Note - 1

1. Corporate Information

Associate CeramicsLirmted (‘the company’) is a listed company incorporated in India in 1970 under the Companies Act, 1956. The registered office of the Company is at 17 Ganesh Chandra Avenue, 4th Floor, Kolkata, West Bengal-700013, India.

The Company is primarily engaged in business of manufacture and sale of refractor}- items.

2. Significant Accounting Policies

The significant accounting policies applied by die Company in the preparation of its financial statements are listed below. Such accounting policies have been applied consistendy to all the periods presented in these financial statements and in preparing the opening Ind AS Balance Sheet as at April 1, 2016 for die purpose of transition to Ind AS, unless otherwise indicated.

a. Statement of compliance

The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under section 133 of the Companies Act, 2013 (the ‘Act’) and other relevant provisions of the Act.

b. Basis of preparation

The financial statements have been prepared under the historical cost convention, on the accrual basis of accounting, with the exception of certain assets and liabilities that are required to be carried at fair values by Ind AS. The accounting policies have been applied consistendy over all the periods presented in these financial statements.

The financial statements are presented in Indian Rupees (“INR”) and all values are rounded to the nearest lakhs, except stated otherwise.

c. Fair value measurement

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. 'Ihe fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• In die principal market for the asset or liability, or

• In the absence of a principal market, in the most advantageous market for the asset or liability. Tlie principal or the most advantageous market must be accessible by die Company.

’Ihe fair value of an asset or a liability is measured using die assumptions that market participants would use when pricing die asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

Ihe company uses valuation techniques that are appropriate in the circumstances and for which sufficient data arc avaikbkto measure fair value, maximizing the use of relevant observable inputs and minimizing the use^doUhbftyfea.ble inputs.

All assets ancl liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2 — Valuation techniques for which the lowest level input diat is significant to the fair value measurement is directly or indireedy observable

Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is Unobservable

For assets and liabilities that: are recognized in the financial statements on a recurring basis, the company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input diat is significant to the fair value measurement as a whole) at the end of each reporting period or each case.

For the purpose of fair value disclosures, the company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

This note summarizes accounting policy⁷ for fair value. Other fair value related disclosures are given in the relevant notes.

• Disclosures for valuation methods, significant estimates and assumptions

• Quantitative disclosures of fair value measurement hierarchy

• Investment in quoted and unquoted equity shares

• Financial instruments

d. Current versus non-current classification

The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated as current when it is:

• Expected to be realized or intended to be sold or consumed in normal operating cycle;

• Held primarily for the purpose of trading;

• Expected to be realized within twelve months after the reporting period, or

• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability⁷ for at least twelve months after the reporting period.

All other assets arc classified as non-current

A liability is current when:

• It is expected to be settled in normal operating cycle;

• It is held primarily for the purpose of trading;

• It is due to be settled within twelve months after the reporting period, or

• There is no unconditional right to defer the settlement of die liability for at least twelve months after the reporting period.

The Company classifies all other liabilities as non-current.

Deferred tax assets anddiate&tjes are classified as non-current assets and liabilities.

The operating c\xle 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 axle.

e. Use of estimates and critical accounting judgements

In preparation of die financial statements, the managementmakes judgments, estimates and assumptions about die carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and the associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and the underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in die period in which die estimates are revised and future periods are affected.

Significant judgments and estimates relating to the carrying values of assets and liabilities include useful lives of property, plant and equipment and intangible assets, impairment of property, plant and equipment, intangible assets and investments, provision for employee benefits and other provisions, recoverability of deferred tax assets, commitments and contingencies.

f. Property, plant and equipment

Recognition and initial measurement

An item of property, plant and equipment is recognised as an asset if it is probable that the future economic benefits associated with the item will flow to the Company and its cost can be measured reliably. Tliis recognition principle is applied to die costs incurred initially to acquire an item of property, plant and equipment and also to costs incurred subsequendy to add to, replace part of, or sen-ice it. All other repair and maintenance costs, including regular senicing, are recognised in the statement of profit and loss as incurred. When a replacement occurs, the carrying value of die replaced part is de-recognised. Where an item of property-, plant and equipment comprises major components having different useful lives, these components are accounted for as separate items.

