2. Material Accounting policies
2.1 Basis of preparation
The Standalone financial statements of the Company
have been prepared in accordance with Indian Accounting
Standards (Ind AS) notified under the Companies (Indian
Accounting Standards) Rules, 2015 (as amended from
time to time) and presentation requirements of Division
II of Schedule III to the Companies Act, 2013, (Ind AS
compliant Schedule III).
The financial statements have been prepared on a historical
cost basis, except for the following assets and liabilities that
have been carried at fair value:
• Derivative financial instruments
• Certain financial assets and liabilities measured
at fair value (refer accounting policy regarding
financial instruments).
The financial statements are presented in Indian Rupees
(INR) and all values are recorded to the nearest crores upto
two decimal (INR'00, 00,000), except otherwise indicated.
The Company has prepared the financial statement on the
basis that it will continue to operate as a going concern.
2.2 Summary of material accounting policies
a) Current versus non-current classification
Based on the time involved between the acquisition of
assets for processing and their realization in cash and
cash equivalents, the Company has identified twelve
months as its operating cycle for determining current
and non-current classification of assets and liabilities in
the balance sheet.
b) Fair value measurement
The Company measures financial instruments at fair
value at each balance sheet date.
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. The fair value measurement is
based on the presumption that the transaction to sell
the asset or transfer the liability takes place either:
• In the 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
The principal or the most advantageous market must
be accessible to / by the Company.
The fair value of an asset or a liability is measured using
the assumptions that market participants would use
when pricing the asset or liability, assuming that market
participants act in their best economic 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.
The Company uses valuation techniques that are
appropriate in the circumstances and for which
sufficient data are available to measure fair value,
maximizing the use of relevant observable inputs and
minimizing the use of unobservable inputs.
All assets and 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 that is significant to the fair value
measurement is directly or indirectly 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 recognised 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 that is significant to the
fair value measurement as a whole) at the end of each
reporting year.
External valuers are involved for valuation of significant
assets and significant liabilities
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 summarises accounting policy for fair value.
Other fair value related disclosures are given in the
relevant notes.
• Disclosures for valuation methods, significant
estimates and assumptions (note 31)
• Quantitative disclosure of Fair Value
hierarchy (note 39A)
• Financial instruments (including those carried at
amortised cost) (note 39)
c) Revenue from contracts with customers
Revenue from contracts with customers is recognised
when control of the goods are transferred to the
customer at an amount that reflects the consideration
to which the Company expects to be entitled in
exchange for those goods. The Company has generally
concluded that it is the principal in its revenue
arrangements because it typically controls the goods
before transferring them to the customer
The disclosures of significant accounting judgements,
estimates and assumptions relating to revenue from
contracts with customers are provided in Note 31.
Sale of Goods
Revenue from Sale of goods is recognised at the point
in time when control of the goods is transferred i.e.
when the goods have been delivered to the specific
location (delivery). Following delivery, the customer
has full discretion over the responsibility, manner
of distribution, price to sell the goods and bears the
risks of obsolescence and loss in relation to the goods.
A receivable is recognised by the Company when the
goods are delivered to the customer as this represents
the point in time at which the right to consideration
becomes unconditional, as only the passage of time is
required before payment is due. The average payment
terms range between 15-90 days. In determining the
transaction price for the Sale of goods, the Company
considers the effects of variable consideration and the
existence of significant financing components.
Variable consideration
If the consideration in a contract includes a variable
amount, the Company estimates the amount of
consideration to which it will be entitled in exchange
for transferring the goods to the customer. The
variable consideration is estimated at contract
inception and constrained until it is highly probable
that a significant revenue reversal in the amount
of cumulative revenue recognised will not occur
when the associated uncertainty with the variable
consideration is subsequently resolved. The Company
recognizes changes in the estimated amount of variable
consideration in the year in which the change occurs.
