Mar 31, 2022
1. General Corporate Information
Tata Metaliks Limited ("the Company") is a subsidiary of Tata Steel Limited. The Company is engaged in the manufacture and sale of pig iron and ductile iron pipes. The Company is having its manufacturing plant at Kharagpur in the state of West Bengal. The Company''s equity shares are listed in BSE Limited and National Stock Exchange of India Limited.
The financial statements were approved and authorised for issue in accordance with the resolution of the Company''s Board of Directors on April 22, 2022.
2. Significant Accounting Policies
This Note provides a list of the significant accounting policies adopted in the preparation of the financial statements. These policies have been consistently applied in all material respect for all the years presented, unless otherwise stated.
2.1 Basis for preparation
(i) Statement of compliance
The financial statements comply in all material respects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the "Act") [Companies (Indian Accounting Standards) Rules, 2015] (as amended) and other provisions of the Act.
(ii) Historical Cost Convention
The financial statements have been prepared on a historical cost basis, except for the following:
⢠Certain financial assets and liabilities (including derivative instruments) that is measured at fair value.
⢠Defined benefit plans - plan assets measured at fair value
(iii) Current versus Non-current Classification
The Company presents assets and liabilities in the Balance Sheet based on current/non-current classification.
An asset is classified as current when it is:
a) expected to be realised or intended to be sold or consumed in the normal operating cycle,
b) held primarily for the purpose of trading,
c) expected to be realised within twelve months after the reporting period, or
d) cash or cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is classified as current when:
a) it is expected to be settled in the normal operating cycle,
b) it is held primarily for the purpose of trading,
c) it is due to be settled within twelve months after the reporting period, or
d) there is no unconditional right to defer settlement of the liability for at least twelve months after the reporting period.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as noncurrent.
(iv) New and amended standards adopted by the group
The Company has applied the following amendments to Ind AS for the first time for their annual reporting period commencing 1 April 2021:
⢠Extension of COVID-19 related concessions -amendments to Ind AS 116
⢠Interest rate benchmark reform - amendments to Ind AS 109, Financial Instruments, Ind AS 107, Financial Instruments: Disclosures, Ind AS 104, Insurance Contracts and Ind AS 116, Leases.
The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
The Ministry of Corporate Affairs has vide notification dated 23 March 2022 notified Companies (Indian Accounting Standards) Amendment Rules, 2022 which amends certain accounting standards, and are effective 1 April 2022. These amendments are not expected to have a material impact on the group in the current or future reporting periods and on foreseeable future transactions
(vi) Rounding of Amounts
All amounts disclosed in the financial statements and notes have been rounded off to the nearest lakh (''00,000) as per the requirement of Schedule III of the Companies Act, 2013 unless otherwise stated.
Intangible assets (Computer Software) has a finite useful life and are stated at cost less accumulated amortisation and accumulated impairment losses, if any.
Software for internal use, which is primarily acquired from third-party vendors is capitalised. Subsequent costs associated with maintaining such software are recognised as expense as incurred. Cost of software includes license fees and cost of implementation/system integration services, where applicable.
Amortisation Method and Periods
Computer software are amortised on a pro-rata basis using the straight-line method over their estimated useful life of 5 Years, from the date they are available for use. Amortisation method and useful lives are reviewed periodically including at each financial year end.
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset''s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Depreciation is calculated on a pro-rata basis using the straightline method to allocate their cost, net of their estimated residual values, over their estimated useful lives in accordance with Schedule II to the Act, unless otherwise mentioned. Each component of an item of property, plant and equipment with a cost that is significant in relation to the cost of that item is depreciated separately if its useful life differs from the other components of the item.
Estimated useful lives of the assets are as follows: |
||
a) |
Factory Building |
30 years |
b) |
Building (Others) |
60 years |
c) |
Plant and Equipment 1 |
15 to 40 years |
d) |
Furniture and Fixtures |
10 years |
e) |
Office Equipment |
5 years |
f) |
Data Processing Equipments 1 |
4 years |
g) |
Vehicles 1 |
5 to 8 years |
h) |
Electrical fittings (Part of Plant and Equipment) |
10 years |
i) |
Temporary Structure (Part of Buildings) |
3 years |
j) |
Railway Sidings |
15 years |
(1)Useful life of these class of assets includes assets wherein useful lives have been determined based on independent technical valuation carried out by external valuers which management believes best represent the period over which the assets are expected to be used. The useful lives for these assets considered for depreciation is different from the useful lives as prescribed under Part C of Schedule II of the Companies Act, 2013.
The useful lives, residual values and the method of depreciation of property, plant and equipment are reviewed, and adjusted if appropriate, at the end of each reporting period.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in profit or loss within ''Other Income''/''Other Expenses''.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as ''Capital Advances'' under other non- current assets and the cost of property, plant and equipment not ready to use are disclosed under ''Capital Work-in- progress''.
Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash- generating units). The impairment if any is reviewed for reversal at each period end.
Expenses incurred on relining of Blast Furnace is capitalised and depreciated over a period of five years of average expected life. The written down value consisting of relining expenditure embedded in the cost of Blast Furnace is written off in the year of fresh lining. All other relining expenses are charged as expense in the year they are incurred.
(i) Classification
The Company classifies its financial assets in the following measurement categories:
⢠those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss), and
⢠those to be measured at amortised 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 other comprehensive income. 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 other comprehensive income.
The Company reclassifies debt investments when and only when its business model for managing those assets changes.
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.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
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:
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 instrument that is subsequently measured at amortised cost is recognised in profit or loss when the asset is derecognised or impaired. Interest income from these financial assets is included in other income using effective interest rate method.
Fair Value through Other Comprehensive Income (FVOCI): 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 (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest
income and foreign exchange gains and losses which are recognised in the profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in ''Other Income''/''Other Expense''. Interest income from these financial assets is included in other income using effective interest rate method.
Fair Value through Profit or Loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss is recognised in profit or loss and presented net in the Statement of Profit and Loss within ''Other Income''/''Other Expense'' 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. Where the Company''s management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss. Changes in the fair value of financial assets at fair value through profit or loss are recognised in ''Other Income''/''Other Expense'' in the Statement of Profit and Loss.
(iii) Impairment of Financial Assets
The Company assesses on a forward looking basis the expected credit losses associated with its assets which are not fair valued through profit or loss. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Note 38 details how the Company determines 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 recognised from initial recognition of the receivables.
(iv) 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 entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks
and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised.
Where the entity has neither transferred a financial asset nor retains 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.
Interest income from debt instruments is recognised using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument but does not consider the expected credit losses.
Dividend is recognised in profit or loss only when the right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the Company, and the amount of the dividend can be measured reliably.
In determining the fair value of 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 and available quoted market prices. All methods of assessing fair value result in general approximation of value, and such value may never actually be realised.
(i) Short-term Employee Benefits
Liabilities for short-term employee benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees'' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current (creditors for accrued wages and salaries) in Balance Sheet. Refer Note 16.
The liability or asset recognised in the Balance Sheet in respect of defined benefit plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually at year end by actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in ''Employee Benefits Expense'' in the Statement of Profit and Loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in Other Comprehensive Income. These are included in ''Retained Earnings'' in the Statement of Changes in Equity. Changes in the present value of the defined benefit obligations resulting from plan ammendments or curtailments are recognisied immediately in profit or loss as past service cost.
Contributions under Defined Contribution Plans payable in keeping with the related schemes are recognised as expenses for the period in which the employee has rendered the service.
(iii) Other long-term employee benefits
The liabilities for leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured annually at year end by actuaries as the present value of expected future benefits in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields on government bonds at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
The income tax expense/credit for the period is the tax payable
on the current period''s taxable income based on the applicable
income tax rate adjusted by changes in deferred tax assets and
liabilities attributable to temporary differences, unused tax credits and to unused tax losses.
The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences, tax credits and losses.
The carrying amount of deferred tax assets is reviewed at each balance sheet date 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 utilised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax are recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity, if any. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
Inventories are stated at the lower of cost and net realisable value. Cost of inventories comprises cost of purchases and all other costs incurred in bringing the inventories to their present location and condition. Cost of purchased inventory are determined after deducting rebates and discounts. Cost of work-in-progress and finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on weighted average
basis. 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.
Cash and cash equivalents include cash in hand, deposits held at call with banks and other short term deposits with an original maturity of three months or less.
Trade receivables are amounts due from customers for goods sold in the ordinary course of business. Trade receivables are recognised initially at the amount of consideration that is unconditional. The Company holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method, less loss allowance.
Trade Payables represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings are removed from the Balance Sheet when the obligation specified in the contract is discharged, cancelled or expired.
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.
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.
Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligation at the end of the reporting period.
A disclosure for contingent liabilities is made when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or nonoccurrence 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 embodying economic benefits will be required to settle or a reliable estimate of the amount cannot be made.
The Company manufactures and sells Pig Iron and Ductile Iron Pipes. Sales are recognised when control of the products has transferred, being when the products are delivered to the customer. Delivery occurs when the products have been shipped or delivered to the specific location as the case may be, the risks of obsolescence and loss have been transferred, and either the customer has accepted the products in accordance with the sales contract, or the Company has objective evidence that all criteria for acceptance have been satisfied. No element of financing is deemed present as the sales are made with a credit term which is consistent with market practice. Sale of products include ancilliary services.
A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.
The Company does not have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year.
As a consequence, the Company does not adjust any of the transaction prices for the time value of money.
(i) Functional and Presentation Currency
Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (''the functional currency''). The financial statements are presented in Indian Rupees, which is the Company''s functional and presentation currency.
In preparing the financial statements transactions in currencies other than the entity''s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions.
At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary items are measured at historical cost.
Exchange differences on monetary items are recognised in the statement of profit and loss in the period in which they arise.
Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included in the statement of profit and loss for the period. Exchange differences arising on retranslation on non-monetary items carried at fair value are included in statement of profit and loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in other comprehensive income.
2.15 Borrowing Costs
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.
Other borrowing costs are expensed in the period in which they are incurred.
2.16 Government grants
Grants from the Government are recognized at their fair value when there is reasonable assurance that the grant will be received and the company will comply with all attached conditions.
Government grants relating to income are deferred and recognised in the profit or loss over the period necessary to match them with the costs that they are intended to compensate and presented within other income.
Government Grants relating to the purchase of Property, Plant and Equipment are included in liabilities as deferred income and credited to statement of profit and loss on a straight line basis over the expected lives of the related assets and or other systematic basis representing of the pattern of fulfillment of obligations associated with grant received presented within other income.
2.17 Leases
As a lessee
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the company. Contracts may contain both lease and non-lease components. The company allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
⢠fixed payments (including in -substance fixed payments), less any lease incentives receivable
⢠variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date
⢠amounts expected to be payable by the company under residual value guarantees
⢠the exercise price of a purchase option if the company is reasonably certain to exercise that option, and
⢠payments of penalties for terminating the lease, if the lease term reflects the company exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the company, the lessee''s incremental borrowing rate is used,being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the company:
⢠where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received
⢠uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the company, which does not have recent third party financing, and
⢠makes adjustments specific to the lease, e .g. term, country, currency and security.
If a readily observable amortising loan rate is available to the individual lessee (through recent financing or market data) which has a similar payment profile to the lease, then the Company use that rate as a starting point to determine the incremental borrowing rate.
The company is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Variable lease payments that depend on sales are recognised in profit or loss in the period in which the condition that triggers those payments occurs.
Right-of-use assets are measured at cost comprising the following:
⢠the amount of the initial measurement of lease liability
⢠any lease payments made at or before the commencement date less any lease incentives received
⢠any initial direct costs, and
⢠restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset''s useful life and the lease term on a straightline basis. If the company is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying assets useful life.
Payments associated with short-term leases of equipment and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.
Lease income from operating leases where the company is a lessor is recognised in income on a straight-line basis over the lease term. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognised as expense over the lease term on the same basis as lease income. The respective leased assets are included in the balance sheet based on their nature. The company did not need to make any adjustments to the accounting for assets held as lessor as a result of adopting the new leasing standard.
The Company enters into certain derivative contracts to hedge risks which are not designated as hedges. Derivative Instruments are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period, with changes included in ''Other Income''/''Other Expenses''.
Financial assets and liabilities are offset and the net amount is reported in the Balance Sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the Company, on or before the end of the reporting period but not distributed at the end of the reporting period.
(i) Basic Earnings per Share
Basic earnings per share is calculated by dividing:
⢠the profit attributable to owners of the Company
⢠by the weighted average number of equity shares outstanding during the periods
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
⢠the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
⢠the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The chief operating decision maker is responsible for allocating resources and assessing performance of the operating segments and has been identified as the Managing Director of the Company.
