1.3 Material accounting policies
A Revenue recognition
(i) Revenue from Amines Division
Revenue from contract with customers
Revenue is recognised when the performance obligations have
been satisfied, which is once control of the goods and services
are transferred from the Company to the customer.
Revenue related to the sale of goods and services is
recognised when the product or service is delivered to the
destination specified by the customer, and the customer
has gained control through their ability to direct the use
of and obtain substantially all the benefits from the asset.
Revenue is measured based on consideration specified in the
contract with a customer which is measured at the fair value
of the consideration received or receivable, net of returns and
allowances, trade discounts and volume rebates and excludes
amounts collected on behalf of third parties.
(ii) Revenue from Hotel Division
Rooms, Food and Beverage and Banquets: Revenue
is recognised at the transaction price that is allocated
to the performance obligation. Revenue includes room
revenue, food and beverage sale and banquet services
which is recognised once the rooms are occupied, food
and beverages are sold and banquet services have been
provided as per the contract with the customer. Advance, if
any, received against room bookings are treated as a liability
pending finalization of bill / provision of services.
Space and shop rentals: Rentals basically consists of rental
revenue earned from letting of spaces for retails and office
at the properties. These contracts for rentals are generally of
short-term in nature. Revenue is recognised in the period in
which services are being rendered.
(iii) Recognition of interest income and export benefits
Interest income is recognized on accrual basis taking into
account the amount outstanding and rate applicable.
Rental income from investment properties is recognised on a
straight line basis over the term of the relevant leases.
Pending export obligation is recognised and disclosed as
non-current liability in the Balance Sheet and transferred to the
Statement of Profit and Loss upon satisfaction of obligation and
where there is no significant uncertainty regarding compliance
with the terms and conditions of such scheme.
B Property, plant and equipment (PPE)
Property, plant and equipment acquired by the company
are carried at acquisition cost less accumulated depreciation
and accumulated impairment losses, if any. The acquisition
cost for this purpose includes the purchase price (net
of duties and taxes which are recoverable in future) and
expenses directly attributable to the asset to bring it to
the site and in the working condition for its intended use.
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. All other repairs and maintenance are
charged to statement of profit and loss during the reporting
period in which they are incurred.
An item of property, plant and equipment is derecognized
upon disposal or when no future economic benefits are
expected to arise from its use.
Difference between the sales proceeds and the carrying
amount of the asset is recognized in the statement of profit
and loss.
The catalyst is an asset that facilitates the process that increases
the future economic benefits and output efficiency expected
from the plant.
Land allotted by MIDC on long lease basis is treated as "Lease
Hold Land" on the basis of possession leaser from MIDC (the
Lessor), The one-time lump sum premium paid at the time of
allotment is amortized over the period of the lease. i.e. 99-year
lease for Unit III and 95-year lease for Unit IV.
C Capital work-in-progress
Capital work-in-progress is carried at cost less impairment loss,
if any. It comprises of property, plant and equipment that are
not yet ready for their intended use at the reporting date.
D Research and Development Expenditure
Expenditure on research is charged to Statement of profit
and loss in the year in which it is incurred. Expenditure during
development phase is capitalised as intangible assets subject
to fulfillment of recognition criteria given under para 57 of
Ind AS 38
E Investment Property
Investment property are the properties held to earn rentals
and/or for capital appreciation (including property under
construction for such purposes). Investment properties
are measured initially at cost, including transaction costs.
Subsequent to initial recognition, investment properties are
measured at cost model which is in accordance with Ind AS 40.
An investment property is derecognised upon disposal or when
the investment property is permanently withdrawn from use and
no further economic benefits expected from disposal. Any gain
or loss arising on derecognition of the property is included in
profit or loss in the period in which the property is derecognised.
Depreciation on building is provided over its useful life of 30
years using the Straight Line Method.
F Expenditure during construction period
Expenditure during construction period (including finance cost
related to borrowed funds for construction or acquisition of
qualifying PPE) is included under Capital Work-in-Progress and
the same is allocated to the respective PPE on the completion
of their construction. Advances given towards acquisition
or construction of PPE outstanding at each reporting date
are disclosed as Capital Advances under "Other non-current
Assets".
G Depreciation and Amortisation
Depreciation is the systematic allocation of the depreciable
amount of PPE over its useful life and is provided on the straight
line method over the useful lives as prescribed in Schedule II to
the Act.