Property', plant and equipment are stated at cost, less acaimulated depreciation and impairment losses if any. The cost of an item of property, plant and equipment comprises of its purchase price including import duties and other non-refundable purchase taxes or levies, direedy attributable cost of bringing the asset to its working condition for its intended use and the initial estimate of decommissioning, restoration and similar liabilities, if any.Trial run expenses (net of revenue) arc capitalised. Borrowing costs incurred during the period of construction is capitalised as part of cost of the qualifying assets.

The gain or loss arising on disposal of an asset is determined as die difference between the sale proceeds and the carrying value of the asset, and is recognised in the statement of profit and loss.

De-recognition

An item of property, plant and equipment and any significant part initially recognised is derecognized upon disposal or when no fumre economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as die difference between the net disposal proceeds and the catnaagjamount of the asset) is included in the income statement when the asset is

g. Depreciation of property plant and equipment

Depreciation or amortisation is provided so as to write off, on a Written down value basis, the cost of property, plant and equipment and other intangible assets, including diosc held under finance leases to their residual value. These charges are commenced from die dates the assets are available for their intended use and arc spread over their estimated useful economic lives as per the useful life prescribed in Schedule II to die Companies Act, 2013, or,as per technical assessment, or, in the case of leased assets, over the lease period, if shorter. The estimated useful lives of assets and residual values are reviewed regularly and, when necessary, revised. No further charge is provided in respect of assets that are fully written down but are still in use.

In case of certain classes of PPE, the Company uses different useful lives than those prescribed in Schedule II to the Act The useful lives have been assessed based on technical advice, taking into account the nature of the PPE and die estimated usage of the asset on the basis of management’s best estimation of obtaining economic benefits from those classes of assets.

Freehold land is not depreciated.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by die end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.

The Company reviews the residual value, useful lives and depreciation method annually and, if expectations differ from previous estimates, the change is accounted for as a change in accounting estimate on a prospective basis.

h. Impairment of non-financial assets-

Property, Plant and Equipment and Intangible Assets

At each balance sheet date, the Company reviews the carrying values of its property, plant and equipment and intangible assets to determine whether there is any indication that die carrying value of those assets may not be recoverable through continuing use. If any such indication exists, die recoverable, amount of the asset is reviewed in order to determine die extent of impairment loss (if any). Where the asset does not generate cash flows that arc independent from other assets, the Company estimates the recoverable amount of the cash generating unit (CGU) to wliich the asset belongs.

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 dieir 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 tor wliich the estimates of future cash flows have not been adjusted. An impairment loss is recognised in die statement of profit and loss as and when the carrying value of an asset exceeds its recoverable amount.

Where an impairment loss subsequendy reverses, the earning value of the asset (or CGU) is increased

to the revised estimate of its recoverable amount so that the increased carrying value does not exceed

the carrying value that would have been determined had no impairment loss been recognised for the

asset (or CGU) in nrijaEaaejus. A reversal of an impairment loss is recognised in the statement of profit

and loss immed

77. —X <f> \\

i. Financial Instruments

Financial assets and financial liabilities are recognised when a Company becomes a party to the contractual provisions of the instruments.

Initial Recognition:

Financial assets and financial 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 titan financial assets and financial liabilities at fair value through profit or loss and ancillary’ costs related to borrowings) 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 recognised immediately in Statement of Profit and Loss.

Classification and Subsequent Measurement: Financial Assets

'lhe Company classifies financial assets as subsequently measured at amortised cost, fair value through other comprehensive income (“FVOCI”) or fair value through profit or loss (“FVTPL”) on the basis of following:

• the entity’s business model for managing the financial assets and

• the contractual cash flow characteristics of the financial asset.

Amortised Cost (AC)

A financial asset shall be classified and measured at amortised cost if both of the following conditions are met:

• the financial asset is held within a business model whose objective is to hold financial 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 die principal amount outstanding.

Fair Value through Other Comprehensive Income (FVTOCI)

A financial asset shall be classified and measured at fair value through OCI if both of the following conditions are met:

• the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling 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 die principal amount outstanding.

Fair Value through Profit or Loss (FVTPL)

A financial asset shall be classified and measured at fair value through profit or loss unless it is measured at amortised cost or at fair value dirough OCI.

All recognised financial assets arc subsequently measured in dieir entirety at either amortised cost or fair value, depending on the classification of the financial assets.

The Company lias measured quoted equity’ instruments at fair value through profit or loss. Classification and Subsequent Measurement: Financial liabilities

Financial hrbihtics^feTcSsStfied as eidier financial liabilities at FVTPL or ‘other financial liabilities’.