Equity shares are classified as equity. Incremental cost directly attributable to the issue of new shares or options are shown in equity as reduction, net of tax from the proceed.
3. Use of estimates and critical accounting judgments
The preparation of the financial statements in conformity with Ind AS requires management to make judgments, estimates and assumptions, that impact the application of accounting policies and the reported amounts of assets, liabilities, income, expenses and disclosures of contingent assets and liabilities at the date of these financial statements and the reported amounts of revenues and expenses for the years presented. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed at each Balance Sheet date. Revisions to accounting estimates are recognised in the period in which the estimate is revised and future periods affected.
This Note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each impacted line item in the financial statements.
The areas involving critical estimates or judgements are:
⢠Employee Benefits (Estimation of Defined Benefit Obligation) - Notes 2.8 and 40
Post-employment/other long term benefits represent obligations that will be settled in future and require assumptions to estimate benefit obligations. The accounting is intended to reflect the recognition of benefit costs over the employees'' approximate service period, based on the terms of the plans and the investment and funding decisions made. The accounting requires the Company to make assumptions regarding variables such as discount rate and salary growth rate. Changes in these key assumptions can have a significant impact on the defined benefit obligations.
⢠Estimation of Expected Useful Lives of Property, Plant and Equipment - Notes 2.4 and 4A
Management reviews its estimate of useful lives of property, plant and equipment at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technical and economic obsolescence that may change the utility of property, plant and equipment.
⢠Contingencies - Notes 2.12 and 28
Legal proceedings covering a range of matters are pending against the Company. Due to the uncertainty inherent in such matters, it is often difficult to predict the final outcome. The cases and claims against the Company often raise factual and legal issues that are subject to uncertainties and complexities, including the facts and circumstances of each particular case/ claim, the jurisdiction and the differences in applicable law. The Company consults with legal counsel and other experts on matters related to specific litigations where considered necessary. The Company accrues a liability when it is determined that an adverse outcome is probable and the amount of the loss can be reasonably estimated. In the event an adverse outcome is possible or an estimate is not determinable, the matter is disclosed.
Deferred income tax expense is calculated based on the differences between the carrying value of assets and liabilities for financial reporting purposes and their respective tax bases that are considered temporary in nature. Valuation of deferred tax assets is dependent on management''s assessment of future recoverability of the deferred tax benefit. Expected recoverability may result from expected taxable income in the future, planned transactions or planned optimising measures. Economic conditions may change and lead to a different conclusion regarding recoverability.
When the fair values of financial assets and financial liabilities recorded in the Balance Sheet cannot be measured based on quoted prices in active markets, their fair values are measured using valuation techniques, including the discounted cash flow model, which involve various judgements and assumptions.
Mar 31, 2018
1. Significant Accounting Policies
This note provides a list of the significant accounting policies adopted in the preparation of the financial statements. These policies have been consistently applied in all material respect for all the years presented, unless otherwise stated.
1.1 Basis for preparation
(i) Statement of compliance
The financial statements comply in all material respects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the âActâ) [Companies (Indian Accounting Standards) Rules, 2015] (as amended) and other provisions of the Act.
(ii) Historical Cost Convention
The financial statements have been prepared on a historical cost basis, except for the following:
Certain financial assets and liabilities (including derivative instruments) that is measured at fair value.
- Defined benefit plans - plan assets measured at fair value
(iii) Current versus Non-current Classification
The Company presents assets and liabilities in the Balance Sheet based on current/non-current classification. An asset is classified as current when it is:
a) expected to be realised or intended to be sold or consumed in the normal operating cycle,
b) held primarily for the purpose of trading,
c) expected to be realised within twelve months after the reporting period, or
d) cash or cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period
All other assets are classified as non-current.
A liability is classified as current when:
a) it is expected to be settled in the normal operating cycle,
b) it is held primarily for the purpose of trading,
c) it is due to be settled within twelve months after the reporting period, or
d) t here is no unconditional right to defer settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are classified as non-current.
(iv) Rounding of Amounts
All amounts disclosed in the financial statements and notes have been rounded off to the nearest Lakh (Rs.00,000) as per the requirement of Schedule III, unless otherwise stated.
1.2 Intangible Assets
Intangible assets (Computer Software) has a finite useful life and are stated at cost less accumulated amortisation and accumulated impairment losses, if any.
Computer Software:
Software for internal use, which is primarily acquired from third-party vendors is capitalised. Subsequent costs associated with maintaining such software are recognised as expense as incurred. Cost of software includes license fees and cost of implementation/ system integration services, where applicable.
Amortisation Method and Period:
Computer software are amortised on a pro-rata basis using the straight-line method over their estimated useful life of 5 Years, from the date they are available for use. Amortisation method and useful lives are reviewed periodically including at each financial year end.
1.3 Property, plant and equipment
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the assetâs carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
1.4 Depreciation of property, plant and equipment
Depreciation is calculated on a pro-rata basis using the straight-line method to allocate their cost, net of their estimated residual values, over their estimated useful lives in accordance with Schedule II to the Act, unless otherwise mentioned. Each component of an item of property, plant and equipment with a cost that is significant in relation to the cost of that item is depreciated separately if its useful life differs from the other components of the item.
Estimated useful lives of the assets are as follows:
(1) Useful life of these class of assets includes assets wherein useful lives have been determined based on independent technical valuation carried out by external valuers which management believes best represent the period over which the assets are expected to be used. The useful lives for these assets considered for depreciation is different from the useful lives as prescribed under Part C of Schedule II of the Companies Act 2013.
The useful lives, residual values and the method of depreciation of property, plant and equipment are reviewed, and adjusted if appropriate, at the end of each reporting period. Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in profit or loss within âOther Incomeâ/âOther Expensesâ.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as âCapital Advancesâ under other non- current assets and the cost of property, plant and equipment not ready to use are disclosed under âCapital Work-in- progressâ.
1.5 Impairment of Non - Financial Assets
Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the assetâs carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assetâs fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash- generating units).The impairment if any is reviewed for reversal at each period end.
1.6 Relining expenses
Expenses incurred on relining of Blast Furnace is capitalised and depreciated over a period of five years of average expected life. The written down value consisting of relining expenditure embedded in the cost of Blast Furnace is written off in the year of fresh lining. All other relining expenses are charged as expense in the year they are incurred.
1.7 Investments other than Investments in Subsidiaries and Other Financial Assets
(i) Classification
The Company classifies its financial assets in the following measurement categories:
those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss), and
those to be 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 profit or loss or other comprehensive income. 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 other comprehensive income. The Company reclassifies debt investments when and only when its business model for managing those assets changes.
(ii) 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. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
Debt Instruments
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 instrument that is subsequently measured at amortised cost is recognised in profit or loss when the asset is derecognised or impaired. Interest income from these financial assets is included in other income using effective interest rate method.
Fair Value through Other Comprehensive Income (FVOCI): 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 fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised in the profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in âOther Incomeâ/âOther Expenseâ.Interest income from these financial assets is included in other income using effective interest rate method.
Fair Value through Profit or Loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss is recognised in profit or loss and presented net in the Statement of Profit and Loss within âOther Incomeâ/âOther Expenseâ 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 other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss. Changes in the fair value of financial assets at fair value through profit or loss are recognised in âOther Incomeâ/âOther Expenseâ in the Statement of Profit and Loss.
(iii) Impairment of Financial Assets
The Company assesses on a forward looking basis the expected credit losses associated with its assets which are not fair valued through profit or loss. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Note 39 details how the Company determines 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, âFinancial Instrumentsâ, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
(iv) 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 entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognised. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset is not derecognised. Where the entity has neither transferred a financial asset nor retains 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.
(v) Income Recognition
Interest Income
Interest income from debt instruments is recognised using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying amount of a financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by considering all the contractual terms of the financial instrument but does not consider the expected credit losses.
Dividend
Dividend is recognised in profit or loss only when the right to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably.
(vi) Fair Value of Financial Instruments
I n determining the fair value of 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 and available quoted market prices. All methods of assessing fair value result in general approximation of value, and such value may never actually be realised.
1.8 Employee Benefits
(i) Short-term Employee Benefits
Liabilities for short-term employee benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employeesâ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current (creditors for accrued wages and salaries) in Balance Sheet.
(ii) Post - employment benefits
Defined Benefit Plans
The liability or asset recognised in the Balance Sheet in respect of defined benefit plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually at year end by actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in âEmployee Benefits Expenseâ in the Statement of Profit and Loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in Other Comprehensive Income. These are included in âRetained Earningsâ in the Statement of Changes in Equity. Changes in the present value of the defined benefit obligations resulting from plan ammendments or curtailments are recognisied immediately in profit or loss as past service cost.
Defined Contribution Plans
Contributions under Defined Contribution Plans payable in keeping with the related schemes are recognised as expenses for the period in which the employee has rendered the service.
(iii) Other long-term employee benefits
The liabilities for leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured annually at year end by actuaries as the present value of expected future benefits in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields on government bonds at the end ofthe reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
1.9 Taxation
The income tax expense/credit for the period is the tax payable on the current periodâs taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences, unused tax credits and to unused tax losses.
The current tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting profit nor taxable profit (tax loss). Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences, tax credits and losses.
The carrying amount of deferred tax assets is reviewed at each balance sheet date 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 utilised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax are recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity, if any. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
1.10 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost of inventories comprises cost of purchases and all other costs incurred in bringing the inventories to their present location and condition. Cost of work-in-progress and finished goods comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on weighted average basis. 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.
1.11a Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks and other short term deposits with an original maturity of three months or less.
1.11b Trade Receivables
Trade receivables are amounts due from customers for goods sold or services rendered in the ordinary course of business. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.
1.11c Trade Payables
Trade Payables represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.
1.11d Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates. Borrowings are removed from the Balance Sheet when the obligation specified in the contract is discharged, cancelled or expired. 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.
1.12 Provisions and Contingencies
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are measured at the present value of managementâs best estimate of the expenditure required to settle the present obligation at the end of the reporting period.
A disclosure for contingent liabilities is made 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 embodying economic benefits will be required to settle or a reliable estimate of the amount cannot be made.
1.13 Revenue Recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable. Revenues are reduced for estimated rebates and other similar allowances and other taxes collected on behalf of third parties.
Sale of Products
The Company recognises revenue when all the following criteria are satisfied:
(i) significant risks and rewards of ownership has been transferred to the customer;
(ii) there is no continuing management involvement with the goods usually associated with ownership, nor effective control over the goods sold has been retained;
(iii) the amount of revenue can be measured reliably
(iv) It is probable that the economic benefits associated with the transaction will flow to the Company;
(v) recovery of the consideration is probable;
1.14 Foreign currency transactions and translation
(i) Functional and Presentation Currency
Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (âthe functional currencyâ). The financial statements are presented in Indian Rupees, which is the Companyâs functional and presentation currency.
(ii) Transactions and Balances
In preparing the financial statements transactions in currencies other than the entityâs functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary items are measured at historical cost. Exchange differences on monetary items are recognised in the statement of profit and loss in the period in which they arise.
Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included in the statement of profit and loss for the period. Exchange differences arising on retranslation on non-monetary items carried at fair value are included in statement of profit and loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in other comprehensive income.
1.15 Borrowing Costs
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Other borrowing costs are expensed in the period in which they are incurred.
1.16 Government grants
Grants from the Government are recognized at their fair value when there is reasonable assurance that the grant will be received and the Company will comply with all attached conditions.
Government grants relating to income are deferred and recognised in the profit or loss over the period necessary to match them with the costs that they are intended to compensate and presented within other income.
Government Grants relating to the purchase of Property, Plant and Equipment are included in liabilities as deferred income and credited to statement of profit and loss on a straight line basis over the expected lives of the related assets and presented within other income.
1.17 Leases
As a lessee
Leases of property, plant and equipment where the Company, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the leaseâs inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in borrowings or other financial liabilities as appropriate. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Leases in which a significant portion of the risk and rewards of ownership are not transferred to the Company as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the lessorâs expected inflationary cost increases.
As a lessor
Lease income from operating leases where the Company is a lessor, is recognised as income on a straight-line basis over the lease term unless the receipts are structured to increase in line with expected general inflationary cost increases. The respective leased assets are included in the balance sheet based on their nature.
1.18 Derivative Instruments
The Company enters into certain derivative contracts to hedge risks which are not designated as hedges. Derivative Instruments are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period, with changes included in âOther Incomeâ/âOther Expensesâ.
1.19 Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the Balance Sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
1.20 Dividend
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the Company, on or before the end of the reporting period but not distributed at the end of the reporting period.