Depreciable amount for assets is the cost of an asset, or
other amount substituted for cost, less its estimated residual
value. Depreciation is recognised so as to write off the cost
of assets (other than freehold land and properties under
construction) less their residual values over their useful lives,
using straight-line method as per the useful life prescribed in
Schedule Il to the Companies Act, 2013.
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.
An asset's carrying amount written down immediately
to its recoverable amount if the asset's carrying amount
is greater than its estimated recoverable amount.
Catalyst is depreciated over the useful life estimated by
Management.
H Government grants / subsidies
The company may receive government grants that require
compliance with certain conditions related to the company's
operating activities (or) are provided to the company by way
of financial assistance on the basis of certain qualifying criteria.
Government grants are recognised when there is reasonable
assurance that the grant will be received upon the company
complying with the conditions attached to the grant.
Accordingly, the government grants by way of financial
assistance on the basis of certain qualifying criteria are
recognised in the statement of profit and loss as they become
receivable.
I Leases
As a Lessor:
Leases for which the Company is a lessor is classified as a
finance or operating lease. Whenever the terms of the lease
transfer substantially all the risks and rewards of ownership to
the lessee, the contract is classified as a finance lease. All other
leases are classified as operating leases.
When the Company is an intermediate lessor, it accounts for
its interests in the head lease and the sublease separately.
The sublease is classified as a finance or operating lease by
reference to the right-of-use asset arising from the head lease.
Operating lease - Rentals payable under operating leases
are charged to the statement of profit and loss on a straight
line basis over the term of the relevant lease unless another
systematic basis is more representative of the time pattern in
which economic benefits from the leased assets are utilised.
As a Lessee:
The Company assesses whether a contract contains a lease, at
inception of a contract. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified
asset for a period of time in exchange for consideration.
To assess whether a contract conveys the right to control the
use of an identified asset, the company assesses whether:
(1) The Contract involves the use of an identified asset;
(2) The Company has substantially all the economic benefits
from use of the asset through the period of the lease and
(3) The Company has the right to direct the use of the asset.
The Company recognizes a right-of-use asset ("ROU") and a
corresponding lease liability for all lease arrangements in which
it is a lessee, except for leases with a term of twelve months
or less (short-term leases) and low value leases. For these
short-term and low value leases, the Company recognizes the
lease payments as an operating expense on a straight-line basis
over the term of the lease. Certain lease arrangements includes
the options to extend or terminate the lease before the end of
the lease term. ROU assets and lease liabilities includes these
options when it is reasonably certain that they will be exercised.
The right-of-use assets are initially recognized at cost, which
comprises the initial amount of the lease liability adjusted for any
lease payments made at or prior to the commencement date of
the lease plus any initial direct costs less any lease incentives.
They are subsequently measured at cost less accumulated
depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement
date on a straight-line basis over the balance lease term of
the underlying asset. Right of use assets are evaluated for
recoverability whenever events or changes in circumstances
indicate that their carrying amounts may not be recoverable.
The lease liability is initially measured at amortized cost at the
present value of the future lease payments. The lease payments
are discounted using the interest rate implicit in the lease or,
if not readily determinable, using the incremental borrowing
rates in the country of domicile of the leases. Lease liabilities are
re-measured with a corresponding adjustment to the related
right of use asset if the company changes its assessment if
whether it will exercise an extension or a termination option.
Lease liability and ROU asset shall be separately presented in
the Balance Sheet and lease payments shall be classified as
financing cash flows.
The company has applied Ind AS 116 using the modified
retrospective approach and therefore the comparative
information has not been restated and continues to be
reported under Ind AS 17.
Operating lease - Rentals payable under operating leases
are charged to the statement of profit and loss on a straight
line basis over the term of the relevant lease unless another
systematic basis is more representative of the time pattern in
which economic benefits from the leased assets are utilised.
J Employee benefits:
Short-term employee benefits
Wages and salaries, including non-monetary benefits that are
expected to be settled 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 employee benefit obligations in the
balance sheet.
Long-term employee benefits
Defined benefit plan - Other long-term employee
benefit obligations
The liabilities for earned leave is 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 at the present value of expected future payments to
be made 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 at
the end of the reporting period that have terms approximating
to the terms of the related obligations. Remeasurements as a
result of the experience adjustments and changes in actuarial
assumptions are recognized in profit or loss.
The obligations are presented as current liabilities in the
balance sheet if the entity does not have an unconditional
right to defer settlement for at least twelve months after the
reporting period, regardless of when the actual settlement is
expected to occur.
