1.1 MATERIAL ACCOUNTING POLICIES
The accounting policies mentioned herein are relating to the standalone financial statements of the Company.
a) Basis of preparation of financial statements
These financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) notified
under Section 133 of the Companies Act, 2013 (the Act) read with Rule 3 of the Companies (Indian Accounting
Standards) Rules, 2015 as amended and guidelines issued by the Securities and Exchange Board of India
(SEBI).
These financial statements are prepared under the historical cost convention except for certain class of
financial assets/ liabilities and net liability for defined benefit plans that are measured at fair value. Historical
cost is generally based on the fair value of the consideration given in exchange for goods and services.
b) Current and Non-current classification
The Company presents assets and liabilities in the balance sheet based on current / non-current classification.
Cash or cash equivalent is treated as current, unless restricted from being exchanged or used to settle a
liability for at least twelve months after the reporting period. In respect of other assets, it is treated as current
when it is:
• expected to be realized or intended to be sold or consumed in the normal operating cycle
• held primarily for the purpose of trading
• expected to be realized within twelve months after the reporting period.
All other assets are classified as non-current.
A liability is treated as current when:
• it is expected to be settled in the normal operating cycle
• it is held primarily for the purpose of trading
• it is due to be settled within twelve months after the reporting period, or
• there is no un conditional right to defer the settlement of the liability for at least twelve
months after the reporting period.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realization in
cash and cash equivalents. The Company has identified twelve months as its operating cycle.
c) Use of estimates
The preparation of financial statements requires management to make certain estimates and assumptions that
affect the amounts reported in the financial statements and notes thereto. The management believes that these
estimates and assumptions are reasonable and prudent. However, actual results could differ from these estimates.
Any revision to accounting estimates is recognized prospectively in the current and future period.
This note provides an overview of the areas that involved a higher degree of judgment 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 judgments is included in the
relevant notes together with information about the basis of calculation for each affected line item in the financial
statements.
d) Significant Estimates and judgements
The areas involving critical estimates or judgments are:
i) Estimation of fair value of unlisted securities-
ii) Defined benefit obligation -
iii) Estimation of useful life of Property, Plant and Equipment -
iv) Estimation and evaluation of provisions and contingencies relating to tax litigations.
e) Property, Plant and Equipment
Freehold Land is carried at historical cost. All other items of Property Plant and Equipment are stated at cost of
acquisition or construction less accumulated depreciation / amortization and impairment, if any. Cost includes
purchase price, taxes and duties, labour cost and directly attributable overheads incurred upto the date the
asset is ready for its intended use. However, cost excludes Goods and Service Tax to the extent credit of the
duty or tax is availed of.
Subsequent costs are included in the asset’s carrying amount or recognized 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 separate
asset is de-recognized when replaced. All other repairs and maintenance are charged to Profit or Loss during
the reporting period in which they are incurred.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included
in profit or loss within other gains/ (losses).
Depreciation and amortization
i) Depreciation on tangible fixed assets is charged over the estimated useful life of the asset,
• On part of buildings, Main plant and machinery and Electrical Installations of Caustic Soda
division, Aspirin, Salicylic Acid, Wind Power at Ramagiri, Wind Power Tamilnadu, Power
Generation and Sugar units at Taduvai and Bhimadole and all buildings, Plant and Machinery,
Electrical Installations, Weigh Bridges and Scales and Workshop Equipment of Cotton & Oil
Products unit, Sulphuric Acid unit at SaggondaCoal based Power Plant at Saggonda and
Solar Power Plant at Kovvur under Straight Line Method.
• On the remaining assets of the above units and all assets of other units, under Written Down
value method.
• In respect of Inter unit Transfer of Assets, Depreciation is computed on the same basis as in
the Transferor unit.