1.21 Earnings per Share
(i) Basic Earnings per Share
Basic earnings per share is calculated by dividing:
the profit attributable to owners of the Company by the weighted average number of equity shares outstanding during the financial year
(ii) Diluted Earnings per Share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
1.22 Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker is responsible for allocating resources and assessing performance of the operating segments and has been identified as the Managing Director of the Company.
1.23 Contributed Equity
Equity shares are classified as equity. Incremental cost directly attributable to the issue of new shares or options are shown in equity as reduction, net of tax from the proceed.
1.24 Business combinations - common control transactions
Business combinations involve led by the company are accounted for using the pooling of interests method as follows :
The assets and liabilities of the combining entities are reflected at their carrying amounts.
No adjustments are made to reflect fair values, or recognize any new assets or liabilities. Adjustments are only made to harmonize accounting policies.
The financial information in the financial statements in respect of prior periods is restated as if the business combination had occurred from the beginning of the preceding period in the financial statements, irrespective of the actual date of the combination. However, were the business combination had occurred after that date,the prior period information is restated only from that date.
The balance of the retained earning appearing in the financial statements of the transferor is aggregated with the corresponding balance appearing in the financial statements of the transferor or is adjusted against general reserve.
The identity of the reserves are presented and the reserves of the transferor become the reserves of the transferee.
The difference, if any, between the amounts recorded as share capital issued plus any additional considerations in the form of cash or other assets and the amount of share capital of the transferor is transferred to capital reserve and is presented separately from other capital reserves.
1.25 Recent Accounting Pronouncements
The Ministry of Corporate Affairs (MCA) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 on March 28, 2018. The rules among other key amendments to Ind AS 12, Income Taxes, Ind AS 21, The Effects of Changes in Foreign Exchange Rates, notify Ind AS 115, Revenue from Contracts with Customers. These rules come into force from April 1, 2018. The Company is evaluating the requirements of the amendments and the effect on the financial statements is being evaluated.
Mar 31, 2017
1. General Corporate Information
Tata Metaliks Limited (âthe Companyâ) is a subsidiary of Tata Steel Limited. The Company is engaged in the manufacture and sale of pig iron and ductile iron pipes. The Company is having its manufacturing plant at Kharagpur in the state of West Bengal.
2.1 Statement of compliance
The financial statements have been prepared in accordance with Ind AS notified under the Companies (Indian Accounting Standards) Rules, 2015.
Up to the year ended March 31, 2016, the Company prepared its financial statements in accordance with the requirements of previous GAAP, which includes Standards notified under the Companies (Accounting Standard) Rules, 2006. The date of transition to Ind AS is April 1, 2015. Refer 3.17 for the details of first-time adoption exemptions availed by the Company.
2.2 Basis for preparation
The financial statements of the Company have been prepared in accordance with the relevant provisions of the Companies Act, 2013, Indian Accounting Standards (Ind AS) prescribed under section 133 of the Companies Act, 2013.
All assets and liabilities have been classified as current or non-current as per Companyâs operating cycle and other criteria set out in Schedule-III of the Companies Act 2013. Based on the nature of business, the Company has ascertained its operating cycle as 12 months for the purpose of Current or non-current classification of assets and liabilities.
The effect on reported financial position and financial performance of the Company on transition to Ind AS has been provided in Note 36, which also includes reconciliations of total equity and total comprehensive income for comparative years under Indian GAAP to those reported for respective years under Ind AS.
The financial statements have been prepared on historical cost basis, except for financial instruments that are measured at fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
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, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/ or disclosures in these financial statements is determined on such a basis, and measurements that have some similarities to fair value but are not fair value, such as net realizable value in Ind AS 2 - Inventories or value in use in Ind AS 36 -Impairment of Assets.
In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date;
- Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
- Level 3 inputs are unobservable inputs for the asset or liability.
3. Use of estimates and critical accounting judgments
3.1 The preparation of accounts in accordance with Ind AS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the accounts and reported amounts of income and expenses during the period.
Actual results could differ from those estimates. The most significant techniques for estimation are described in the accounting policies below. Critical accounting judgments and the key sources of estimation or uncertainty in applying the Company''s accounting policies arise in relation to goodwill, intangibles, property, plant and equipment, current asset provisions, deferred tax, retirement benefits, provisions created for redundancy, rationalization and related costs, and financial derivatives. The detailed accounting policies, including underlying judgments and methods of estimations for each of these items are discussed below. All of these key factors are reviewed on a continuous basis. Revisions to accounting estimates are recognized in the period in which estimates are revised and any future periods affected.
3.2 Intangible Assets
Software costs are included in the balance sheet as intangible assets where they are clearly linked to long term economic benefits for the Company. In this case they are measured initially at purchase cost and then amortized on a straight-line basis over their estimated useful lives. All other costs on software are expensed in the statement of profit and loss as incurred.
3.3 Property, plant and equipment
An item of property, plant and equipment is recognized as an asset if it is probable that 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. All other repair and maintenance costs, including regular servicing, are recognized in the statement of profit and loss as incurred. When a replacement occurs, the carrying amount of the replaced part is derecognized.
Property, plant and equipment are stated at cost, less accumulated depreciation and impairment losses. Cost includes all direct costs and expenditures incurred to bring the asset to its working condition and location for its intended use.
The gain or loss arising on disposal of an asset is determined as the difference between the sale proceeds and the carrying amount of the asset, and is recognized in the statement of profit and loss.
3.4 Depreciation and amortization of property, plant and equipment and intangible assets
Depreciation or amortization is provided so as to write off, on a straight-line basis, the cost of property, plant and equipment and other intangible assets. These charges are commenced from the dates the assets are available for their intended use and are spread over their estimated useful economic lives. The estimated useful lives of assets and residual values are reviewed regularly and, when necessary, revised.
Depreciation on assets under construction commences only when the assets are ready for their intended use.
The estimated useful lives for the main categories of property, plant and equipment and other intangible assets are:
a) Factory Building 30 years.
b) Building (Others) 60 years.
c) Plant and Machinery 20 to 35 years.
d) Moulds 2 years.
e) Furniture and Fixtures 5 years.
f) Office Equipment 5 to 15 years.
g) Desktops and Laptops1 4 years.
h) Vehicles1 5 years.
i) Computer Software 5 years. j) Electrical fittings 10 years. k) Temporary Structure 3 years.
(1) Useful life of these class of assets has been determined based on independent technical valuation carried out by external valuers which management believes best represent the period over which the assets are expected to be used. The useful lives for these assets considered for depreciation is different from the useful lives as prescribed under Part C of Schedule II of the Companies Act, 2013.
3.5 Impairment
At each balance sheet date, the Company reviews the carrying amounts of its property, plant and equipment and intangible assets to determine whether there is any indication that the carrying amount of those assets may not be recoverable through continuing use. If any such indication exists, the recoverable amount of the asset is reviewed in order to determine the extent of impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Company estimates the recoverable amount of the cash generating unit to which the asset belongs. Intangible assets with an indefinite useful life are tested for impairment annually and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. An impairment loss is recognized in the statement of profit and loss as and when the carrying amount of an asset exceeds its recoverable amount.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash generating unit) in prior years. A reversal of an impairment loss is recognized as income immediately.
3.6 Relining expenses
Expenses incurred on relining of Blast Furnace is capitalized and depreciated over a period of five years of average expected life. The written down value consisting of relining expenditure embedded in the cost of Blast Furnace is written off in the year of fresh lining. All other relining expenses are charged as expense in the year they are incurred.
3.7 Financial Instruments
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value measured on initial recognition of financial asset or financial liability. The transaction costs directly attributable to the acquisition of financial assets and financial liabilities at fair value through profit and loss are immediately recognized in the statement of profit and loss.
Effective interest method
The effective interest method is a method of calculating the amortized 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.
a) Financial assets Financial assets at amortized cost
Financial assets are subsequently measured at amortized cost if these financial assets are held within a business model whose objective is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets measured at fair value
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a business model whose objective is to hold these assets in order to collect contractual cash flows or to sell these financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial asset not measured at amortized cost or at fair value through other comprehensive income is carried at fair value through profit or loss.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the following financial assets:
- Financial assets that are debt instruments, and are measured at amortized cost e.g., loans, debt securities, deposits and trade receivables
- Financial assets that are debt instruments and are measured as at FVTOCI
- Trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 18
The Company follows âsimplified approachâ for recognition of impairment loss allowance on trade receivables. The application of simplified approach does not require the Company to track changes in credit risk. Rather, it recognizes impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that there is no longer a significant increase in credit risk since initial recognition, the Company reverts to recognizing impairment loss allowance based on 12-month ECL.
Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the reporting date.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the original EIR.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the statement of profit and loss. This amount is reflected under the head âother expensesâ in the statement of profit and loss. The balance sheet presentation for various financial instruments is described below:
Financial assets measured as at amortized cost: ECL is presented as an allowance, i.e., as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
Debt instruments measured at FVTOCI: Since financial assets are already reflected at fair value, impairment allowance is not further reduced from its value. Rather, ECL amount is presented as âaccumulated impairment amountâ in the OCI.
For assessing increase in credit risk and impairment loss, the Company combines financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increases in credit risk to be identified on a timely basis.
The Company does not have any purchased or originated credit-impaired (POCI) financial assets, i.e., financial assets which are credit impaired on purchase/ origination.
De recognition of financial assets
The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all risks and rewards of ownership of the asset to another entity. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognizes its retained interest in the assets and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the financial asset and also recognizes a collateralized borrowing of the proceeds received.
b) Financial liabilities and equity instruments
Classification as debt or equity
Financial liabilities and equity instruments issued by the Company are classified according to the substance
of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.
Financial Liabilities
Trade and other payables are initially measured at fair value, net of transaction costs, and are subsequently measured at amortized cost, using the effective interest rate method.
Interest-bearing bank loans, overdrafts and issued debt are initially measured at fair value and are subsequently measured at amortized cost using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognized over the term of the borrowings in accordance with the Company''s accounting policy for borrowing costs.
De recognition of financial liabilities
The Company derecognizes financial liabilities when, and only when, the Company''s obligations are discharged, cancelled or they expire.
Derivative financial instruments
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. The instruments are confined principally to forward foreign exchange contracts and interest rate swaps. These derivatives contracts do not generally extend beyond 6 months, except for interest rate swaps.
Derivatives are accounted for and measured at fair value from the date the derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. The fair values for forward currency contracts and interest rate swaps are marked to market at the end of each reporting period.
3.8 Retirement benefit costs
Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.
For defined benefit retirement schemes the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuation being carried out at each balance sheet date. Re-measurement gains and losses of the net defined benefit liability/ (asset) are recognized immediately in other comprehensive income. The service cost, net interest on the net defined benefit liability/ (asset) is treated as a net expense within employment costs.
Past service cost is recognized as an expense when the plan amendment or curtailment occurs or when any related restructuring costs or termination benefits are recognized, whichever is earlier.
The retirement benefit obligation recognized in the balance sheet represents the present value of the defined-benefit obligation as reduced by the fair value plan assets.
Other long-term employee benefits
Liabilities recognized in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Company in respect of services provided by employees up to the reporting date. The expected costs of these benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit retirement plans. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to the statement of profit and loss in the period in which they arise. These obligations are valued annually by independent qualified actuaries.
3.9 Taxation
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 by the end of the reporting period. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences. In contrast, deferred tax assets are only recognized to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilized.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realized 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 amount of its assets and liabilities.
Current and deferred tax are recognized 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 recognized in other comprehensive income or directly in equity.
3.10 Inventories
Inventories are stated at the lower of cost and net realizable value. Costs comprise direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Net realizable value is the price at which the inventories can be realized in the normal course of business after allowing for the cost of conversion from their existing state to a finished condition and for the cost of marketing, selling and distribution. Provisions are made to cover slow moving and obsolete items based on historical experience of utilization on a product category basis, which involves individual businesses considering their local product lines and market conditions.
3.11 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks and other short term deposits with an original maturity of three months or less.
For the purposes of the Cash Flow Statement, cash and cash equivalents is as defined above, net of outstanding bank overdrafts. In the balance sheet, bank overdrafts are shown within borrowings in current liabilities.
3.12 Provisions
Provisions are recognized in the balance sheet when the Company has a present obligation (legal or constructive) as a result of a past event, which is expected to result in an outflow of resources embodying economic benefits which can be reliably estimated. Each provision is based on the best estimate of the expenditure required to settle the present obligation at the balance sheet date. When appropriate, provisions are measured on a discounted basis.
Constructive obligation is an obligation that derives from an entity''s actions where:
(a) by an established pattern of past practice, published policies or a sufficiently specific current statement, the entity has indicated to other parties that it will accept certain responsibilities; and
(b) as a result, the entity has created a valid expectation on the part of those other parties that it will discharge those responsibilities.
3.13 Revenue
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable. Revenues are reduced for estimated rebates and other similar allowances.
