2. MATERIAL ACCOUNTING POLICIES
a) Statement of Compliance
These financial statements have been prepared in accordance with the Indian Accounting Standards (hereinafter referred
to as the 'Ind AS') as notified by Ministry of Corporate Affairs pursuant to section 133 of the Companies Act, 2013 read
with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards)
Amendment Rules, 2016.
b) Basis of Preparation
The financial statements have been prepared on accrual and going concern basis and under the historical cost convention
with the exception of certain assets and liabilities that are required to be carried at fair values as per Ind AS.
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.
All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and
other criteria as set out in the Division II of Schedule III to the Companies Act, 2013. Based on the nature of products and
the time between acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has
ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities.
c) Use of estimates and critical accounting judgements
In preparation of the financial statements, the Company makes judgements, estimates and assumptions about the
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 the period in which the estimate is revised and future periods affected.
Significant judgements and estimates relating to the carrying values of assets and liabilities includes useful lives of property,
plant and equipment and intangible assets, impairment of property, plant and equipment, intangible assets and investments,
provisions for employee benefits and other provisions, recoverability of deferred tax assets, commitments and contingencies.
d) Property, Plant and Equipment
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. Property, plant and equipment are
carried at cost, less accumulated depreciation and impairment. Cost of an item of property, plant and equipment is the cash
price equivalent at the recognition date; if payment is deferred beyond normal credit terms, the difference between cash
price equivalent and the total payment is recognized as interest over the period of credit. 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. Capital work-in-progress comprises the cost of fixed assets that are not ready for their intended use at the
reporting date.
Property, plant and equipment includes spare parts, stand-by equipment and servicing equipment which are expected to be
used for a period more than twelve months and meets the recognition criteria of plant, property and equipment.
Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future
economic benefits associated with these will flow to the Company and the costs to the item can be measured reliably. Repairs
and maintenance costs are recognized in the statement of profit and loss as incurred. The cost and related accumulated
depreciation are eliminated from the financial statements upon sale or retirement of the asset and the resultant gain or
losses are recognized in the statement of profit and loss.
e) Intangible assets
Intangible assets are recognised, only if it is probable that the future economic benefits that are attributable to the assets
will flow to the enterprise and the cost of the assets can be measured reliably. The intangible assets are carried at cost less
accumulated amortisation and accumulated impairment losses, if any.
f) Depreciation and amortization of property, plant and equipment and intangible assets
Depreciation on property, plant and equipment is provided to the extent of depreciable amount on pro-rata basis over
the useful life of respective assets as prescribed under schedule-ll to the Companies Act, 2013. The estimated useful life,
residual value and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in
estimates accounted for on prospective basis.
a. On straight-line method in respect of
i) Buildings of Paper machine-ll, Ill, IV, ETP-ll, Power Generation Unit-ll & Ill at Balasore.
ii) Plant & machinery of Paper Machine Ill, IV, ETP-ll, Power Generation unit-ll & Ill at Balasore.
b. On written down value method in respect of other assets.
c. Leasehold land is amortised over the period of lease.
d. Software licenses are amortised over the period of license.
Freehold land is not depreciated.
Addition to an asset, is depreciated over the remaining useful life of that asset, except when such addition retains a separate
identity and is capable of being used after the asset is disposed of, such additions are depreciated independently over its own
useful life.
Depreciable value of fixed asset is its cost of acquisition as reduced by estimated residual value.
g) Inventories
a. Finished goods, stock-in-process, raw materials, stores, chemicals and spare parts are valued at lower of cost or net
realisable value. Costs comprise direct materials and, where applicable, direct labour costs and those overheads that
have been incurred in bringing the inventories to their present location and condition. Net realisable value is the price
at which the inventories can be realised in the normal course of business after allowing for the cost of conversion from
their existing state to a finished condition and for the cost of marketing, selling and distribution.
b. Valuation of inventory is done under weighted average cost formula.
c. Inventories do not include items of spare parts which meets the recognition criteria of plant, property and equipment
and be treated as such.
Provisions are made to cover slow moving and obsolete items based on historical experience.
h) Cash and Cash Equivalents
Cash and cash equivalents includes cash in hand, demand deposits with banks, other short term highly liquid investments
with original maturities of three months or less.
i) Financial Instruments
Financial Assets:
Financial assets are recognised when the Company becomes a party to the contractual provisions of the instrument. On
initial recognition, a financial asset is recognised at fair value, in case of financial assets which are recognised at fair value
through profit and loss (FVTPL), its transaction cost are recognised in the statement of profit and loss. In other cases, the
transaction cost are attributed to the acquisition value of the financial asset.
Financial assets are subsequently classified as measured at
Ý amortised cost
Ý fair value through profit and loss (FVTPL)
Ý fair value through other comprehensive income (FVOCI).
Financial assets are not reclassified subsequent to their recognition, except if and in the period the Company changes its
business model for managing financial assets.
Trade Receivables:
A Receivable is classified as a 'trade receivable' if it is in respect to the amount due from customers on account of goods sold
or services rendered in the ordinary course of business. Trade receivables are initially recognized at transaction price, and
subsequently measured at amortized cost by providing loss allowance at an amount equal to lifetime expected credit losses.