Defined benefit plan - Gratuity obligation
The liability or assets recognized in the balance sheet in respect
of gratuity 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 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 benefit
expense in the statement of profit and loss. Remeasurement
gains and losses arising from experience adjustments and
changes in actuarial assumptions are recognized in the period
in which they occur, directly in other comprehensive income.
They are included in retained earnings.
Changes in the present value of the defined benefit obligation
resulting from plan amendments or curtailments are
recognized immediately in profit or loss. The gratuity liability is
covered through a recognized Gratuity Fund managed by Life
Insurance Corporation of India.
Defined contribution plans
Contributions to post employment benefit plans in the form
of provident fund, employee state insurance scheme and
pension scheme as per regulations are charged as an expense
on accrual basis when employees have rendered the service.
The Company has no further payment obligations once the
contributions have been paid.
K Tax expenses
Accounting treatment in respect of deferred taxation and
current tax is in accordance with Indian Accounting Standard
12 (Ind AS 12) - "Income Taxes"
Tax expense for the year comprises current and deferred tax.
Current Tax is the amount of tax payable on the taxable
income for the year as determined in accordance with the
applicable tax rates and the provisions of the Income-tax Act,
1961 and other applicable tax laws that have been enacted or
substantively enacted by the end of the reporting period.
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 available against which those deductible
temporary differences can be utilised. Such deferred tax assets
and liabilities are not recognised if the temporary differences
arise from the initial recognition (other than in a business
combination) of assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit. In addition,
deferred tax liabilities are not recognised if the temporary
difference arises from the initial recognition of goodwill.
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 assets and liabilities are measured at the tax rates
that are expected to apply in the period in which the liability is
settled or the asset realised, based on tax rates (and tax laws)
that have been enacted or substantively enacted by the end
of the reporting period.
Tax relating to items recognized directly in equity or other
comprehensive income is recognised in equity or other
comprehensive income and not in the Statement of Profit and Loss.
Deferred tax assets and liabilities are offset if there is a legally
enforceable right to offset current tax liabilities and assets,
and they are related to income taxes levied by the same tax
authority, but they intend to settle current tax liabilities and
assets on a net basis or their tax assets and liabilities will be
realized simultaneously.
L Inventories
Raw materials, packing materials, stores and spares, and
other consumables are valued at cost or net realizable value,
whichever is lower. Cost comprises of basic cost (net of GST,
if any) and other costs incurred in bringing them to their
respective present location and condition. Cost is determined
on a First-in-First Out basis.
Work-in-Progress and finished goods are valued at cost or net
realizable value, whichever is lower. Cost includes all direct
costs and a proportion of other fixed manufacturing overheads
based on normal operating capacity.
Food & Beverages:
Groceries and beverages are valued at cost which is determined
on weighted average basis.
M Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash
at banks and on hand and short-term deposits with an original
maturity of not more than three months, which are subject to
an insignificant risk of changes in value.
N 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.
Transactions in foreign currencies are recorded at the exchange
rates prevailing on the date of transaction. Foreign currency
monetary assets and liabilities such as cash, receivables,
payables, etc., are translated at year end exchange rates.
Exchange differences arising on settlement of transactions
and translation of monetary items are recognised as income
or expense in the year in which they arise.
O Impairment of Assets
(i) Impairment of financial instruments
The Company assesses at each reporting date whether
a financial asset (or a group of financial assets)
such as investments, trade receivables, advances
and security deposits held at amortised cost and financial assets
that are measured at fair value through other comprehensive
income are tested for impairment based on evidence or
information that is available without undue cost or effort.
Expected credit losses are assessed and loss allowances
recognised if the credit quality of the financial asset has
deteriorated significantly since initial recognition.
(ii) Impairment of non-financial assets
Impairment loss, if any, is provided to the extent, the carrying
amount of assets or cash generating units exceed their
recoverable amount. Recoverable amount is higher of an
asset's net selling price and its value in use. Value in use is the
present value of estimated future cash flows expected to arise
from the continuing use of an asset or cash generating unit and
from its disposal at the end of its useful life. Impairment losses
recognised in prior years are reversed when there is an
indication that the impairment losses recognised no longer
exist or have decreased. Such reversals are recognised as an
increase in carrying amounts of assets to the extent that it
does not exceed the carrying amounts that would have been
determined (net of amortization or depreciation) had no
impairment loss been recognised in previous years.
P Earnings Per Share
Basic Earnings Per Share ('EPS') is computed by dividing the net
profit attributable to the equity shareholders by the weighted
average number of equity shares outstanding during the
year. Diluted earnings per share is computed by dividing the
net profit by the weighted average number of equity shares
considered for deriving basic earnings per share and also the
weighted average number of equity shares that could have
been issued upon conversion of all dilutive potential equity
shares. Dilutive potential equity shares are deemed converted
as of the beginning of the year, unless issued at a later date.