Sale of goods
The Company recognizes revenue when all the following criteria are satisfied:
(i) significant risks and rewards of ownership has been transferred to the customer;
(ii) there is no continuing management involvement with the goods usually associated with ownership, nor effective control over the goods sold has been retained;
(iii) the amount of revenue can be measured reliably;
(iv) It is probable that the economic benefits associated with the transaction will flow to the group;
(v) recovery of the consideration is probable;
Interest income
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset''s net carrying amount on initial recognition.
3.14 Foreign currency transactions and translation
Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (''the functional currency''). The financial statements are presented in Indian Rupees, which is the Company''s presentation currency.
In preparing the financial statements transactions in currencies other than the entity''s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary items are measured at historical cost.
Exchange differences on monetary items are recognized in the statement of profit and loss in the period in which they arise.
Exchange differences arising on translation of long term foreign currency monetary items recognized in the financial statements before the beginning of the first Ind AS financial reporting period are recognized directly in equity or added/deducted from the cost of assets as the case may be.
Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included in the statement of profit and loss for the period. Exchange differences arising on retranslation on non-monetary items carried at fair value are included in statement of profit and loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income.
3.15 Borrowing Costs
Borrowings costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale are added to the cost of those assets, until such time as the assets are substantially ready for the intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
Discounts or premiums and expenses on the issue of debt securities are amortized over the term of the related security and included within finance charges. Premiums payable on early redemptions of debt securities, in lieu of future finance costs, are written off as finance charges when paid.
3.16 Government grants
Government grants are recognized when there is reasonable assurance that the entity will comply with the conditions attaching to them and that the grants will be received.
Government grants are recognized in the statement of profit and loss on a systematic basis over the periods in which the Company recognizes as expenses the related costs for which the grants are intended to compensate. Government grants whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets are recognized in the balance sheet by setting up the grant as deferred income.
Other government grants (grants related to income) are recognized as income over the periods necessary to match them with the costs for which they are intended to compensate, on a systematic basis. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of providing immediate financial support with no future related costs are recognized in the statement of profit and loss in the period in which they become receivable.
Grants related to income are presented under other income in the statement of profit and loss except for grants received in the form of rebate or exemption which are deducted in reporting the related expense.
3.17 First-time adoption - mandatory exceptions, optional exemptions
3.17.1 Overall principle
The Company has prepared the opening balance sheet as per Ind AS as of April 01, 2015 (âthe transition dateâ) by recognizing all assets and liabilities whose recognition is required by Ind AS, not recognizing items of assets or liabilities which are not permitted by Ind AS, by reclassifying items from previous GAAP to Ind AS as required under Ind AS, and applying Ind AS in measurement of recognized assets and liabilities. However, this principle is subject to the certain exceptions and certain optional exemptions availed by the Company as detailed below.
3.17.2 De recognition of Financial Assets and Financial Liabilities
The Company has applied the de recognition requirements of financial assets and financial liabilities prospectively for transaction occurring on or after April 1, 2015 (âthe transition dateâ).
3.17.3 Classification of debt instruments
The Company has determined the classification of debt instruments in terms of whether they meet the amortized cost criteria or the Fair value through other comprehensive income (FVTOCI) criteria based on the fact and circumstances that existed as of the transition date.
3.17.4 Deemed cost for Property, Plant and Equipment and Intangible assets
The Company has elected to continue with the carrying value of all its plant and equipment and intangible assets recognized as of April 1, 2015 (âtransition dateâ) measured as per the previous GAAP and used that carrying value as its deemed cost as of the transition date.
3.17.5 Determining whether an arrangement contains a lease
The Company has applied Appendix C of Ind AS 17 Determining whether an arrangement contains a Lease to determine whether an arrangement existing at the transition date contain a lease on the basis of facts and circumstances existing at the date.
3.17.6 Long Term Foreign Currency Monetary Items
The Company elected to continue the policy adopted for accounting for exchange differences arising from translation of long-term foreign currency monetary items recognized in the financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period as per the previous GAAP.
Mar 31, 2015
1.01 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 specified under
Section 133 of the Companies Act, 2013, read with Rule 7 of the
Companies (Accounts) Rules, 2014 and the relevant provisions of the
Companies Act, 2013 ("the 2013 Act") / Companies Act, 1956 ("the
1956 Act"), as applicable. The financial statements have been
prepared on accrual basis under the historical cost convention. The
accounting policies adopted in the preparation of the financial
statements are consistent with those followed in the previous year.
2.02 Use of Estimates
The preparation of the financial statements in conformity with Indian
GAAP requires the Management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including
contingent liabilities) and the reported income and expenses during the
year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results
could differ due to these estimates and the differences between the
actual results and the estimates are recognised in the periods in which
the results are known / materialise.
2.03 Changes in acounting estimates
The Company has revised its estimates of useful life of its fixed
assets as prescribed in Part C of Schedule II of the Companies Act,
2013, except for furniture & fixtures and vehicles for which an useful
life of 5 years have been considered. Carrying amount less residual
value of the assets whose remaining useful life has become nil at the
beginning of the period, has been adjusted with the opening balance of
retained earnings net of deferred tax. The useful life of Furniture
and Fixtures and Vehicles has been considered to be 5 years in whose
case the life of the assets has been assessed based on technical
advice, the estimated usage of the asset, the operating conditions of
the asset, past history of replacement, etc.
2.04 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.
2.05 Government grants
Government grants which are given with reference to the total
investments in an undertaking and no repayment is ordinarily expected
in respect thereof, the grants are treated as capital reserve which can
be neither distributed as dividend nor considered as deferred income.
2.06 Tangible assets
i) Tangible assets are stated at cost less accumulated
depreciation/amortisation. The cost of an asset includes the purchase
cost of materials, including import duties and non-refundable taxes,
and any directly attributable costs of bringing an asset to the
location and condition of its intended use. Interest on borrowings used
to finance the construction of qualifying assets are capitalised as
part of the cost of the asset until such time that the asset is ready
for its intended use.
ii) Freehold land is not depreciated. Premium paid on leasehold land
and land development expenses are amortised over the primary lease
period. Other fixed assets are depreciated on a straight line method as
per the useful life prescribed in Schedule II to the Companies Act,
2013 except in respect of the following categories of assets, in whose
case the life of the assets has been assessed as under based on
technical advice, taking into account the nature of the asset, the
estimated usage of the asset, the operating conditions of the asset,
past history of replacement.:
Category of assets Estimated useful life
Furniture & Fixtures 5 years
Vehicles 5 years
2.07 Intangible assets
Intangible assets are stated at acquisition cost, net of accumulated
amortisation. Intangible assets are amortised on straight line basis
over their estimated useful life. The cost of software is amortised on
straight line basis over an estimated useful life of five years.
2.08 Relining expenses
Expenses incurred on relining of Blast Furnace is capitalised and
depreciated over a period of five years of average expected life. The
written down value consisting of relining expenditure embedded in the
cost of Blast Furnace is written off in the year of fresh lining. All
other relining expenses are charged as expense in the year they are
incurred.
2. Summary of Significant Accounting Policies
2.09 Impairment
Wherever events or changes in circumstances indicate that the carrying
value of fixed assets may be impaired, the Company subjects such assets
to a test of recoverability, based on discounted cash flows expected
from use or disposal of such assets. If the assets are impaired, the
Company recognises an impairment loss as the difference between the
carrying value and its recoverable amount.
2.10 Investments
Long term investments are carried at cost less provision for diminution
other than temporary (if any) in value of such investments. Current
investments are carried at lower of cost and fair value.
2.11 Leases
The Company's significant leasing arrangements are in respect of
operating leases for premises (Office, Residence etc.,). The leasing
arrangements which normally have a tenure of eleven months to three
years are cancellable with a reasonable notice, and are renewable by
mutual consent at agreed terms. The aggregate lease rent payable is
charged as rent in the statement of profit and loss. Assets primarily
vehicles acquired on leases where a significant portion of the risks
and rewards of ownership are retained by the lessor are classified as
operating leases. Lease rentals are charged to the statement of profit
and loss on straight line basis over the lease term.
2.12 Inventories
i) Raw materials are valued at cost comprising purchase price, freight
and handling, non refundable taxes and duties and other directly
attributable costs.
ii) Finished products are valued at lower of cost and net realisable
value.
iii) Stores and spares are valued at cost comprising of purchase price,
freight and handling, non refundable taxes and duties and other
directly attributable costs less provisions for obsolescence, if any.
iv) Value of inventories are ascertained on the "weighted average"
basis.
2.13 Cash and Cash Equivalents
Cash and cash equivalents comprises of cash on hand and balances in
current accounts and deposit accounts with banks having original
maturity of less than three months.
2.14 Revenue recognition
i) Sale of Products
Revenue from the sale of goods is recognised in the statement of profit
and loss when the significant risks and rewards of ownership have been
transferred to the buyer, which generally coincides with the delivery
of goods to customers. Revenue includes consideration received or
receivable, excise duty but net of discounts and other sales related
taxes.
ii) Dividend and Interest income
Dividend income is recognised when the Company's right to receive
dividend is established. Interest income is recognised on a time
proportion basis taking into account the amount outstanding and the
rate applicable.
iii) Insurance Claims
The Company recognises insurance claims when the recoverability of the
claims is established with a reasonable certainty.
iv) Revenue Subsidy from Government of West Bengal
Subsidy linked to the incurrence of capital expenditures sanctioned by
the Government under notified schemes are recognised as income on
disbursement by the Government.
2.15 Foreign Currency Transactions
Foreign currency transactions are recorded on initial recognition in
the reporting currency i.e. Indian rupees, using the exchange rates
prevailing on the date of the transaction. Monetary assets and
liabilities in currencies other than the reporting currency and foreign
exchange contracts remaining unsettled are remeasured at the rates of
exchange prevailing at the balance sheet date. Exchange difference
arising on the settlement of monetary items, and on the remeasurement
of monetary items, other than long-term foreign currency monetary items
are included in the statement of profit and loss.
Foreign Currency forward contracts, other than those entered into to
hedge foreign currency risk on unexecuted firm commitments or highly
probable forecast transactions are treated as foreign currency
transactions and accounted accordingly as per Accounting Standard (AS)
11 - Effects of changes in foreign exchange rates. The difference
between the contract rate and spot rate on the date of transaction is
recognised as premium/discount and recognised over the life of the
contract. Exchange differences arising on account of remeasurement and
gains and losses arising on account of roll over/cancellation of
foreign currency forward contracts are recognised in the statement of
profit and loss.
2.16 Employee Benefits
i) Short term Benefits
Short term employee benefits are recognised as an expense at the
undiscounted amount in the statement of profit and loss of the year in
which the related service is rendered.
ii) Defined Contribution Plans
Defined contribution plans are those plans where the Company pays fixed
contributions to funds managed by independent trusts. Contributions are
paid in return for services rendered by the employees during the year.
The company has no legal or constructive obligation to pay further
contributions if the fund does not hold sufficient assets to pay
employee benefits. The Company provides Provident Fund facility to all
employees and Superannuation benefits to selected employees. The
contributions are expensed as they are incurred in line with the
treatment of wages and salaries.
iii) Defined Benefit Plans
The Company provides Gratuity benefits to its employees. Gratuity
liabilities are funded through a separate trust with its funds managed
by Life Insurance Corporation of India. The present value of these
defined benefit obligations are ascertained by an independent actuarial
valuation as per the requirement of Accounting Standards (AS) 15 -
Employee Benefits. The liability recognised in the balance sheet is the
present value of the defined benefit obligations on the balance sheet
date less the fair value of the plan assets (for funded plans),
together with adjustments for unrecognised past service costs. All
actuarial gains and losses are recognised in the Statement of Profit
and Loss in full in the year in which they occur.
iv) 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 service are recognised as a liability at the present value of
the defined benefit obligation as at the balance sheet date.
2.17 Borrowing costs
Borrowing costs that are attributable to the acquisition, construction
or production of qualifying assets are capitalised as part of the cost
of such assets till such time the asset is ready for its intended use.
A qualifying asset is an asset that necessarily takes a substantial
period of time to get ready for its intended use. All other borrowing
costs are recognised as an expense in the statement of profit and loss
in the period in which they are incurred.
2.18 Taxes on Income
i) Current Tax
Current tax is measured at the amount expected to be paid to the tax
authorities in accordance with the provisions of the Income-tax Act,
1961.
ii) Deferred tax
Deferred tax assets and liabilities are recognised by computing the tax
effect on timing differences which arise during the year and reverse in
the subsequent periods. The Company is eligible for tax deductions
available under section 80IA of the Income Tax Act, 1961, in respect of
income attributable to captive power plants being an eligible business.
