2 Material accounting policies
2.1 Revenue Recognition
Revenue from contracts with customers is recognised
when control of the goods or services are transferred to
the customer at an amount that reflects the consideration
entitled in exchange for those goods or services. Generally,
control is transferred at point in time, usually upon despatch
from Factory or upon shipment of goods to the customer or
when the goods is made available to the customer, provided
transfer of title to the customer occurs and the Company
has not retained any significant risks of ownership or future
obligations with respect to the goods shipped.
Revenue from rendering of services is recognised over time
by measuring the progress towards complete satisfaction of
performance obligations at the reporting period.
Revenue is measured at the amount of consideration which
the Company expects to be entitled to in exchange for
transferring distinct goods or services to a customer as
specified in the contract. Consideration is generally due upon
satisfaction of performance obligations and a receivable
is recognised when it becomes unconditional. Generally,
the credit period varies between 60 to 180 days from the
shipment or delivery of goods or services as the case may be
depending on product and geographic region.
Interest income from a financial asset is recognised 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 principle
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.
2.2 Property, Plant and Equipment ('PPE') and Capital
work-in-progress
Property, Plant and Equipment are stated at cost, net
of recoverable taxes, trade discount and rebates less
accumulated depreciation and impairment losses, if any.
Such cost includes purchase price, borrowing cost and
any cost directly attributable to bringing the assets to its
working condition for its intended use, net charges on foreign
exchange contracts and adjustments arising from exchange
rate variations attributable to the assets. In case of land the
Company has availed fair value as deemed cost on the date of
transition to Ind AS.
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 entity and the cost can be measured
reliably. Property, Plant and Equipment which are significant
to the total cost of that item of PPE and having different useful
life are accounted separately. Other Indirect Expenses incurred
relating to project, net of income earned during the project
development stage prior to its intended use, are considered
as pre-operative expenses and disclosed under Capital Work-
in-Progress.
Depreciation methods, estimated useful lives and
residual value
Depreciation on Property, Plant and Equipment is provided
using written down value method on depreciable amount.
Depreciation is provided based on useful life of the assets as
prescribed in Schedule II to the Companies Act, 2013.
The residual values, useful lives and methods of depreciation
of Property, Plant and Equipment are reviewed at each
financial year end and adjusted prospectively, if appropriate.
Gains or losses arising from derecognition of a Property, Plant
and Equipment are measured as the difference between the
net disposal proceeds and the carrying amount of the asset
and are recognised in the Statement of Profit and Loss when
the asset is derecognised.
Capital work-in-progress includes cost of property, plant and
equipment under installation / under development as at the
balance sheet date together with cost which are directly
attributable to it.
2.3 Leases
The Company, as a lessee, recognises a right- of-use asset and
a lease liability for its leasing arrangements, if the contract
conveys the right to control the use of an identified asset. The
contract conveys the right to control the use of an identified
asset, if it involves the use of an identified asset and the
Company has substantially all of the economic benefits from
use of the asset and has right to direct the use of the identified
asset. The cost of the right-of- use asset shall comprise of
the amount of the initial measurement of the lease liability
adjusted for any lease payments made at or before the
commencement date plus any initial direct costs incurred. The
right-of-use assets is subsequently measured at cost less any
accumulated depreciation, accumulated impairment losses, if
any and adjusted for any remeasurement of the lease liability.
The right-of-use assets is depreciated using the straight-line
method from the commencement date over the shorter of
lease term or useful life of right-of-use asset.
The Company measures the lease liability at the present value
of the lease payments that are not paid at the commencement
date of the lease. The lease payments are discounted using
the interest rate implicit in the lease, if that rate can be readily
determined. If that rate cannot be readily determined, the
Company uses incremental borrowing rate.
2.4 Intangible Assets
Intangible Assets are stated at cost of acquisition net
of recoverable taxes, trade discount and rebates less
accumulated amortisation/depletion and impairment losses,
if any. Such cost includes purchase price, borrowing costs,
and any cost directly attributable to bringing the asset to
its working condition for the intended use, net charges on
foreign exchange contracts and adjustments arising from
exchange rate variations attributable to the Intangible Assets.