Financial Liabilities at FVTPL

Financial liabilities arc classified as at FVTPL when the financial liability is held for trading or are designated upon initial recognition as FVTPL:

Gains or Losses on liabilities held for trading are recognised in the Statement of Profit and Loss.

Other Financial Liabilities

Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortised cost using the effective interest method.

The effective interest method is a method of calculating the amortised 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.

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment: at die end of each reporting period. The Company recognises a loss allowance for expected credit losses on financial asset. In case of trade receivables, the Company follows the simplified approach permitted by Ind AS 109 — Financial Instruments for recognition of impairment loss allowance. The application of simplified approach docs not require the Company to track changes in credit risk. The Company calculates the expected credit losses on trade receivables using a provision matrix on the basis of its historical credit loss experience.

Derecognition of financial assets

The Company derecognises a financial asset when the contractual rights to die cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of die 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 recognises 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, die Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss if such gain or loss would have otherwise been recognised in profit or loss on disposal of that financial asset.

Offsetting financial instruments

Financial assets and liabilities are offset and the net amount isreported in the balance sheet wherethere is a legally enforceable right to offset the recognised amounts and there is an intention to setdeonanetbasis or-realise the asset and settle the liability simultaneously.

j. Employee benefits Short term obligations

Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related sendee are recognised in respect of employees’ sendees 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 employee benefits obligations in die balance sheet.

Defined contribution plans

Payments to defined contribution plans are charged as an expense as thev fall due. Payments made to state managed retirement benefit schemes are dealt with as payments to defined contribution schemes where die Company’s obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme.

k. Inventories

Raw materials, stores and spares & traded goods are valued at lower of cost and net realizable value. However, material and other items held for use in the production of finished goods are not written down below cost if the finished products, in which they will be incorporated are expected to be sold at or above cost.

Work-in-progress and finished goods are valued at lower of cost and net realizable value. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Cost of finished goods includes excise duty and is determined on weighted average basis.

By-products are valued at estimated net realizable value.

Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

l. Provisions, Contingent liabilities and Contingent assets

A Provision is recognised when the company has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to setde the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses.

Provisions are measured at the present value of management’s best estimate of the expenditure required to setde the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of time value of money and the risks specific to the liability. The increase in the provision due to passage of time is recognised as interest expense.

A present obligation that arises from past events where it is cither not probable diat an outflow of resources will be required to setde or a reliable estimate of the amount: cannot be made, is disclosed as a contingent liability. Contingent liabilities are also disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by die occurrence or non -occurrence of one or more uugcdamTutiire events not wholly within the control of the Company.

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Contingent assets are not recognised in financial statements since this may result in the recognition of income that may never be realised. However, when the realisation of income is virtually certain, then the related asset is not a contingent asset and is recognised.

• m. Government grants

The Company recognizes government grants only when there is reasonable assurance that the conditions attached to them shall be complied with and the grants will be received. Grants related to assets are treated as deferred income and are recognized as other income in the Statement of Profit and Loss on a systematic and rational basis over the useful life of the asset. Grants related to income are recognized on a systematic basis over the periods necessary to match them with the related costs which they are intended to compensate and are deducted from die expense in the Statement of Profit and Loss

n. Non-current assets held for sale and discontinued operadons

Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying value and fair value less costs to sell.

Assets and disposal groups are classified as held for sale if their earning value will be recovered tlirough a sale transaction rather than through continuing use. This condition is onlv met when die sale is highly probable and the asset, or disposal group, is available for immediate sale in its present condition and is marketed for sale at a price that is reasonable in reladon to its current fair value. The Company must also be committed to the sale, which should be expected to qualify for recognition as a completed sale widiin one year from the date of classification.

Where a disposal group represents a separate major line of business or geographical area of operations, or is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations, then it is treated as a discontinued operation. The post-tax profit or loss of die discontinued operation together with the gain or loss recognised on its disposal are disclosed as a single amount in the statement of profit and loss, with all prior periods being presented on this basis.

o. Income taxes

Income tax expense represents the sum of die tax currcndy payable and deferred tax.

Current tax

Current tax includes income tax for Current Year atid adjustment for earlier year is die amount of tax payable based on the taxable profit for the period as determined in accordance with die applicable tax rates and the provisions of the Income Tax Act, 1961 and other applicable tax laws in the countries where the Company operates and generates taxable income.