In view of tax deduction available to the Company under Section 80IA of
the Income Tax Act, 1961, deferred tax is recognised in respect of
timing differences, which originate before or during the tax holiday
period but reverse before or after the tax holiday period. Deferred tax
assets against unabsorbed depreciation and carried forward loss under
tax laws, are recognised only to the extent that there is virtual
certainty supported by convincing evidence that sufficient future
taxable income will be available against which such deferred tax assets
can be realised. Deferred tax assets on other timing differences are
recognised only to the extent that there is a reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realised.
iii) Current and Deferred tax is measured based on the provisions of
tax laws and tax rates enacted or substantively enacted as at the
Balance Sheet date.
2.19 Provisions, Contingent liabilities and Contingent assets
i) Provision
Provisions are recognised for liabilities that can be measured only by
using a substantial degree of estimation, if the Company has a present
obligation as a result of past event, a probable outflow of resources
is expected to settle the obligation and the amount of the obligation
can be reliably estimated.
ii) Contingent Liabilities and Assets
Contingent liability is a possible obligation that arises from past
events and 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 enterprise, or is a present obligation
that arises from past events but is not recognised because either it is
not probable that an outflow of resources embodying economic benefits
will be required to settle the obligation, or a reliable estimate of
the amount of the obligation cannot be made. Contingent liabilities are
disclosed and not recognised. Contingent Assets are neither recognised
not disclosed.
2.20 Earnings Per Share
The basic earnings per share is computed by dividing the net profit
attributable to the equity shareholders for the year by the weighted
average number of equity shares outstanding during the year. Diluted
earnings per share is computed by dividing the net profit attributable
to the equity shareholders for the year by the weighted average number
of equity together with any dilutive equity equivalent shares
outstanding during the year, except where the results would be
anti-dilutive.
2.21 Segment Reporting
The Company identifies primary segments based on the dominant source,
nature of risks and returns, internal organisation and management
structure and the internal performance reporting systems. The
accounting policies adopted for the 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 the their relationship to the operating
activities of the segment. Assets and liabilities which relate to the
Company as a whole and are not allocable to segments on reasonable
basis have been included under "unallocable asset/ liabilities".
Mar 31, 2014
1. General Corporate Information
Tata Metaliks Limited ("the Company") is a subsidiary of Tata Steel
Limited, engaged in the manufacture of foundry grade pig iron. The
Company is having its manufacturing plants at Kharagpur in the state of
West Bengal and at Redi in the State of Maharashtra. The Company has
discontinued its operation at Redi unit from Novemeber 19, 2012.
2. Summary of Significant Accounting Policies
2.01 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 in respect of Section 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 have been prepared on accrual basis under the
historical cost convention. The accounting policies adopted in the
preparation of financial statements are consistent with those followed
in the previous year.
2.02 Use of Estimates
The accounts presentation in accordance with Generally Accepted
Accounting Principles in India requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and the disclosures of contingent liabilities as at the
date of the financial statements and the reported amounts of expenses
during the period. Actual results could differ from those estimates.
Any revision to accounting estimates is recognised prospectively in the
current and future periods.
2.03 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.
2.04 Government grants
Government grants which are given with reference to the total
investments in an undertaking and no repayment is ordinarily expected
in respect thereof, the grants are treated as capital reserve which can
be neither distributed as dividend nor considered as deferred income.
2.05 Tangible assets
i) Tangible assets are stated at cost less accumulated
depreciation/amortisation. The cost of an asset includes the purchase
cost of materials, including import duties and non-refundable taxes,
and any directly attributable costs of bringing an asset to the
location and condition of its intended use. Interest on borrowings used
to finance the construction of qualifying assets are capitalised as
part of the cost of the asset until such time that the asset is ready
for its intended use.
ii) Freehold land is not depreciated. Premium paid on leasehold land
and land development expenses are amortised over the primary lease
period. Railway sidings the ownership of which vest with the Railway
authorities are depreciated over ten years. Other fixed assets are
depreciated on a straight line basis applying the rates and in the
manner prescribed in Schedule XIV to the Companies Act, 1956.
2.06 Intangible assets
Intangible assets are stated at acquisition cost, net of accumulated
amortisation. Intangible assets are amortised on a straight line basis
over their estimated useful life. The cost of software is amortised on
a straight line basis over an estimated useful life of five years.
2.07 Relining expenses
Expenses incurred on relining of Blast Furnace is capitalised and
depreciated over a period of five years of average expected life. The
written down value consisting of relining expenditure embedded in the
cost of Blast Furnace is written off in the year of fresh lining. All
other relining expenses are charged as expense in the year they are
incurred.
2.08 Impairment
Wherever events or changes in circumstances indicate that the carrying
value of fixed assets may be impaired, the Company subjects such assets
to a test of recoverability, based on discounted cash flows expected
from use or disposal of such assets. If the assets are impaired, the
Company recognises an impairment loss as the difference between the
carrying value and its recoverable amount.
2.09 Investments
Long term investments are carried at cost less provision for diminution
other than temporary (if any) in value of such investments. Current
investments are carried at lower of cost and fair value.
2.10 Lease
The Company''s significant leasing arrangements are in respect of
operating leases for premises (Office, Residence etc.,). The leasing
arrangements which normally have a tenure of eleven months to three
years are cancellable with a reasonable notice, and are renewable by
mutual consent at agreed terms. The aggregate lease rent payable is
charged as rent in the statement of profit and loss. Assets primarily
vehicles acquired on leases where a significant portion of the risks
and rewards of ownership are retained by the lessor are classified as
operating leases. Lease rentals are charged to the statement of profit
and loss on straight line basis.
2.11 Inventories
i) Raw materials are valued at cost comprising purchase price, freight
and handling, non refundable taxes and duties and other directly
attributable costs.
ii) Finished products are valued at lower of cost and net realisable
value.
iii) Stores and spares are valued at cost comprising of purchase price,
freight and handling, non refundable taxes and duties and other
directly attributable costs less provisions for obsolescence, if any.
iv) Value of inventories are generally ascertained on the "weighted
average" basis.
2.12 Cash and Cash Equivalents
Cash and cash equivalents comprises of cash on hand and balances in
current accounts and deposit accounts with banks having original
maturity of less than three months.
2.13 Revenue recognition
i) Sale of Products
Revenue from the sale of goods is recognised in the statement of profit
and loss when the significant risks and rewards of ownership have been
transferred to the buyer, which generally coincides with the delivery
of goods to customers. Revenue includes consideration received or
receivable, excise duty but net of discounts and other sales related
taxes.
ii) Dividend and Interest income
Dividend income is recognised when the Company''s right to receive
dividend is established. Interest income is recognised on a time
proportion basis taking into account the amount outstanding and the
rate applicable.
iii) Insurance Claims
The Company recognises insurance claims when the recoverability of the
claims is established with a reasonable certainty.
iv) Revenue Subsidy from Government of West Bengal
Subsidy linked to the incurrence of capital expenditures sanctioned by
the Government under notified schemes are recognised as income on
disbursement by the Government.
v) Sales tax deferral scheme
Excess of deferred sales tax liability discharged over the payment made
based on net present value is recognised as income at the time of
payment of net present value.
2.14 Foreign Currency Transactions
Foreign currency transactions are recorded on initial recognition in
the reporting currency i.e. Indian rupees, using the exchange rates
prevailing on the date of the transaction. Monetary assets and
liabilities in currencies other than the reporting currency and foreign
exchange contracts remaining unsettled are remeasured at the rates of
exchange prevailing at the balance sheet date. Exchange difference
arising on the settlement of monetary items, and on the remeasurement
of monetary items, other than long-term foreign currency monetary items
are included in the statement of profit and loss.
Foreign Currency forward contracts, other than those entered into hedge
foreign currency risk on unexecuted firm commitments or highly probable
forecast transactions are treated as foreign currency transactions and
accounted accordingly as per Accounting Standard (AS) 11 - Effects of
changes in foreign exchange rates. The difference between the contract
rate and spot rate on the date of transaction is recognised as
premium/discount and recognised over the life of the contract. Exchange
differences arising on account of remeasurement and gains and losses
arising on account of roll over/cancellation of foreign currency
forward contracts are recognised in the statement of profit and loss.
2.15 Employee Benefits
i) Short term Benefits
Short term employee benefits are recognised as an expense at the
undiscounted amount in the statement of profit and loss of the year in
which the related service is rendered.
ii) Defined Contribution Plans
Defined contribution plans are those plans where the Company pays fixed
contributions to funds managed by independent trusts. Contributions are
paid in return for services rendered by the employees during the year.
The company has no legal or constructive obligation to pay further
contributions if the fund does not hold sufficient assets to pay
employee benefits. The Company provides Provident Fund facility to all
employees and Superannuation benefits to selected employees. The
contributions are expensed as they are incurred in line with the
treatment of wages and salaries.
iii) Defined Benefit Plans
The Company provides Gratuity and Leave Encashment Benefits to its
employees. Gratuity liabilities are funded through a separate trust
with its funds managed by Life Insurance Corporation of India. The
liability towards leave encashment is not funded. The present value of
these defined benefit obligations are ascertained by an independent
actuarial valuation as per the requirement of Accounting Standards (AS)
15 - Employee Benefits. The liability recognised in the balance sheet
is the present value of the defined benefit obligations on the balance
sheet date less the fair value of the plan assets (for funded plans),
together with adjustments for unrecognised past service costs. All
actuarial gains and losses are recognised in the Statement of Profit
and Loss in full in the year in which they occur.
2.16 Borrowing costs
Borrowing costs that are attributable to the acquisition, construction
or production of qualifying assets are capitalised as part of the cost
of such assets till such time the asset is ready for its intended use.
A qualifying asset is an asset that necessarily takes a substantial
period of time to get ready for its intended use. All other borrowing
costs are recognised as an expense in the statement of profit and loss
in the period in which they are incurred.
2.17 Taxes on Income
i) Current Tax
Current tax is measured at the amount expected to be paid to the tax
authorities in accordance with the provisions of the Income-tax Act,
1961.
ii) Deferred tax
Deferred tax assets and liabilities are recognised by computing the tax
effect on timing differences which arise during the year and reverse in
the subsequent periods. The Company is eligible for tax deductions
available under section 80IA of the Income Tax Act, 1961, in respect of
income attributable to captive power plants being an eligible business.
In view of tax deduction available to the Company under Section 80IA of
the Income Tax Act, 1961, deferred tax is recognised in respect of
timing differences, which originate before or during the tax holiday
period but reverse before or after the tax holiday period. Deferred tax
assets against unabsorbed depreciation and carried forward loss under
tax laws, are recognised only to the extent that there is virtual
certainty supported by convincing evidence that sufficient future
taxable income will be available against which such deferred tax assets
can be realised. Deferred tax assets on other timing differences are
recognised only to the extent that there is a reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realised.
iii) Current and Deferred tax is measured based on the provisions of
tax laws and tax rates enacted or substantively enacted as at the
Balance Sheet date.
2.18 Provisions, Contingent liabilities and Contingent assets
i) Provision
Provisions are recognised for liabilities that can be measured only by
using a substantial degree of estimation, if the Company has a present
obligation as a result of past event, a probable outflow of resources
is expected to settle the obligation and the amount of the obligation
can be reliably estimated.
ii) Contingent Liabilities and Assets
Contingent liability is a possible obligation that arises from past
events and 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 enterprise, or is a present obligation
that arises from past events but is not recognised because either it is
not probable that an outflow of resources embodying economic benefits
will be required to settle the obligation, or a reliable estimate of
the amount of the obligation cannot be made. Contingent liabilities are
disclosed and not recognised. Contingent Assets are neither recognised
not disclosed.
2.19 Earnings Per Share
The basic earnings per share is computed by dividing the net profit
attributable to the equity shareholders for the year by the weighted
average number of equity shares outstanding during the year. Diluted
earnings per share is computed by dividing the net profit attributable
to the equity shareholders for the year by the weighted average number
of equity together with any dilutive equity equivalent shares
outstanding during the year, except where the results would be
anti-dilutive.
2.20 Segment Reporting
The Company identifies primary segments based on the dominant source,
nature of risks and returns, internal organisation and management
structure and the internal performance reporting systems. The
accounting policies adopted for the 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 the their relationship to the operating
activities of the segment. Assets and liabilities which relate to the
Company as a whole and are not allocable to segments on reasonable
basis have been included under "unallocable asset/liabilities".
