2(B) MATERIAL ACCOUNTING POLICY
A) Property, Plant and Equipment
Property, plant and equipment are stated at cost of acquisition or construction less accumulated depreciation
and impairment, if any. For this purpose, cost includes deemed cost which represents the carrying value of
property, plant and equipment recognised as at 1st April, 2016 measured as per the previous Generally Accepted
Accounting Principles (GAAP).
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. This recognition
principle is applied to the costs incurred initially to acquire an item of property, plant and equipment and also
to costs incurred subsequently to add to, replace part of, or service it. All other repair and maintenance costs,
including regular servicing, are recognised in the statement of profit and loss as incurred. When a replacement
occurs, the carrying value of the 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.
*Based on technical evaluation, the Management believes that the useful lives as given above best represent the
period over which Management expects to use these assets. Hence, the useful lives for these assets is different
from the useful lives as prescribed under Part C of Schedule II of the Companies Act 2013.
Property, plant and equipment are stated at cost, less accumulated depreciation and impairment. Cost includes
all direct costs and expenditures incurred to bring the asset to its working condition and location for its intended
use. Trial run expenses (net of revenue) are 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 the difference between the sale proceeds and
the carrying value of the asset, and is recognised in the statement of profit and loss.
B) Intangibles
Subsequent to initial recognition, intangible assets with definite useful lives are reported at cost less accumulated
amortisation and accumulated impairment losses.
C) Depreciation and amortisation of property, plant and equipment and intangible assets
(i) Depreciation is provided on prorata basis on straight line method at the rates determined based on
estimated useful lives of tangible assets where applicable, specified in Schedule II to the Act. These charges
are commenced from the dates the assets are available for their intended use and are spread over their
estimated useful economic lives 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. Depreciation
on assets under construction commences only when the assets are ready for their intended use.
(ii) Bearer Plants are depreciated from the date when they are ready for commercial harvest.
(iii) Leasehold Land is amortised over the tenure of respective leases.
D) Government Grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the
grant will be received and the Company will comply with all attached conditions.
Government grants relating to income are deferred and recognised in the profit or loss over the period necessary
to match them with the costs that they are intended to compensate and presented within other operating
income.
Government grants relating to the acquisition/ construction of property, plant and equipment are included in
non-current liabilities as deferred income and are credited to profit or loss on a straight-line basis over the
expected lives of the related assets and presented within other operating income.
E) Impairment
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 the carrying value of those assets may not
be recoverable through continuing use. If any such indication exists, the recoverable amount of the asset is
reviewed in order to determine the extent of impairment loss (if any). Where the asset does not generate cash
flows that are independent from other assets, the Company estimates the recoverable amount of the cash
generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset for which the estimates
of future cash flows have not been adjusted. An impairment loss is recognised in the statement of profit and loss
as and when the carrying value of an asset exceeds its recoverable amount.
Where an impairment loss subsequently reverses, the carrying value of the asset (or cash generating unit) 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
cash generating unit) in prior years. A reversal of an impairment loss is recognised in the statement of profit and
loss immediately.
F) Leases
The Company determines whether an arrangement contains a lease by assessing whether the fulfilment of a
transaction is dependent on the use of a specific asset and whether the transaction conveys the right to use that
asset to the Company in return for payment. Where this occurs, the arrangement is deemed to include a lease
and is accounted for either as finance or operating lease.
Leases are classified as finance leases where the terms of the lease transfers substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases.
The Company as lessee
(i) 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 asset are consumed.
Contingent rentals arising under operating leases are recognised as an expense in the period in which they
are incurred. In the event that lease incentives are received to enter into operating leases, such incentives
are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental
expense on a straight line basis, except where another systematic basis is more representative of the time
pattern in which economic benefits from the leased asset are consumed.
(ii) Finance lease - Finance leases are capitalised at the commencement of lease, at the lower of the fair
value of the property or the present value of the minimum lease payments. The corresponding liability to
the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned
between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest
on the remaining balance of the liability. Finance charges are recognised in the statement of profit and loss
over the period of the lease.
G) Financial instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual
provisions of the instrument. Financial assets and liabilities are initially measured at fair value. Transaction costs
that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than
financial assets and financial liabilities at fair value through profit and loss) are added to or deducted from the
fair value measured on initial recognition of financial asset or financial liability. The transaction costs directly
attributable to the acquisition of financial assets and financial liabilities at fair value through profit and loss are
immediately recognised in the statement of profit and loss.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial instrument and of
allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly
discounts future cash receipts or payments through the expected life of the financial instrument, or where
appropriate, a shorter period.
a) Financial assets
Cash and bank balances
Cash and bank balances consist of:
Financial assets at amortised cost
Financial assets are subsequently measured at amortised cost if these financial assets are held within a business
model whose objective is to hold these assets in order to collect contractual cash flows and the contractual
terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
Financial assets measured at fair value
Financial assets are measured at fair value through other comprehensive income if these financial assets are
held within a business model whose objective is to hold these assets in order to collect contractual cash flows or
to sell these financial assets and the contractual terms of the financial asset give rise on specified dates to cash
flows that are solely payments of principal and interest on the principal amount outstanding.