Deferred tax

Deferred tax is recognised on temporary’ differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary' differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be ay'ailable against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary' difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that a^jj^gtcttl^r the taxable profit nor the accounting profit. In addition, deferred tax liabilities are temporary difference arises from the initial recognition of goodwill.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except whercdic Company is able to control the reversal of die temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to die extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of die temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred rax 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.

Minimum Alternate I’ax (MAT) paid in accordance with the tax law's, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognised as an asset in die Balance Sheet when it is highly probable that future economic benefit associated with it will flow to the Company.

Deferred tax assets and liabilities arc measured at the tax rates diat arc expected to apply in die period in which the liability is settled or the asset realised, based on tax rates (and tax law’s) that have been enacted or substantively enacted by die end of the reporting period.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and die deferred taxes relate to the same taxable entity and the same taxation authority.

Current and deferred tax for the year

Current and deferred tax arc recognised in profit or loss, except w’hen diey are relate to items that are recognised in other comprehensive income or direedy in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or direedy in equity respectively. Where current tax or deferred tax arises from die initial accounting for a business combination, the tax effect is included m die accounting for the business combination.

p. Revenue

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 net of discounts, taking into account contractually defined terms and excluding taxes or duties collected on behalf of the government

Goods & Sendee Tax (GST) has been implemented w.e.f. 1st July 2017. Consequendy, Central Excise, VAT, Service Tax etc. have been replaced by GST. GST, VAT, Service Tax etc are not included in Revenue from Operations. I Iowever, excise duty was included in Revenue from Operations till 30th June, 2017. Hence, reported revenue for the period up to 30th June, 2017 are not comparable with those thereafter.

Sale of goods

Revenue from the sale of goods is recognised when the significant risks and rewards of ownership have been transferred to die buyer, usually on delivery of the goods. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates.

Interest income

Interest income is accrued on a time proportion basis, by reference to the principal outstanding and the effective interest rate applicable.

Dividend income

Dividend income from investments is recognised when the shareholder’s rights to receive payment have been established.

q. Foreign currency transactions

The financial statements of the Company are presented in Indian rupees (?), which is the functional currency of the Company and the presentation currency for the financial statements.

In preparing the financial statements, transactions in currencies other than the Company’s functional currency are recorded at the rates of exchange prevailing on die date of the transaction. At the end of each reporting period, monetary items denominated in foreign currencies are re-translated at the rates prevailing at the end of the repordng period. Nonmonetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items diat are measured in terms of liistorical cost in a foreign currency are not translated.

Exchange differences arising on translation of long term foreign currency monetary items recognised in the financial statements before the beginning of the first Ind AS financial reporting period in respect of which the Company has elected to recognise such exchange differences in equity or as part of cost of assets as allowed under Ind AS 101-“First time adoption of Indian Accounting Standard” are recognised directly in equity or added/deducted to/ from the cost of assets as the case may be. Such exchange differences recognised in equity⁷ or as part of cost of assets is recognised in the statement of profit and loss on a systematic basis.

Exchange differences arising on the retranslation or settlement of other monetary items are included in die statement of profit and loss for the period.

r. Borrowing costs

Borrowings costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of die asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs dial an entity incurs in connection with die borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the interest costs.

s. Earnings per share

Basic earnings pier share is computed by dividing the net profit or loss for the period attributable to die equity shareholders of the Company by the weighted average number of equity shares outstanding during die pcnodxjFny A^fehted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares that have changed the number of equity shares outstanding, without a corresponding change in resources.

Diluted earnings per share is computed by dividing the profit / (loss) after tax as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares including the treasury shares held by the Company to satisfy the exercise of the share options by die employees.

t. Trade receivables

Trade receivables arc recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

u. Cash and cash equivalents

For the purpose of presentation in die statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with the financial institutions, other short term, highly liquid investments with original maturities of three mondis or less (except die instruments which are pledged) that arc 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.

v. Tradeand other payables

These amounts represent liabilities for goods and sendees provided to the company' prior to die end of financial year which are unpaid. The amounts are unsecured and are usually paid within the credit period allowed. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. Long term trade payables are recognised initially' at their fair value and subsequendy measured at amordsed cost using the effective interest method.

w. Segment reporting

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the company’s chief operating decision maker to make decisions for which discrete financial information is available. Based on the management approach as defined in lnd AS 108, the chief operating decision maker evaluates the Company’s performance and allocates resources based on an analysis of various performance business segments and geographic segments.