• In respect of the following assets, the useful life has been estimated by the technical personnel
which is different from the life given under Part C of Schedule II of the Companies Act, 2013 as
detailed here under:
o Boilers, Chlorine storage Tank, MS Storage Tank, HCL Plant, DM Water plant, Diesel
Generator set, ET Plant Pond, Turbines, Rectifiers, Cell Plant, Shell, Evaporation
Plant, Fusion Plant, Sulphur Melting Station, Rotary Ball Mill, Bagassee Handling
System, Centrifugal Machinery - 20 years.
o MS Pipe lines, Refrigeration Plant, Distributed Control System, ET Plant, Brass T ubes,
Bearings, Process Plant, Sodium Sulphate Recovery Plant - 15 years.
o Cooling Towers, Instrumentation, Air Compressors, Chains - 10 years
o Solar Plant - 25 years.
ii) Residual values and useful lives are reviewed, and adjusted, if appropriate, for each reporting period.
The Andhra Sugars Limited
i i i) Advances paid towards the acquisition of Property, Plant and Equipment outstanding at each
BalanceSheet date is classified as Capital advances under other Non-current assets and the
cost of assets not put to use before such date are disclosed under Capital Work-in-Progress.
iv) Assets to be disposed off are reported at the lower of carrying value or fair value less cost to sell.
(f) Capital work-in-progress
Projects under commissioning and other Capital work-in-progress are carried at cost comprising of direct and
indirect costs, related incidental expenses and attributable interest. Depreciation on Capital work-in-progress
commences when assets are ready for their intended use and transferred from Capital work-in-progress Group to
Tangible Fixed Assets Group.
g) Investment Property:
Investment properties are measured initially at cost, including transactions costs. Subsequent to initial
recognition, investment properties are stated at cost less accumulated depreciation and accumulated
impairment loss, if any.
The cost includes the cost of replacing parts and borrowing costs for long term construction projects if the
recognition criteria are met. When significant parts of the property are required to be replaced at intervals,
the company depreciates them separately based on their specific useful lives. All other repair and maintenance
costs are recognized in profit or loss as incurred.
The company depreciates building component of investment property over 30 years from the date of original
purchase.
Though the company measures investment property using cost based measurement the fair value of
investment property is disclosed in the notes. Fair values are determined based on an annual evaluation
performed by an accredited external independent valuer.
Investment properties are de-recognized either when they have been disposed off or when they are
permanently withdrawn from use and no future economic benefit is expected from their disposal. The
difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or
loss in the period of de-recognition.
h) Intangible assets
Intangible assets are stated at cost less accumulated amortization and impairment. Intangible assets are amortized
over 6 years on a straight-line basis, from the date that they are available for use. In respect of approved Research
and Development programme, expenditure of capital nature is included in the fixed assets and other expenditure is
charged off to revenue in the year in which such expenditure is incurred.
i) Impairment
i. Financial Assets:
The company recognizes loss allowances using Expected Credit Loss (ECL) model for the financial
assets which are not fair valued through Profit and Loss. Loss allowance for trade receivables is
measured at an amount equal to the 12-month ECL, unless there has been a significant increase in
credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of
expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date
to the amount that is required to be recognized is recognized as an impairment gain or loss in profit
or loss.
ii. 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 recognized 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 compared at the lowest levels for
which there are separately identifiable cash inflows which are largely independent of the cash inflows from other
assets or groupof assets (cash-generating units). Non-financial assets other than goodwill that suffered impairment
are reviewed for possible reversal of the impairment at the end of each reporting period.
j) Foreign currency 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 Company operates (‘the functional currency’). i.e in Indian rupee (INR) and all values are rounded
off to nearest lakhs except where otherwise indicated.