Rights, preferences and restrictions attached to shares
i) Equity Shares
The Company has one class of equity 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 case of interim dividend. In the event of liquidation, the
equity shareholders are eligible to receive the remaining assets of the
Company after distribution of all preferential amounts, in proportion
to their shareholding.
ii) Non-cumulative Redeemable Preference Shares
Non-cumulative redeemable preference shares having a par value of Rs. 100
carries a fixed rate of dividend of 8.5%. The dividends proposed by
the Board of Directors are subject to approval of the ensuing Annual
General meeting. The dividends are not accumulated in case it is not
approved by the Annual General Meeting. The preference shares are
redeemable at par value after a period for 36 months from the date of
allotment which is falling due in March 2015. In case of liquidation
the preference shareholders will have preference over the equity
shareholders over the distribution of remaining assets of the Company.
Mar 31, 2013
1.01 Basis of accounting
The financial statements are prepared under the historical cost
convention on going concern and on accrual basis. The financial
statements are presented in accordance with Generally Accepted
Accounting Principles in India, Accounting Standards notified under
Section 211(3C) of the Companies Act, 1956 and the relevant provisions
thereof. The accounting policies adopted in the preparation of the
financial statements are consistent with those followed in the previous
year.
The presentation of financial Statements in accordance with Generally
Accepted Accounting Principles in India requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosures of contingent liabilities as at the
date of the financial statements and the reported amounts of expenses
during the year. Actual results could differ from those estimates. Any
revision to accounting estimates is recognised prospectively in the
current and future periods.
1.02 Cash flow statement
Cash flows are reported using the indirect method, whereby
profit/floss) 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.
1.03 Government grants
Government grants which are given with reference to the total
investments in an undertaking and no repayment is ordinarily expected
in respect thereof, the grants are treated as capital reserve which can
be neither distributed as dividend nor considered as deferred income.
1.04 Tangible assets
i) Tangible assets are stated at cost less accumulated
depreciation/amortisation. The cost of an asset includes the purchase
cost of materials, including import duties and non-refundable taxes,
and any directly attributable costs of bringing an asset to the
location and condition of its intended use. Interest on borrowings used
to finance the construction of qualifying assets are capitalised as
part of the cost of the asset until such time that the asset is ready
for its intended use. The effect of exchange differences arising on
reporting of long-term foreign currency monetary items is accounted by
addition or deduction to the cost of the assets so far it relates to
depreciable capital assets in line with Companies (Accounting
Standards) Amendment Rules 2009 relating to Accounting Standard (AS) 11
- Effects of changes in foreign exchange rates notified by Government
of India on 31 March, 2009.
ii) Freehold land is not depreciated. Premium paid on leasehold land
and land development expenses are amortised over the primary lease
period. Railway sidings the ownership of which vest with the Railway
authorities are depreciated over ten years. Other fixed assets are
depreciated on a straight line basis applying the rates and in the
manner prescribed in Schedule XIV to the Companies Act, 1956.
1.05 Intangible assets
Intangible assets are stated at acquisition cost, net of accumulated
amortisation. Intangible assets are amortised on a straight line basis
over their estimated useful life. The cost of software is amortised on
a straight line basis over an estimated useful life of five years.
1.06 Relining expenses
Expenses incurred on relining of Blast Furnace is capitalised and
depreciated over a period of five years of average expected life. All
other relining expenses are charged as expense in the year they are
incurred. The written down value consisting of relining expenditure
embedded in the cost of Blast Furnace is written off in the year of
fresh lining.
1.07 Impairment
Wherever events or changes in circumstances indicate that the carrying
value of fixed assets may be impaired, the Company subjects such assets
to a test of recoverability, based on discounted cash flows expected
from use or disposal of such assets. If the assets are impaired, the
Company recognises an impairment loss as the difference between the
carrying value and its recoverable amount.
1.08 Investments
Long term investments are carried at cost less provision for diminution
other than temporary (if any) in value of such investments. Current
investments are carried at lower of cost and fair value.
1.09 Lease
The Companies significant leasing arrangements are in respect of
operating leases for premises (Office, Residence etc.,). The leasing
arrangements which normally have a tenure of eleven months to three
years are cancellable with a reasonable notice, and are renewable by
mutual consent at agreed terms. The aggregate lease rent payable is
charged as rent in the statement of profit and loss. Assets primarily
vehicles acquired on leases where a significant portion of the risks
and rewards of ownership are retained by the lessor are classified as
operating leases. Lease rentals are charged to the statement of profit
and loss on straight line basis.
1.10 Inventories
i) Raw materials are valued at cost comprising purchase price, freight
and handling, non refundable taxes and duties and other directly
attributable costs.
ii) Finished products are valued at lower of cost and net realisable
value.
iii) Stores and spares are valued at cost comprising of purchase price,
freight and handling, non refundable taxes and duties and other
directly attributable costs.
iv) Value of inventories are generally ascertained on the "weighted
average" basis.
1.11 Cash and Cash Equivalents
Cash and cash equivalents comprises of cash on hand and balances in
current accounts and deposit accounts with banks having original
maturity of less than three months.
1.12 Revenue recognition
i) Sale of Products
Revenue from the sale of goods is recognised in the statement of profit
and loss when the significant risks and rewards of ownership have been
transferred to the buyer, which generally coincides with the delivery
of goods to customers. Revenue includes consideration received or
receivable, excise duty but net of discounts and other sales related
taxes
ii) Dividend and Interest income
Dividend income is recognised when the company''s right to receive
dividend is established. Interest income is recognised on a time
proportion basis taking into account the amount outstanding and the
rate applicable.
iii) Insurance Claims
The Company recognises insurance claims when the recoverability of the
claims is established with a reasonable certainty.
iv) Revenue Subsidy from Government of West Bengal.
Subsidy linked to the incurrence of capital expenditures sanctioned by
the Government under notified schemes are recognised as income on
disbursement by the Government.
v) Sales tax deferral scheme
Excess of deferred sales tax liability discharged over the payment made
based on net present value is recognised as income at the time of
payment of net present value.
1.13 Foreign Currency Transactions
Foreign currency transactions are recorded on initial recognition in
the reporting currency i.e. Indian rupees, using the exchange rates
prevailing on the date of the transaction. Monetary assets and
liabilities in currencies other than the reporting currency and foreign
exchange contracts remaining unsettled are remeasured at the rates of
exchange prevailing at the balance sheet date. Exchange difference
arising on the settlement of monetary items, and on the remeasurement
of monetary items, other than long-term foreign currency monetary items
are included in the statement of profit and loss.
The Company has opted for accounting the exchange difference arising on
long-term foreign currency monetary items in line with the Companies
(Accounting Standards) Amendment Rules, 2009 relating to Accounting
Standards (AS) 11 - Effects of changes in foreign exchange rates
notified by the Government of India on 31 March 2009. Accordingly
exchange difference arising on the settlement and remeasurement of
long-term foreign currency monetary items relating to the acquisition
of depreciable capital asset are accounted by addition or deduction to
the cost of the depreciable assets.
Foreign Currency forward contracts, other than those entered into to
hedge foreign currency risk on unexecuted firm commitments or highly
probable forecast transactions are treated as foreign currency
transactions and accounted accordingly as per Accounting Standard (AS)
11 - Effects of changes in foreign exchange rates. The difference
between the contract rate and spot rate on the date of transaction is
recognised as premium/discount and recognised over the life of the
contract. Exchange differences arising on account of remeasurement and
gains and losses arising on account of roll over/cancellation of
foreign currency forward contracts are recognised in the statement of
profit and loss.
1.14 Employee Benefits
i) Short term Benefits
Short term employee benefits are recognised as an expense at the
undiscounted amount in the statement of profit and loss of the year in
which the related service is rendered.
ii) Defined Contribution Plans
Defined contribution plans are those plans where the Company pays fixed
contributions to funds managed by independent trusts. Contributions are
paid in return for services rendered by the employees during the year.
The company has no legal or constructive obligation to pay further
contributions if the fund does not hold sufficient assets to pay
employee benefits. The Company provides Provident Fund facility to all
employees and Superannuation benefits to selected employees. The
contributions are expensed as they are incurred in line with the
treatment of wages and salaries.
iii) Defined Benefit Plans
The Company provides Gratuity and Leave Encashment Benefits to its
employees. Gratuity liabilities are funded through a separate trust
with its funds managed by Life Insurance Corporation of India. The
liability towards leave encashment is not funded. The present value of
these defined benefit obligations are ascertained by an independent
actuarial valuation as per the requirement of Accounting Standards (AS)
15 - Employee Benefits. The liability recognised in the balance sheet
is the present value of the defined benefit obligations on the balance
sheet date less the fair value of the plan assets (for funded plans),
together with adjustments for unrecognised past service costs. All
actuarial gains and losses are recognised in the Statement of Profit
and Loss in full in the year in which they occur.
1.15 Borrowing costs
Borrowing costs that are attributable to the acquisition, construction
or production of qualifying assets are capitalised as part of the cost
of such assets till such time the asset is ready for its intended use.
A qualifying asset is an asset that necessarily takes a substantial
period of time to get ready for its intended use. All other borrowing
costs are recognised as an expense in the statement of profit and loss
in the period in which they are incurred.
1.16 Taxes on Income
i) Current Tax
Current tax is measured at the amount expected to be paid to the tax
authorities in accordance with the provisions of the Income-tax Act,
1961.
ii) Deferred tax
Deferred tax assets and liabilities are recognised by computing the tax
effect on timing differences which arise during the year and reverse in
the subsequent periods. The Company is eligible for tax deductions
available under section 80IA of the Income Tax Act, 1961, in respect of
income attributable to captive power plants being an eligible business.
In view of tax deduction available to the Company under Section 80IA of
the Income Tax Act, 1961, deferred tax is recognised in respect of
timing differences, which originate before or during the tax holiday
period but reverse before or after the tax holiday period. Deferred tax
assets against unabsorbed depreciation and carried forward loss under
tax laws, are recognised only to the extent that there is virtual
certainty supported by convincing evidence that sufficient future
taxable income will be available against which such deferred tax assets
can be realised. Deferred tax assets on other timing differences are
recognised only to the extent that there is a reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realised.
iii) Current and Deferred tax is measured based on the provisions of
tax laws and tax rates enacted or substantively enacted as at the
Balance Sheet date.
1.17 Provisions, Contingent liabilities and Contingent assets
i) Provision
Provisions are recognised for liabilities that can be measured only by
using a substantial degree of estimation, if the Company has a present
obligation as a result of past event, a probable outflow of resources
is expected to settle the obligation and the amount of the obligation
can be reliably estimated.
ii) Contingent Liabilities and Assets
Contingent liability is a possible obligation that arises from past
events and 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 enterprise, or is a present obligation
that arises from past events but is not recognised because either it is
not probable that an outflow of resources embodying economic benefits
will be required to settle the obligation, or a reliable estimate of
the amount of the obligation cannot be made. Contingent liabilities are
disclosed and not recognised. Contingent Assets are neither recognised
nor disclosed.
1.18 Earnings Per Share
The basic earnings per share is computed by dividing the net profit
attributable to the equity shareholders for the year by the weighted
average number of equity shares outstanding during the year. Diluted
earnings per share is computed by dividing the net profit attributable
to the equity shareholders for the year by the weighted average number
of equity together with any dilutive equity equivalent shares
outstanding during the year, except where the results would be
anti-dilutive.
1.19 Segment Reporting
The Company identifies primary segments based on the dominant source,
nature of risks and returns, internal organisation and management
structure and the internal performance reporting systems. The
accounting policies adopted for the 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 the their relationship to the operating
activities of the segment. Assets and liabilities which relate to the
Company as a whole and are not allocable to segments on reasonable
basis have been included under "unallocable asset/liabilities".
Mar 31, 2012
1.01 Basis of Accounting
The financial statements are prepared under the historical cost
convention on going concern and on accrual basis. The financial
statements are presented in accordance with Generally Accepted
Accounting Principles in India, Accounting Standards notified under
Section 211(3C) of the Companies Act, 1956 and the relevant provisions
thereof.
The accounts presentation in accordance with Generally Accepted
Accounting Principles in India requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and the disclosures of contingent liabilities as at the
date of the financial statements and the reported amounts of expenses
during the year. Actual results could differ from those estimates. Any
revision to accounting estimates is recognised prospectively in the
current and future periods.
1.02 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.
1.03 Government Grants
Government grants which are given with reference to the total
investments in an undertaking and no repayment is ordinarily expected
in respect thereof, the grants are treated as capital reserve which can
be neither distributed as dividend nor considered as deferred income.
1.04 Tangible Assets
i) Tangible assets are stated at cost less accumulated
depreciation/amortisation. The cost of an asset includes the purchase
cost of materials, including import duties and non-refundable taxes,
and any directly attributable costs of bringing an asset to the
location and condition of its intended use. Interest on borrowings used
to finance the construction of qualifying assets are capitalised as
part of the cost of the asset until such time that the asset is ready
for its intended use. The effect of exchange differences arising on
reporting of long-term foreign currency monetary items is accounted by
addition or deduction to the cost of the assets so far it relates to
depreciable capital assets in line with Companies (Accounting
Standards) Amendment Rules 2009 relating to Accounting Standard 11
(AS-11) notified by Government of India on March 31, 2009.
ii) Freehold land is not depreciated. Premium paid on leasehold land
and land development expenses are amortised over the primary lease
period. Railway sidings the ownership of which vest with the Railway
authorities are depreciated over ten years. Other fixed assets are
depreciated on a straight line basis applying the rates and in the
manner prescribed in Schedule XIV to the Companies Act, 1956.