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 entity and the cost can be measured
reliably. Other Indirect Expenses incurred relating to project,
net of income earned during the project development stage
prior to its intended use, are considered as pre-operative
expenses and disclosed under Intangible Assets Under
Development.
Gains or losses arising from de-recognition of an Intangible
Asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and
are recognised in the Statement of Profit and Loss when the
asset is derecognised.
2.5 Investments
Investments that are readily realisable and intended to be held
for not more than a year are classified as current investments.
All other investments are classified as long-term investments.
Long-term investments are carried at cost. However, provision
for diminution in value is made to recognise a decline, other
than temporary, in the value of the investments.
2.6 Research and Development Expenditure
Revenue expenditure pertaining to research is charged
to the Statement of Profit and Loss as and when incurred.
Development costs are capitalised as an intangible asset if it
can be demonstrated that the project is expected to generate
future economic benefits, it is probable that those future
economic benefits will flow to the entity and the costs of
the asset can be measured reliably, else it is charged to the
Statement of Profit and Loss.
2.7 Cash and Cash Equivalents
Cash and cash equivalents comprise of cash on hand, cash
at banks, short-term deposits and short-term, highly liquid
investments that are readily convertible to known amounts of
cash and which are subject to an insignificant risk of changes
in value.
2.8 Finance Costs
Borrowing costs that are directly attributable to the
acquisition or construction of qualifying assets are capitalised
as part of the cost of such assets. A qualifying asset is one that
necessarily takes substantial period of time to get ready for
its intended use. All other borrowing costs are charged to the
Statement of Profit and Loss for the period for which they are
incurred.
2.9 Inventories
I tems of inventories are measured at lower of cost and net
realisable value after providing for obsolescence, if any, except
in case of by-products which are valued at net realisable
value. Cost of inventories comprises of cost of purchase,
cost of conversion and other costs including manufacturing
overheads (being allocated on the basis of normal operating
capacity) net of recoverable taxes incurred in bringing them
to their respective present location and condition.
Cost of finished goods, work-in-progress, raw materials,
chemicals, stores and spares, packing materials, trading and
other products are determined on FIFO basis.
2.10 Impairment of Non-Financial Assets - Property, Plant
and Equipment and Intangible Assets
The Company assesses at each reporting date as to
whether there is any indication that any Property, Plant and
Equipment and Intangible Assets or group of Assets, called
Cash Generating Units (CGU) may be impaired. If any such
indication exists, the recoverable amount of an asset or CGU
is estimated to determine the extent of impairment, if any.
When it is not possible to estimate the recoverable amount
of an individual asset, the Company estimates the recoverable
amount of the CGU to which the asset belongs.
An impairment loss is recognised in the Statement of Profit
and Loss to the extent, asset's carrying amount exceeds its
recoverable amount. The recoverable amount is higher of an
asset's fair value less cost of disposal and value in use. Value in
use is based on the estimated future cash flows, discounted
to their present value using pre-tax discount rate that reflects
current market assessments of the time value of money and
risk specific to the assets. The impairment loss recognised in
prior accounting period is reversed if there has been a change
in the estimate of recoverable amount.
2.11 Borrowings:
Borrowings are initially recognized at fair value net oftransaction
cost incurred. Borrowings are subsequently measured at
amortized cost. Any difference between the proceeds (net of
transaction costs) and the redemption amount is recognized
in profit or loss over the period of the borrowings using the
effective interest method. Fees paid on the establishment of
loan facilities are recognized 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 the facility will be drawn down the
fee is capitalized as a pre -payment for liquidity services and
amortized 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. The difference between the carrying amount of a
financial liability that has been extinguished or transferred to
another party and the consideration paid, including any non¬
cash assets transferred or liabilities assumed is recognised in
profit or loss as other gains / (losses). Borrowings are classified
as current liabilities unless the group has an unconditional
right to defer settlement of the liability for at least 12 months
after the reporting period.
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