(ii) Transactions and balances
Transactions in foreign currencies are recorded at the exchange rates prevailing on the date of transaction.
i) Foreign currency monetary assets and liabilities such as cash, receivables, payables, etc., are translated
at year end exchange rates.
ii) Non-monetary items denominated in foreign currency such as investments, fixed assets, etc., are valued
at the exchange rate prevailing on the date of transaction.
iii) Exchange differences arising on settlement of transactions and translation of monetary items are
recognized as income or expense in the year in which they arise.
k) Investment in Subsidiaries and Associates:
Investments in subsidiaries are measured at cost as per Ind AS 27 - Separate Financial statements.
An investment in an associate is accounted for using the equity method from the date on which the investee
becomes an associate. On acquisition of the investment in an associate, any excess of the cost of the investment
over the company’s share of the net fair value of the identifiable assets and liabilities of the investee is recognized
as goodwill, which is included within the carrying amount of the investment and is not tested for impairment
individually. An excess of the company’s share of the net fair value of the identifiable assets and liabilities over the
cost of the investment, after reassessment is recognized directly in equity as capital reserve in the period in which
the investment is acquired.
l) Inventories
Inventories are stated at the lower of cost and net realizable value. Net realizable value represents the estimated
selling price for inventories less all estimated costs of completion and cost necessary to make the sale.
i) Cost of raw materials, components, stores, spares and work-in-process are valued at cost, determined on
a first-in-first-out basis except stores & spares which are valued at weighted average cost.
ii) Materials and supplies held for use in production of inventories are not written down if the finished products
in which they will be used are expected to be sold at or above cost. Slow and non-moving material,
obsolesces, defective inventories are duly provided for.
iii) By-products and scrap are valued at net realizable value and it is reduced from cost of the main product.
iv) Excess/ shortages, if any, arising on physical verification are absorbed in the respective consumption
accounts.
x) The net realisable value of work-in-progress is determined with reference to the selling prices of related
finished products.
m) Cash and Cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents include cash on hand,
deposits held at call with financial institutions/banks, other short-term, highly liquid investments with original
maturities of three months or less that are readily convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in
current liabilities in the balance sheet.
n) Cash flow statement:
Cash flows are reported using the indirect method, whereby the profit for the period is adjusted for the effects of
transactions of non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments
and item of income or expenses associated with investing or financing cash flows. The cash flows from operating,
investing and financing activities of the company are segregated.
The Andhra Sugars Limited
0) Financial instruments
Financial assets and financial liabilities are recognized when company becomes a party to the contractual
provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. T ransaction 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 of the
financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable
to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized
immediately in profit or loss.
p) Financial assets
All regular way purchases or sales of financial assets are recognized and de-recognized on a trade date
basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of
assets with in the time frame established by regulation or convention in the market place.
All recognized financial assets are subsequently measured in their entirety at either amortized cost or fair
value, depending on the classification of the financial assets
For the impairment policy on financial assets - refer Para No. i (i).
1) Classification of financial assets
Debt instruments that meet the following conditions are subsequently measured at amortized cost (except for
debt instruments that are designated as at fair value through profit or loss on initial recognition):
• the asset is held within a business model whose objective is to hold assets in order to collect
contractual cash flows; and
• the contractual terms of the instrument give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
Debt instruments that meet the following conditions are subsequently measured at fair value through other
comprehensive income (except for debt instruments that are designated as at fair value through profit or loss
on initial recognition):
• the asset is held within a business model whose objective is achieved both by collecting contractual
cash flows and selling financial assets; and
• the contractual terms of the instrument give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
Interest income is recognized in profit or loss for FVTOCI debt instruments. For the purposes of recognizing
foreign exchange gains and losses, FVTOCI debt instruments are treated as financial assets measured at
amortized cost. Thus, the exchange differences on the amortized cost are recognized in profit or loss and
other changes in the fair value of FVTOCI financial assets are recognized in other comprehensive income and
accumulated under the heading of ‘investment Revaluation reserve’ through other comprehensive income’.
When the investment is disposed of the cumulative gain or loss previously accumulated in this reserve is
reclassified to profit or loss.
All other financial assets are subsequently measured at fair value through Profit and loss.