1.05 Relining Expenses
Expenses incurred on relining of Blast Furnace is capitalised and
depreciated over a period of five years of average expected life. All
other relining expenses are charged as expense in the year they are
incurred. The written down value consisting of relining expenditure
embedded in the cost of Blast Furnace is written off in the year of
fresh lining.
1.06 Impairment
Wherever events or changes in circumstances indicate that the carrying
value of fixed assets may be impaired, the Company subjects such assets
to a test of recoverability, based on discounted cash flows expected
from use or disposal of such assets. If the assets are impaired, the
Company recognises an impairment loss as the difference between the
carrying value and value in use.
1.07 Investments
Long term investments are carried at cost less provision for diminution
other than temporary (if any) in value of such investments. Current
investments are carried at lower of cost and fair value.
1.08 Lease
The Companies significant leasing arrangements are in respect of
operating leases for premises (Office, Residence etc.). The leasing
arrangements which normally have a tenor of eleven months to three
years are cancellable with a reasonable notice, and are renewable by
mutual consent at agreed terms. The aggregate lease rent payable is
charged as rent in the statement of profit and loss. Assets acquired on
leases where a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Lease rentals are charged to the statement of profit and loss
on straight line basis.
1.09 Inventories
i) Raw materials are valued at cost comprising purchase price, freight
and handling, non refundable taxes and duties and other directly
attributable costs.
ii) Finished products are valued at lower of cost and net realisable
value.
iii) Stores and spares are valued at cost comprising of purchase price,
freight and handling, non refundable taxes and duties and other
directly attributable costs.
iv) Value of inventories are generally ascertained on the "weighted
average" basis.
1.10 Cash and Cash Equivalents
Cash and cash equivalents comprises of cash on hand and balances in
current accounts and deposit accounts with banks having original
maturity of less than three months.
1.11 Revenue recognition
i) Sale of Products
Revenue from the sale of goods is recognised in the statement of profit
and loss when the significant risks and rewards of ownership have been
transferred to the buyer, which generally coincides with the delivery
of goods to customers. Revenue includes consideration received or
receivable, excise duty but net of discounts and other sales related
taxes.
ii) Dividend and Interest income
Dividend income is recognised when the company's right to receive
dividend is established. Interest income is recognised on a time
proportion basis taking into account the amount outstanding and the
rate applicable.
iii) Insurance Claims
The Company recognises insurance claims when the recoverability of the
claims is established with a reasonable certainty.
iv) Revenue Subsidy from Government of West Bengal
Subsidy linked to the incurrence of capital expenditures sanctioned by
the Government under notified schemes are recognised as income on
disbursement by the Government.
v) Sales tax deferral scheme
Excess of deferred sales tax liability discharged over the payment made
based on net present value is recognised as income at the time of
payment of net present value.
1.12 Foreign Currency Transactions
Foreign currency transactions are recorded on initial recognition in
the reporting currency i.e. Indian rupees, using the exchange rates
prevailing on the date of the transaction. Monetary assets and
liabilities in currencies other than the reporting currency and foreign
exchange contracts remaining unsettled are remeasured at the rates of
exchange prevailing at the balance sheet date. Exchange difference
arising on the settlement of monetary items, and on the remeasurement
of monetary items, other than long-term foreign currency monetary items
are included in the statement of profit and loss.
The Company has opted for accounting the exchange difference arising on
long-term foreign currency monetary items in line with the Companies
(Accounting Standards) Amendment Rules, 2009 relating to Accounting
Standards 11 (AS 11) - The effects of changes in foreign exchange rates
notified by the Government of India on March 31, 2009. Accordingly
exchange difference arising on the settlement and remeasurement of
long-term foreign currency monetary items relating to the acquisition
of depreciable capital asset are accounted by addition or deduction to
the cost of the depreciable assets.
Foreign Currency forward contracts, other than those entered into to
hedge foreign currency risk on unexecuted firm commitments or highly
probable forecast transactions are treated as foreign currency
transactions and accounted accordingly as per Accounting Standard (AS)
11 - Effects of Changes in Foreign Exchange Rates. The difference
between the contract rate and spot rate on the date of transaction is
recognised as premium/discount and recognised over the life of the
contract. Exchange differences arising on account of remeasurement and
gains and losses arising on account of roll over/cancellation of
foreign currency forward contracts are recognised in the statement of
profit and loss.
1.13 Employee Benefits
i) Short term Benefits
Short term employee benefits are recognised as an expense at the
undiscounted amount in the statement of profit and loss of the year in
which the related service is rendered.
ii) Defined Contribution Plans
Defined contribution plans are those plans where the Company pays fixed
contributions to a fund managed by independent trusts. Contributions
are paid in return for services rendered by the employees during the
year. The company has no legal or constructive obligation to pay
further contributions if the fund does not hold sufficient assets to
pay employee benefits. The Company provides Provident Fund facility to
all employees and Superannuation benefits to selected employees. The
contributions are expensed as they are incurred in line with the
treatment of wages and salaries.
iii) Defined Benefit Plans
The Company provides Gratuity and Leave Encashment Benefits to its
employees. Gratuity liabilities are funded through a separate trust
with its funds managed by Life Insurance Corporation of India. The
liability towards leave encashment is not funded. The present value of
these defined benefit obligations are ascertained by an independent
actuarial valuation as per the requirement of Accounting Standards 15 -
Employee Benefits. The liability recognised in the balance sheet is the
present value of the defined benefit obligations on the balance sheet
date less the fair value of the plan assets (for funded plans),
together with adjustments for unrecognised past service costs. All
actuarial gains and losses are recognised in the Statement of Profit
and Loss in full in the year in which they occur.
1.14 Borrowing costs
Borrowing costs that are attributable to the acquisition, construction
or production of qualifying assets are capitalised as part of the cost
of such assets till such time the asset is ready for its intended use.
A qualifying asset is an asset that necessarily takes a substantial
period of time to get ready for its intended use. All other borrowing
costs are recognised as an expense in the statement of profit and loss
in the period in which they are incurred.
1.15 Taxes on Income
i) Current Tax
Current tax is measured at the amount expected to be paid to the tax
authorities in accordance with the provisions of the Income-tax Act,
1961.
ii) Deferred tax
Deferred tax assets and liabilities are recognised by computing the tax
effect on timing differences which arise during the year and reverse in
the subsequent periods. The Company is eligible for tax deductions
available under section 80IA of the Income Tax Act, 1961, in respect of
income attributable to captive power plants being an eligible business.
In view of tax deduction available to the Company under Section 80IA of
the Income Tax Act, 1961, deferred tax is recognised in respect of
timing differences, which originate before or during the tax holiday
period but reverse before or after the tax holiday period.Deferred tax
assets against unabsorbed depreciation and carried forward loss under
tax laws, are recognised only to the extent that there is virtual
certainty supported by convincing evidence that sufficient future
taxable income will be available against which such deferred tax assets
can be realised. Deferred tax assets on other timing differences are
recognised only to the extent that there is a reasonable certainty that
sufficient future taxable income will be available against which such
deferred tax assets can be realised.
iii) Current and Deferred tax is measured based on the provisions of
tax laws and tax rates enacted or substantively enacted as at the
Balance Sheet date.
1.16 Provisions, Contingent liabilities and Contingent assets
i) Provision
Provisions are recognised for liabilities that can be measured only by
using a substantial degree of estimation, if the Company has a present
obligation as a result of past event, a probable outflow of resources
is expected to settle the obligation and the amount of the obligation
can be reliably estimated.
ii) Contingent Liabilities and Assets
Contingent liabilities are not recognised but disclosed in the case of
a present obligation arising from a past event, when it is not probable
that an outflow of resources will be required to settle the obligation.
Contingent Assets are neither recognised not disclosed.
1.17 Earnings Per Share
The basic earnings per share is computed by dividing the net profit
attributable to the equity shareholders for the year by the weighted
average number of equity shares outstanding during the year. Diluted
earnings per share is computed by dividing the net profit attributable
to the equity shareholders for the year by the weighted average number
of equity together with any dilutive equity equivalent shares
outstanding during the year, except where the results would be anti-
dilutive.
1.18 Segment Reporting
The Company identifies primary segments based on the dominant source,
nature of risks and returns, internal organisation and management
structure and the internal performance reporting systems. The
accounting policies adopted for the 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. Assets and liabilities which relate to the
Company as a whole and are not allocable to segments on reasonable
basis have been included under "unallocable asset/liabilities".
i) Equity Shares
The company has one class of equity shares having a par value of f 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 case of interim dividend. In the event of liquidation, the
equity shareholders are eligible to receive the remaining assets of the
Company after distribution of all preferential amounts, in proportion
to their shareholding.
ii) Non-cumulative Redeemable Preference Shares
Non-cumulative redeemable preference shares having a par value of Rs. 100
carries a fixed rate of dividend of 8.5%. The dividends proposed by
the Board of Directors are subject to approval of the ensuing Annual
General meeting. The dividends are not accumulated in case it is not
approved by the Annual General Meeting. The preference shares are
redeemable at par value after a period for 36 months from the date of
allotment. In case of liquidation the preference shareholders will have
preference over the equity shareholders over the distribution of
remaining assets of the Company. from the date of allotment. First
installment has been paid on January 7, 2012. The next date of
redemption is on January 7,2013.
Mar 31, 2011
A) Basis of Accounting
The financial statements are prepared under historical cost convention
on going concern and on accrual basis and are in compliance with the
accounting standards notified under Section 211(3C) of the Companies
Act, 1956 and the relevant provisions thereof.
The financial statements are presented in accordance with Generally
Accepted Accounting Principles in India, Accounting Standards notified
under Section 211 (3C) of the Companies Act, 1956 and the relevant
provisions thereof. The accounts presentation under Indian Generally
Accepted Accounting Principles (GAAP) requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosures of contingent liabilities as at the
balance sheet date.
b) Revenue Recognition
i) Sale of goods
Revenue from the sale of goods is recognised in the profit & loss
account when the significant risks and rewards of ownership have been
transferred to the buyer. Revenue includes consideration received or
receivable, excise duty but net of discounts and other sales related
taxes.
ii) Dividend and Interest income
Dividend income is recognised when the company's right to receive
dividend is established. Interest income is recognised on accrual basis
based on interest rates implicit in the transactions.
iii) Revenue Subsidy from Government of West Bengal
Subsidy linked to the incurrence of capital expenditures sanctioned by
the Government under notified schemes are recognised as income on
disbursement by the Government.
iv) Sales Tax deferral scheme
Excess of deferred sales tax liability discharged over the payment made
based on net present value is recognised as income at the time of
payment of net present value.
c) Fixed Assets
All fixed assets are valued at cost less depreciation/amortisation. The
cost of an asset includes the purchase cost of materials, including
import duties and non refundable taxes, and any directly attributable
costs of bringing an asset to the location and condition of its
intended use. Pre-operation expenses including trial run expenses (net
of revenue) are capitalised. Interest on borrowings used to finance
the construction of fixed assets are capitalised as part of the cost of
the asset until such time that the asset is ready for its intended use.
d) Depreciation
Freehold land is not depreciated. Premium paid on leasehold land and
land development expenses are amortised over the period of lease.
Railway sidings the ownership of which vest with the Railway
authorities are depreciated over ten years. Other fixed assets are
depreciated on a straight line basis applying the rates and in the
manner prescribed in Schedule XIV to the Companies Act, 1956.
e) Relining Expenses
Expenses incurred on relining of Blast Furnace is capitalised and
depreciated over a period of five years of average expected life. All
other relining expenses are charged as expense in the year they are
incurred. The written down value consisting of relining expenditure
embedded in the cost of Blast Furnace is written off in the year of
fresh lining.
f) Investments
Long-term Investments are carried at cost less provision for diminution
other than temporary (if any) in value of such investments.
Current Investments are carried at lower of cost and fair value.
g) Inventories
Raw materials are valued at cost comprising purchase price, freight and
handling, non refundable taxes and duties and other directly
attributable costs.
Finished products are valued at lower of cost and net realisable value.
Stores and spares are valued at cost comprising of purchase price,
freight and handling, non refundable taxes and duties and other
directly attributable costs.