For some trade receivables the Company may obtain security in the form of guarantee, security deposit or letter of credit
which can be called upon if the counterparty is in default under the terms of the agreement.
The company recognizes loss allowance on trade receivable, which does not contain a significant financing component, using
"simplified approach” at an amount equal to Lifetime Expected Credit Loss (ECL) considering the risk or probability that a
credit loss may occur, even if the possibility of a credit loss occurring is very low, time value of money based on reasonable
and supportable information that are available.
Loss allowances on trade receivable are recognized in the Statement of Profit and Loss within other expenses.
Debt Instruments:
Debt instruments are initially measured at amortised cost, fair value through other comprehensive income ('FVOCI') or
fair value through profit or loss ('FVTPL) till derecognition on the basis of (i) the entity's business model for managing the
financial assets and (ii) the contractual cash flow characteristics of the financial asset.
a) Measured at amortised cost:
Financial assets that are held within a business model whose objective is to hold financial assets in order to collect
contractual cash flows that are solely payments of principal and interest, are subsequently measured at amortised cost
using the effective interest rate ('EIR') method less impairment, if any. The amortisation of EIR and loss arising from
impairment, if any is recognised in the Statement of Profit and Loss.
b) Measured at fair value through other comprehensive income:
Financial assets that are held within a business model whose objective is achieved by both, selling financial assets and
collecting contractual cash flows that are solely payments of principal and interest, are subsequently measured at fair
value through other comprehensive income. Fair value movements are recognized in the other comprehensive income
(OCI). Interest income measured using the EIR method and impairment losses, if any are recognised in the Statement of
Profit and Loss. On derecognition, cumulative gain or loss previously recognised in OCI is reclassified from the equity to
'other income' in the Statement of Profit and Loss.
c) Measured at fair value through profit or loss:
A financial asset not classified as either amortised cost or FVOCI, is classified as FVTPL. Such financial assets are
measured at fair value with all changes in fair value, including interest income and dividend income if any, recognised as
'other income' in the Statement of Profit and Loss.
Equity Instruments:
All Investments In equity Instruments classified under financial assets are measured at fair value. The company In respect of
equity investments, which are not held for trading made an irrevocable election based on its judgment to present in other
comprehensive income subsequent changes in the fair value (FVOCI) of such equity instrument.
The Company makes such election on an instrument-by-instrument basis. Fair value changes on an equity instrument Is
recognised as other Income In the Statement of Profit and Loss unless the Company has elected to measure such Instrument
at FVOCI. Fair value changes excluding dividends, on an equity Instrument measured at FVOCI are recognised In OCI.
Amounts recognised In OCI are not subsequently reclassified to the Statement of Profit and Loss. Dividend Income on the
Investments In equity Instruments are recognised as 'other Income' In the Statement of Profit and Loss.
Derecognition
The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or
It transfers the contractual rights to receive the cash flows from the asset.
Impairment of Financial Asset
Expected credit losses are recognized for all financial assets subsequent to Initial recognition other than financials assets In
FVTPL category.
For financial assets other than trade receivables, as per Ind AS 109, the Company recognises 12 month expected credit
losses for all originated or acquired financial assets If at the reporting date the credit risk of the financial asset has not
Increased significantly since Its Initial recognition. The expected credit losses are measured as lifetime expected credit losses
If the credit risk on financial asset Increases significantly since Its Initial recognition. The Company's trade receivables do not
contain significant financing component and loss allowance on trade receivables Is measured at an amount equal to life time
expected losses i.e. expected cash shortfall.
The Impairment losses and reversals are recognised In Statement of Profit and Loss.
Financial Liabilities and Equity Instruments:
Classification as debt or equity
Debt 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. While equity Instruments
are Issued to extinguish all or part of a financial a financial liability, those are recognized at the fair value of the equity
Instrument Issued.
Preference shares
Preference shares Issued by the company are considered as equity when those are convertible either mandatorily or at the
option of the company Into pre-determined fixed number of equity shares of the company. In all other cases, preference
shares are classified as debt.
Contingent settlement conditions If any attached with the preference shares that may require redemption of preference
shares In cash, are evaluated according to the substance of the conditions as well as considering operation, performance
and outlook of the company. Contingent settlement conditions, which have no genuine possibility of occurring or have an
extremely rare chance of occurrence, does not affect classification of preference shares.
Financial Liabilities-
Initial recognition and measurement
Financial liabilities are recognised when the Company becomes a party to the contractual provisions of the Instrument.
Financial liabilities are Initially measured at the amortised cost unless at Initial recognition, they are classified as fair value
through profit and loss. In case of trade payables, they are Initially recognised at fair value and subsequently, these liabilities
are held at amortised cost, using the effective Interest method.
Subsequent measurement
Financial liabilities are subsequently measured at amortised cost using the EIR method. Financial liabilities carried at fair
value through profit or loss are measured at fair value with all changes in fair value recognised in the Statement of Profit
and Loss.
Derecognition
A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expires.
Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amount is included in the Balance Sheet where there is a legally
enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and
settle the liability simultaneously.
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