the purpose of depreciation, impairment loss is taken into
account.
(ii) Leasehold land is amortised over the duration of the lease.
(iii) Capital assets whose ownership does not vest in the Company are
depreciated over their estimated useful life.
(m) Impairment of Assets
Impairment is ascertained at each Balance Sheet date in respect of Cash
Generating Units. An impairment loss is recognised whenever the
carrying amount of an asset exceeds its recoverable amount. The
recoverable amount is the greater of the net selling price and the
value in use. In assessing the value in use, the estimated future cash
flows are discounted to their present value based on an appropriate
discount factor. An impairment loss recognised is reversed if there has
been a change in the estimates of cash flows and discount rates used
for determining the recoverable amount. The carrying amount is
increased to the amount that would have been determined had no
impairment loss been recognised in accordance with AS-28.
(n) Employee Benefits
Employee benefits consist of Provident Fund, Superannuation Fund,
Gratuity Fund, compensated absences, long service awards, post
retirement medical benefits, Directorsà retirement obligations and
Family Benefit Scheme. Provident fund is considered as a defined
benefit plan.
(i) Post-employment benefit plans
Payments to defined contribution retirement benefit schemes for
eligible employees in the form of Superannuation Fund are charged as an
expense as they fall due.
For defined benefit schemes in the form of gratuity fund, post
retirement medical benefits, Directorsà Pension Liabilities and Family
Benefit Scheme, the cost of providing benefits is determined using the
Projected Unit Credit Method, with actuarial valuations being carried
out at each Balance Sheet date. Actuarial gains and losses are
recognised in full in the Profit and Loss Account for the period in
which they occur. Past service cost is recognised immediately to the
extent that the benefits are already vested, and otherwise is amortised
on a straight-line basis over the average period until the benefits
become vested. The retirement benefit obligation recognised in the
Balance Sheet represents the present value of the defined benefit
obligation as adjusted for unrecognised past service cost, and as
reduced by the fair value of scheme assets. Any asset resulting from
this calculation is limited to past service cost, plus the present
value of available refunds and reductions in future contributions to
the schemes.
The Company makes contribution towards provident fund, a defined
benefit retirement plan. The provident fund is administered by the
Trustees of the Tata Chemicals Limited Provident Fund. The Rules of the
CompanyÃs Provident Fund administered by a Trust require that if the
Board of Trustees are unable to pay interest at the rate declared by
the Employeesà Provident Fund by the Government under para 60 of the
Employeesà Provident Fund Scheme, 1952 for the reason that the return
on investment is less or for any other reason, then the deficiency
shall be made good by the Company. Having regard to the assets of the
Fund and the return on the investments, the Company does not expect any
deficiency in the foreseeable future.
Family Benefit Scheme is an unfunded defined benefit plan. The benefits
of the plan accrue to eligible employees at the time of death or
permanant disablement while in service, either as a result of an injury
or as certified by the CompanyÃs Medical Board. The monthly payment to
dependents of the deceased / disabled employee under the plan equals to
100% of the last drawn basic salary in case of Management and Officer
cadre employees and 100% of the last drawn basic salary plus Dearness
Allowance & Fixed Additional Dearness Allowance for employees in the
workmen category. The Company accounts for the liability for Family
Benefit Scheme payable in future based on an independent actuarial
valuation carried out at each Balance Sheet date.
(ii) Short-term employee benefits
The undiscounted amount of short-term employee benefits expected to be
paid in exchange for the services rendered by employees is recognised
during the period when the employees renders the service. These
benefits include compensated absences such as paid annual leave.
The cost of compensated absences is accounted as under :
(a) in case of accumulated compensated absences, when employees renders
the services that increase their entitlement of future compensated
absences; and
(b) in case of non - accumulating compensated absence when the absences
occur.
(iii) Long-term employee benefits
Compensated absences which are not expected to occur within twelve
months after the end of the period in which the employee renders the
related services are recognised as a liability at the present value of
the defined benefit obligation at the Balance Sheet date. Long Service
Awards are recognised as a liability at the present value of the
defined benefit obligation at the Balance Sheet date.
(o) Taxes on Income
Current tax is the amount of tax payable on the taxable income for the
year as determined in accordance with the provisions of the Income Tax
Act,1961.Deferred tax is recognised for all timing differences, subject
to the consideration of prudence, applying the tax rates that have been
substantively enacted at the Balance Sheet date.
(p) Derivative Contracts
The Company enters into derivative contracts in the nature of full
currency swaps, currency options, forward contracts with an intention
to hedge its existing assets and liabilities and firm commitments.
Derivative contracts which are closely linked to the underlying
transactions are recognised in accordance with the contract terms. All
other contracts are marked-to-market and losses are recognised in the
Profit and Loss Account. Gains arising on the same are not recognised
on grounds of prudence.
(q) Provisions and Contingencies
A provision is recognised when the Company has a present obligation as
a result of past events and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a
reliable estimate can be made. Provisions are not discounted to
present value and are determined based on best estimate required to
settle the obligation at the Balance Sheet date. These are reviewed at
each Balance Sheet date and adjusted to reflect the current best
estimates. Contingent assets and liabilities are not recognised.
(r) Segment Reporting
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company. Segment revenue, segment
expenses, segment assets and segment liabilities have been identified
to segments on the basis of their relationship to the operating
activities of the segment. Revenue, expenses, assets and liabilities
which relate to the Company as a whole and are not allocable to
segments on reasonable basis have been included under Ãunallocated
revenue / expenses / assets / liabilitiesÃ.
(s) Borrowing costs
Costs in connection with the borrowing of funds to the extent not
directly related to the acquisition of fixed assets are amortised and
charged to Profit and Loss Account, over the tenure of the loan.
(t) Debenture Issues Expenses
Debenture issue expenses and redemption premium are adjusted against
the Securities Premium Account as permissible under Section 78(2) of
the Companies Act, 1956.
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