In computing diluted earnings per share, only potential equity
shares that are dilutive and that either reduces earnings per
share or increases loss per share are included.
Q Financial instruments
A financial instrument is any contract that gives rise to a
Financial Asset of one entity and Financial liability or equity
instrument of another entity.
(i) Initial measurement and recognition
Financial assets and financial liabilities are initially recognised
when the Company becomes a party to the contractual
provisions of the instrument. A financial asset or financial
liability is initially measured at fair value plus, for an item not at
fair value through profit and loss (FVTPL), transaction costs that
are directly attributable to its acquisition or issue.
(ii) Classification and subsequent measurement
Financial assets
All financial assets except Trade receivables are initially
measured at fair value plus, for an item not at fair value through
profit and loss (FVTPL), transaction costs that are directly
attributable to its acquisition or issue.
(iii) Subsequent measurement
For the purpose of subsequent measurement, financial assets
are categorised as under:
- amortised cost;
- Fair Value through Other Comprehensive Income (FVOCI)
- equity investment; or
- Fair Value Through Profit or Loss (FVTPL)
Financial assets are not reclassified subsequent to their initial
recognition, except if and in the period the Company changes
its business model for managing financial assets.
A financial asset is measured at amortised cost if it meets both
of the following conditions and is not designated as at FVTPL:
- the asset is held within a business model whose objective
is to hold assets 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.
On initial recognition of an equity investment that is not held
for trading, the Company may irrevocably elect to present
subsequent changes in the investment's fair value in OCI
(designated as FVOCI - equity investment). This election is
made on an investment-by-investment basis.
All financial assets not classified as measured at amortised
cost or FVOCI as described above are measured at FVTPL.
This includes all derivative financial assets. On initial recognition,
the Company may irrevocably designate a financial asset
that otherwise meets the requirements to be measured at
amortised cost or at FVOCI as at FVTPL if doing so eliminates
or significantly reduces an accounting mismatch that would
otherwise arise.
Financial assets at FVTPL: These assets are subsequently
measured at fair value. Net gains and losses, including any
interest or dividend income, are recognised in profit or loss.
Financial assets at amortised cost: These assets are
subsequently measured at amortised cost using the effective
interest method. The amortised cost is reduced by impairment
losses. Interest income, foreign exchange gains and losses and
impairment are recognised in profit or loss. Any gain or loss on
derecognition is recognised in profit or loss.
Equity investments at FVOCI: These assets are subsequently
measured at fair value. Dividends are recognised as income in
profit or loss unless the dividend clearly represents a recovery
of part of the cost of the investment. Other net gains and losses
are recognised in OCI and are not reclassified to profit or loss.
Financial Liabilities:
Financial liabilities are classified as measured at amortised
cost or FVTPL. A financial liability is classified as at FVTPL if
it is classified as held-for-trading, or it is a derivative or it is
designated as such on initial recognition. Financial liabilities
at FVTPL are measured at fair value and net gains and losses,
including any interest expense, are recognised in statement
of profit or loss. Other financial liabilities are subsequently
measured at amortised cost using the effective interest
method. Interest expense and foreign exchange gains and
losses are recognised in statement of profit or loss.
Derecognition - Financial assets
A Financial asset is primarily derecognised when the right to
receive the contractual cash flows in a transaction in which
substantially all of the risks and rewards of ownership of the
financial asset are transferred or in which the Company neither
transfers nor retains substantially all of the risks and rewards of
ownership and does not retain control of the financial asset.
If the Company enters into transactions whereby it transfers
assets recognised on its balance sheet, but retains either all
or substantially all of the risks and rewards of the transferred
assets, the transferred assets are not derecognised.
Derecognition - Financial liabilities
The Company derecognises a financial liability when its
contractual obligations are discharged or cancelled, or expired.
The Company also derecognises a financial liability when its
terms are modified and the cash flows under the modified
terms are substantially different. In this case, a new financial
liability based on the modified terms is recognised at fair value.
The difference between the carrying amount of the financial
liability extinguished and the new financial liability with
modified terms is recognised in profit or loss.
Financial Instruments Offsetting
Financial assets and financial liabilities are offset and the net
amount reported in the balance sheet if there is a currently and
legally enforceable right to set off the amounts and it intends
either to settle them on a net basis or to realise the asset and
settle the liability simultaneously.
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