The Company in respect of equity investments (other than in subsidiaries, associates and joint ventures) which
are not held for trading has made an irrevocable election to present in other comprehensive income subsequent
changes in the fair value of such equity instruments. Such an election is made by the Company on an instrument
by instrument basis at the time of initial recognition of such equity investments.
Financial asset not measured at amortised cost or at fair value through other comprehensive income is carried
at fair value through the statement of profit and loss.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and
recognition of impairment loss on the following financial assets:
• Financial assets that are debt instruments, and are measured at amortised cost e.g., loans, debt securities,
deposits and trade receivables
• Financial assets that are debt instruments and are measured as at FVTOCI
• Trade receivables or any contractual right to receive cash or another financial asset that result from
transactions that are within the scope of Ind AS 18.
The Company follows 'simplified approach' for recognition of impairment loss allowance on trade receivables.
The application of simplified approach does not require the Company to track changes in credit risk. Rather,
it recognises impairment loss allowance based on lifetime ECLs at each reporting date, right from its initial
recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that
whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not
increased significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased
significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that
there is no longer a significant increase in credit risk since initial recognition, the Company reverts to recognising
impairment loss allowance based on 12-month ECL.
Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a
financial instrument. The 12-month ECL is a portion of the lifetime ECL which results from default events that are
possible within 12 months after the reporting date. ECL is the difference between all contractual cash flows that
are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive
(i.e., all cash shortfalls), discounted at the original EIR.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/expense in the
statement of profit and loss. This amount is reflected under the head 'other expenses' in the statement of profit
and loss. The balance sheet presentation for various financial instruments is described below:
Financial assets measured as at amortised cost: ECL is presented as an allowance, i.e., as an integral part of the
measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the
asset meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying
amount.
Debt instruments measured at FVTOCI: Since financial assets are already reflected at fair value, impairment
allowance is not further reduced from its value. Rather, ECL amount is presented as 'accumulated impairment
amount' in the OCI.
For assessing increase in credit risk and impairment loss, the Company combines financial instruments on the
basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable
significant increases in credit risk to be identified on a timely basis.
The Company does not have any purchased or originated credit-impaired (POCI) financial assets, i.e., financial
assets which are credit impaired on purchase/ origination.
Derecognition of financial assets
The Company de-recognises a financial asset only when the contractual rights to the cash flows from the asset
expire, or it transfers the financial asset and substantially all risks and rewards of ownership of the asset to
another entity.
If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues
to control the transferred asset, the Company recognises its retained interest in the assets and an associated
liability for amounts it may have to pay.
If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset,
the Company continues to recognise the financial asset and also recognises a collateralised borrowing for the
proceeds received.
b) Financial liabilities and equity instruments
Classification as debt or equity
Financial liabilities and equity instruments issued by the Company are classified according to the substance
of the contractual arrangements entered into and the definitions of a financial liability and an equity
instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after
deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue
costs.
Financial Liabilities
Trade and other payables are initially measured at fair value, net of transaction costs, and are subsequently
measured at amortised cost, using the effective interest rate method where the time value of money is
significant.
Interest bearing bank loans, overdrafts and issued debt are initially measured at fair value and are
subsequently measured at amortised cost using the effective interest rate method. Any difference between
the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over
the term of the borrowings in the statement of profit and loss.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company's obligations are
discharged, cancelled or they expire.
Derivative financial instruments
In the ordinary course of business, the Company uses certain derivative financial instruments to reduce
business risks which arise from its exposure to foreign exchange and interest rate fluctuations. The
instruments are confined principally to forward foreign exchange contracts and interest rate swaps. The
instruments are employed as hedges of transactions included in the financial statements or for highly
probable forecast transactions/firm contractual commitments. These derivatives contracts do not generally
extend beyond six months except for interest rate derivatives.
Derivatives are initially accounted for and measured at fair value from the date the derivative contract is
entered into and are subsequently re-measured to their fair value at the end of each reporting period.
H) Employee benefits
Defined contribution plans
Payments to defined contribution plans are charged as an expense as they fall due. Payments made to state managed
retirement benefit schemes are dealt with as payments to defined contribution schemes where the Company's
obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme.
Defined benefit plans
For defined benefit retirement schemes the cost of providing benefits is determined using the Projected Unit Credit
Method, with actuarial valuation being carried out at each balance sheet date. Re-measurement gains and losses of
the net defined benefit liability/(asset) are recognised immediately in other comprehensive income. The service cost
and net interest on the net defined benefit liability/(asset) is treated as a net expense within employment costs.
Past service cost is recognised as an expense when the plan amendment or curtailment occurs or when any related
restructuring costs or termination benefits are recognised, whichever is earlier.
The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit
obligation as reduced by the fair value plan assets.
Compensated absences
Compensated absences which are not expected to occur within twelve months after the end of the period in which
the employee renders the related service are recognised based on actuarial valuation at the present value of the
obligation as on the reporting date.
I) Inventories
a) Stock of Tea is valued at lower of cost computed on annual average basis or net realisable value. Stock of Tea
Waste is valued at estimated realisable value.
b) Stock of stores and spares are valued at cost on weighted average basis or net realisable value.
c) As per practice followed by the Company the value of green leaf in stock as at the close of the year are not taken
into accounts.
d) Provision is made for obsolete and slow moving stores wherever necessary.
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