Value of inventories are generally ascertained on the "weighted
average" basis.
h) Foreign Currency Transactions
Foreign Currency transactions are recorded on initial recognition in
the reporting currency i.e. Indian rupees, using the exchange rates
prevailing on the date of the transaction. Monetary assets and
liabilities in currencies other than the reporting currency and foreign
exchange contracts remaining unsettled are remeasured at the rates of
exchange prevailing at the balance sheet date. Exchange difference
arising on the settlement of monetary items, and on the remeasurement
of monetary items, are included in profits loss for the year.
Foreign Currency forward contracts, other than those entered into to
hedge foreign currency risk on unexecuted firm commitments or highly
probable forecast transactions are treated as foreign currency
transactions and accounted accordingly as per Accounting Standard (AS)
11 - Effects of Changes in Foreign Exchange Rates. The difference
between the contract rate and spot rate on the date of transaction is
recognised as premium/discount and recognised over the life of the
contract. Exchange differences arising from remeasurement of contracts
are included in the profit and loss for the year. Gains and losses
arising on account of roll over/cancellation of forward contracts are
recognised as income/expenses in the pre- operative expenses.
All other derivative contracts including forward contracts entered into
to hedge foreign currency risks on unexecuted firm commitments and
highly probable forecast transactions, are recognised in the financial
statements at fair value as on the Balance Sheet date in pursuance of
the announcement of the Institute of Chartered Accountants of India
dated March 29, 2008 on accounting of derivatives.
i) Borrowing Costs
Borrowing Costs that are attributable to the acquisition, construction
of qualifying assets are capitalised as part of the cost of such assets
till such time the asset is ready for its intended use or sale. A
qualifying asset is an asset that necessarily takes a substantial
period of time to get ready for its intended use. Costs incurred in
connection with arrangement of borrowings are amortised over the period
of the borrowing. All other borrowing costs are recognised as an
expense in the profit & loss account in the period in which they are
incurred.
j) Employee Benefits
i) Short term benefits
Short term employee benefits are recog- nised as an expense at the
undiscounted amount in the profit and loss account of the year in which
the related service is rendered.
ii) Post employment benefits
Defined Contribution Plans
Defined Contribution Plans are those plans where the Company pays fixed
contributions to a separate entity. Contributions are paid in return
for services rendered by the employees during the year. The company has
no legal or constructive obligation to pay further contributions if the
fund does not hold sufficient assets to pay employee benefits. The
contributions are expensed as they are incurred in line with the
treatment of wages and salaries.
In respect of contribution of provident fund to the trust set up by the
Company, since the Company is obligated to meet interest shortfall, if
any, with respect to covered employees, such employee benefit plan is
classified as Defined Benefit Plan in accordance with the Guidance on
implementing Accounting Standard (AS) 15 (Revised) on Employee
Benefits.
Defined Benefit Plans
Defined Benefit Plans are arrangements that provide guaranteed benefits
to employees, either by way of contractual obligations or through a
collective agreement. This guarantee of benefits represents a future
commitment of the Company and, as such, a liability is recognised. The
present value of these defined benefit obligations are ascertained by
an independent actuarial valuation as per the requirement of Accounting
Standards 15-Employee Benefits. The liability recognised in the balance
sheet is the present value of the defined benefit obligations on the
balance sheet date less the fair value of the plan assets (for funded
plans), together with adjustments for unrecognised past service costs.
All actuarial gains and losses are recognised in Profits Loss Account
in full in the year in which they occur.
k) Taxes on Income
Current Taxes
Provision for Current Tax is determined on the basis of taxable income
and tax credits computed in accordance with the provisions of the
Income Tax Act, 1961. Current Tax for the current and previous year are
provided based on the Minimum Alternate Tax (MAT) determined to be
payable under the provisions of Section 115JB of the Income Tax Act,
1961. MAT credit is recognised as an asset only when and to the extent
there is convincing evidence that the company will pay normal income
tax during the specified period.
Deferred Taxes
Deferred tax assets and liabilities are recognised by computing the tax
effect on timing differences which arise during the year and reverse in
the subsequent periods. Deferred tax assets against unabsorbed
depreciation or carry forward losses under the Income Tax Act, 1961 are
recognised only to the extent that there is virtual certainty supported
by convincing evidence that sufficient future taxable income will be
available against which such deferred tax asset can be realised.
Deferred tax assets against other timing differences are recognised
only to the extent that there is a reasonable certainty that sufficient
future taxable income will be available against which such deferred tax
assets can be realised.
I) Leases
The Companies significant leasing arrangements are in respect of
operating leases for premises (Office, Residence etc.). The leasing
arrangements which normally have a tenor of eleven months to three
years are cancellable with a reasonable notice, and are renewable by
mutual consent at agreed terms. The aggregate lease rent payable is
charged as rent in the profits loss account.
m) Earnings Per Share
The Company reports basic and diluted earnings per share in accordance
with Accounting Standard (AS) 20 - Earnings Per Share. Basic earnings
per equity share have been computed by dividing net profit after tax
attributable to equity share holders by the weighted average numbers of
equity shares outstanding during the year. Diluted earnings during the
year adjusted for the effects of all dilutive potential equity shares
per share is computed using the weighted average number of equity
shares and dilutive potential equity shares outstanding during the
year.
n) Impairment
Wherever events or changes in circumstances indicate that the carrying
value of fixed assets may be impaired, the company subjects such assets
to a test of recoverability, based on discounted cash flows expected
from use or disposal of such assets. If the assets are impaired, the
company recognises an impairment loss as the difference between the
carrying value and value in use.
o) Provision, Contingent Liabilities and Contingent Assets
Provisions involving substantial degree of estimation in measurement
are recognised when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognised but are disclosed in the
notes. Contingent Assets are neither recognised nor disclosed in the
financial statements.
p) Government Grants
Government grants which are given with reference to the total
investments in an undertaking and no repayment is ordinarily expected
in respect thereof, the grants are treated as capital reserve which can
be neither distributed as dividend nor considered as deferred income.
Mar 31, 2010
A) These financial statements have been prepared on going concern
assumptions under the historical cost convention on an accrual basis
and in conformity with the relevant accounting standards as notified
under the Companies (Accounting Standards) Rules, 2006 and the
Companies Act, 1956.
b) Sale of Products :
Sale of goods is net of trade discounts and are exclusive of sales tax.
c) Subsidies from Government :
(i) on capital account
Subsidy sanctioned and disbursed by the Government, under a notified
scheme linked to the incurrence of capital expenditure by the company
either in a past period or during the current reporting period is
credited directly to Capital Reserve.
(ii) on revenue account Subsidy sanctioned and disbursed by the
Government, under a notified scheme linked to the identified revenue
expenditure incurred either in a past period or during the current
reporting period is recognised in the Profit and Loss Account.
d) Gratuity :
Provision for gratuity liability to employees is made on the basis of
an independent actuarial valuation as on 31st March, 2010.
e) Leave Salaries :
Provision for leave salaries is made on the basis of an independent
actuarial valuation as on 31st March, 2010.
f) Termination Benefits :
Termination Benefits incurred are recognised as an expense immediately.
g) Relining Expenses:
Relining expenses, other than major overhaul expenses on Blast Furnace
relining, are charged as an expense in the year in which they are
incurred.
h) Depreciation :
Provided on the straight line method basis at the rates and in the
manner prescribed under Schedule XIV to the Companies Act, 1956, other
than the Railway Siding the ownership of which vests with the Railway
Authorities which is being amortised over 10 years (Refer Note on
Schedule D). Leasehold land and site development cost are amortised
over the period of lease. Blast Furnace relining is capitalised and
depreciated over a period of five years (average expected life).
i) Foreign Exchange Transactions :
Monetary assets and liabilities related to foreign currency
transactions remaining unsettled at the end of the year are translated
at period end rates.
All differences in translation of monetary assets and liabilities and
realised gains and losses on foreign exchange transactions are
recognised in the Profit and Loss Account.
In respect of transactions covered by forward exchange contracts, the
difference between the spot rate and contract rate on the date of
transaction is charged to the Profit and Loss Account over contract
period. In case of transactions covered by Buyers credit, the
gain/(loss) on foreign exchange is shown separately in manufacturing
expenses.
j) Gain or loss on Derivatives :
Outstanding derivative contracts at the balance sheet date are marked
to market. While anticipated losses on outstanding derivative contracts
at the balance sheet date are provided for fully, anticipated gains on
such contracts are ignored, in conformity with the announcement issued
by the Institute of Chartered Accountants of India in March 2008.
k) Fixed Assets :
All fixed assets are valued at cost less specific grants received.
Pre-operation expenses including trial run expenses (net of revenue)
are capitalised. Interest on borrowings and financing costs during the
period of construction is added to the cost of qualifying fixed assets.
Blast furnace relining expenditure is capitalised, the written-down
value consisting of lining/relining expenditure embedded in the cost of
the furnace is written off in the year of fresh relining. During the
year ended 31st March, 2010, relining expenses incurred Rs.Nil
(corresponding previous year ended 31st March,2009 : Rs 11,487,496.12
capitalised) has been capitalized and is being amortised over five
years from the date of re - commissioning.
l) Investments :
Long term investments are carried at cost less provision for diminution
other than temporary, if any. Current investments are carried at lower
of cost and fair value.
m) Inventories :
All inventories are carried at lower of cost and net realizable value.
Cost of inventories is generally ascertained on the moving weighted
average basis. Work-in-progress and finished and semi-finished products
are valued on full absorption cost basis.
n) Current Tax :
Current tax is the amount of income tax determined to be payable
(recoverable) in respect of the taxable income (tax loss) for an
accounting period or computed on the basis of the provisions of Section
115 JB of the Income - tax Act , 1961 by way of minimum alternate tax
(MAT) at the prescribed percentage on the adjusted book profits of a
year , when income - tax liability under the normal method of tax
payable basis works out either a lower amount or nil amount compared to
the tax liability under Section 115 JA.
o) Deferred Tax :
(i) Deferred Tax is accounted for by computing the tax effect of timing
differences between taxable income and accounting income for a period
that originate in one period and are capable of reversal in one or more
subsequent periods.
(ii) Deferred Tax asset is recognised and 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,except in the case of unabsorbed depreciation or carry
forward of losses under the Income Tax Act,1961, deferred tax asset is
recognised only to the extent that there is virtual certainty supported
by convincing evidence that sufficient future taxable income will be
available against which such deferred tax asset can be realised.
(iii) In the case of recent losses,the company recognises deferred tax
assets only to the extent that it has timing differences the reversal
of which will result in sufficient income against which such deferred
tax assets can be realised.
p) Leases :
The Companys significant leasing arrangements are in respect of
operating leases for premises (Residence, Office etc.). The leasing
arrangements which are not non cancellable range between eleven months
to three years generally, and are usually renewable by mutual consent
at agreed terms. The aggregate lease rent payable are charged as rent
in the Profit and Loss Account.
q) Borrowings and Ancilliary cost :
Borrowings and ancilliary costs incurred in connection with arrangement
of borrowings is being amortised over the period of the borrowing.
r) Contingent Liabilities :
These are disclosed in relation to confirmed demands which are
contested by the company and it is not probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation.
s) Employee Benefits :
(i) Defined Contribution Schemes: Companys contribution towards
Provident Fund and Superannuation Fund and provision for discretionary
pension being set-up over the five year tenure of the wholetime
director,on arithmetical basis (DCS) paid / payable during the year to
the recognized fund of Tata Metaliks Limited, or the employee, as the
case may be, are charged to the Profit and Loss Account.
(ii) Defined Benefit Schemes: Companys liability towards Gratuity is a
defined benefit Scheme (DBS).Liability towards Leave Encashment and
Gratuity are ascertained (on annual basis only) by an independent
actuarial valuation, per the requirements of Accounting Standard 15
(revised 2005) on ÃEmployee BenefitsÃ.
(iii) Other Long-term Employee Benefits are recognised as an expense in
the Profit and Loss Account for the period in which employees have
rendered services.
Estimated liability on account of long - term benefits is discounted to
the current value, on actuarial basis, as on the date of the balance
sheet. This includes provision for leave encashment which is Rs
26,030,000.00. (iv) Gratuity and Superannuation benefits to employees
have been funded under separate arrangements with the Life Insurance
Corporation of India (LIC).
(v) Gratuity benefits to employees have been funded under the pension
and group scheme with Life Insurance Corporation of India.As such the
details of investments made are not avaliable with the company. (vi)
Actuarial gains and losses are recognised in the Profit and Loss
Account.
t) Impairment :
An impairment loss on asset is recognised in the Profit and Loss
Account , if and only if its recoverable amount is less than its
carrying amount.
Disclaimer: This is 3rd Party content/feed, viewers are requested to use their discretion and conduct proper diligence before investing, GoodReturns does not take any liability on the genuineness and correctness of the information in this article