2) Effective interest method
The effective interest method is a method of calculating the amortized cost of a debt instrument and of
allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts
estimated future cash receipts (including all fees and points paid or received that form an integral part of the
effective interest rate, transaction costs and other premiums or discounts) through the expected life of the
debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognized on an effective interest basis for debt instruments other than those financial assets
classified as at FVTPL. Interest income is recognized in profit or loss and is included in the “Other income”
line item.
3) Investments in equity instruments at FVTOCI
On initial recognition, the company can make an irrevocable election (on an instrument-by-instrument basis)
to present the subsequent changes in fair value in other comprehensive income pertaining to investments in
equity instruments. This election is not permitted if the equity investment is held for trading. These elected
investments are initially measured at fair value plus transaction costs. Subsequently, they are measured at
fair value with gains and losses arising from changes in fair value recognized in other comprehensive income
and accumulated in the ‘investment Revaluation Reserve’ through other comprehensive income’. The cumulative
gain or loss is not reclassified to profit or loss on disposal of the investments.
A financial asset is held for trading if:
• it has been acquired principally for the purpose of selling it in the near term; or
• on initial recognition it is part of a portfolio of identified financial instruments that the company manages
together and has a recent actual pattern of short-term profit-making; or
• it is a derivative that is not designated and effective as a hedging instrument or a financial guarantee.
The company has equity investments which are not held for trading. The company has elected the FVTOCI
irrevocable option for both of these investments. Fair value is determined in the manner described in Para
No.s.
Dividends on these investments in equity instruments are recognized in profit or loss when the company’s
right to receive the dividends is established, it is probable that the economic benefits associated with the
dividend will flow to the entity, the dividend does not represent a recovery of part of cost of the investment and
the amount of dividend can be measured reliably. Dividends recognized in profit or loss are included in the
‘Other income’ line item.
4) Financial assets at fair value through profit or Loss (FVTPL)
Investments in equity instruments are classified as at FVTPL, unless the company irrevocably elects on
initial recognition to present subsequent changes in fair value in other comprehensive income for investments
in equity instruments which are not held for trading (see note. 3 above).
Debt instruments that do not meet the amortized cost criteria or FVTOCI criteria (see above) are measured at
FVTPL. In addition, debt instruments that meet the amortized cost criteria or the FVTOCI criteria but are
designated as at FVTPL are measured at FVTPL.
A financial asset that meets the amortized cost criteria or debt instruments that meet the FVTOCI criteria
may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces
a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognizing
the gains and losses on them on different bases. The company has not designated any debt instrument as at
FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or
losses arising on re-measurement recognized in profit or loss. The net gain or loss recognized in profit or loss
incorporates any dividend or interest earned on the financial asset and is included in the ‘Other income’ line
item. Dividend on financial assets at FVTPL is recognized when the company’s right to receive the dividends
is established, it is probable that the economic benefits associated with the dividend will flow to the entity, the
dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be
measured reliably.
5) De-recognition of financial assets
The Company de-recognizes a financial asset when the contractual rights to the cash flows from the asset
expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the
asset to another party. 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
asset 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 for the proceeds received.
6) Foreign exchange gain and losses
The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and
translated at the spot rate at the end of each reporting period.
• For foreign currency denominated financial assets measured at amortized cost and FVTPL, the
exchange differences are recognized in profit or loss except for those which are designated as hedging
instruments in a hedging relationship.
• Changes in the carrying amount of investments in equity instruments at FVTOCI relating to changes
in foreign currency rates are recognized in other comprehensive income.
• For the purposes of recognizing foreign exchange gains and losses, FVTOCI debt instruments are
treated as financial assets measured at amortized cost. Thus, the exchange differences on the
amortized cost are recognized in profit or loss and other changes in the fair value of FTVOCI financial
assets are recognized in other comprehensive income.
Financial liabilities and equity instrument
1) Classification as debt or equity
Debt and equity instruments issued by a company entity are classified as either financial liabilities or as
equity in accordance with the substance of the contractual arrangements and the definitions of a financial
liability and an equity instrument
2) Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting
all of its liabilities. Equity instruments issued by a company entity are recognized at the proceeds received,
net of direct issue costs.
Re-purchase of the Company’s own equity instruments is recognized and deducted directly in equity. No gain
or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company’s own
equity instruments.
3) Financial liabilities
All financial liabilities are subsequently measured at amortized cost using the effective interest method or at
FVTPL.
(i)Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the financial liability is either contingent consideration
recognized by the Company as an acquirer in a business combination to which Ind AS 103 applies or is held
for trading or it is designated as at FVTPL.
A financial liability is classified as held for trading if:
• it has been incurred principally for the purpose of repurchasing it in the near term; or
• on initial recognition it is part of a portfolio of identified financial instruments that the Company
manages together and has a recent actual pattern of short-term profit-taking; or
• it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for trading or contingent consideration recognized by the
Company as an acquirer in a business combination to which Ind AS 103 applies, maybe designated as at
FVTPL upon initial recognition if:
• such designation eliminates or significantly reduces a measurement or recognition inconsistency
that would otherwise arise;
• the financial liability forms part of a company of financial assets or financial liabilities or both, which
is managed and its performance is evaluated on a fair value basis, in accordance with the Company’s
documented risk management or investment strategy, and information about the company is being
provided internally on that basis; or
• it forms part of a contract containing one or more embedded derivatives, and Ind AS 109 permits the
entire combined contract to be designated as at FVTPL in accordance with Ind AS 109.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on re-measurement
recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest paid on
the financial liability and is included in the ‘Other income’ line item.
However, for non-held-for-trading financial liabilities that are designated as at FVTPL, the amount of change in
the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognized
in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in
other comprehensive income would create or enlarge an accounting mismatch in profit or loss, in which case
these effects of changes in credit risk are recognized in profit or loss. The remaining amount of change in the
fair value of liability is always recognized in profit or loss. Changes in fair value attributable to a financial
liability’s credit risk that are recognized in other comprehensive income are reflected immediately in retained
earnings and are not subsequently reclassified to profit or loss.
Gains or losses on financial guarantee contracts and loan commitments issued by the Company that are
designated by the Company as at fair value through profit or loss are recognized in profit or loss.
Fair value is determined in the manner described in Para - s.
(ii) Financial liabilities subsequently measured at amortized cost
Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortized
cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are
subsequently measured at amortized cost are determined based on the effective interest method, interest
expense that is not capitalized as part of costs of an asset is included in the ‘Finance costs’ line item.
The effective interest method is a method of calculating the amortized cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts
estimated future cash payments (including all fees and points paid or received that form an integral part of the
effective interest rate, transaction costs and other premiums or discounts) through the expected life of the
financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
De-recognition of financial liabilities
The Company de-recognizes financial liabilities when and only when, the Company’s obligations are discharged,
cancelled or have expired. An exchange between with a lender of debt instruments with substantially different
terms is accounted for as an extinguishment of the original financial liability and the recognition of a new
financial liability. Similarly, a substantial modification of the terms of an existing financial liability (whether or
not attributable to the financial difficulty of the debtor) is accounted for as an extinguishment of the original
financial liability and the recognition of a new financial liability. The difference between the carrying amount of
the financial liability de-recognized and the consideration paid and payable is recognized in profit or loss.
q) Borrowings
Borrowing cost incurred in connection with the funds borrowed for acquisition/erection of assets that necessarily
take substantial period of time to get ready for intended use, are capitalized as part of such assets. Interest income
earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is
deducted from the borrowing cost eligible for capitalization. Borrowing cost also includes exchange differences to
the extent regarded as an adjustment to the borrowing costs. All other borrowing costs are charged to revenue.
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