Some contracts for the sale of goods provide customers
with a right of return the goods within a specified
period, volume rebates and pricing incentives, which
give rise to variable consideration. The Company
provides retrospective volume rebates and pricing
incentives to certain customers once the quantity
of products purchased during the year exceeds a
threshold specified in the contract. Rebates are offset
against amounts payable by the customer. To estimate
the variable consideration for the expected future
rebates, the Company applies the most likely amount
method for contracts with a single-volume threshold
and the expected value method for contracts with more
than one volume threshold. The selected method that
best predicts the amount of variable consideration is
primarily driven by the number of volume thresholds
contained in the contract. The Company then applies
the requirements on constraining estimates of variable
consideration and recognises a liability for the expected
future rebates.
The disclosures of significant estimates and assumptions
relating to the estimation of variable consideration for
volume rebates are provided in Note 31
Significant Financing component
The Company applies the practical expedient for short¬
term advances received from customers. That is, the
promised amount of consideration is not adjusted for
the effects of a significant financing component if the
period between the transfer of the promised good and
the payment is one year or less.
Contract balances
Trade receivables
A receivable is recognised if an amount of consideration
that is unconditional (i.e., only the passage of time
is required before payment of the consideration is
due). Refer to accounting policies of financial assets in
section (p) Financial instruments - initial recognition
and subsequent measurement.
Contract liabilities
A contract liability is recognised if a payment is
received or a payment is due (whichever is earlier) from
a customer before the Company transfers the related
goods or services. Contract liabilities are recognised
as revenue when the Company performs under the
contract (i.e., transfers control of the related goods or
services to the customer).
Cost to obtain a contract
The Company pays sales commission to its selling agents
for certain contract that they obtain for the Company.
The Company applies the optional practical expedient
to immediately expense costs to obtain a contract if
amortization period would have been recognised
is one year or less. As such, sales commissions are
immediately recognised as an expense and included
as part of other expenses. Costs to fulfill a contract
i.e. freight, insurance and other selling expenses are
recognized as an expense in the year in which related
revenue is recognised.
d) Other revenue streams
Export Benefits
Export entitlements in the form of Remissions of Duties
and Taxes on Exported Products (RoDTEP), Duty
Drawback Scheme, Merchandise Export Incentive
Scheme and Rebate of State and Central Taxes and
Levies (ROSCTL) are recognised in the statement
of profit and loss when the right to receive credit as
per the terms of the scheme is established in respect
of exports made and when there is no significant
uncertainty regarding the ultimate collection of the
relevant export proceeds.
Dividend
Dividend on financial assets is recognised when the
Company's right to receive the payment is established
i.e. when it is probable that the economic benefits
associated with the dividend will flow to the entity.
Interest Income
For all debt instruments measured either at amortised
cost interest income is recorded using the effective
interest rate (EIR). EIR is the rate that exactly discounts
the estimated future cash payments or receipts over
the expected life of the financial instrument or a
shorter year, where appropriate, to the gross carrying
amount of the financial asset or to the amortised cost
of a financial liability. When calculating the effective
interest rate, the Company estimates the expected
cash flows by considering all the contractual terms
of the financial instrument but does not consider the
expected credit losses. Interest income is included in
finance income in the statement of profit and loss.
Scrap Sales
Income from Sales of Scrap is recognized at the point
in time when control of the assets is transferred
to the customer.
Insurance Claims
Insurance claims are recognized when there exists no
significant uncertainty with regards to the amount to
be realized and ultimate collection thereof.
e) Taxes
Tax expense comprises current tax expense
and deferred tax.
Current income tax
Current income tax assets and liabilities are measured
at the amount expected to be recovered from or paid
to the taxation authorities. The tax rates and tax laws
used to compute the amount are those that are enacted
or substantively enacted, at the reporting date in
accordance with the Income Tax Act, 1961.
Current income tax relating to items recognised
outside profit or loss is recognised outside profit or loss
(either in other comprehensive income or in equity).
Current tax items are recognised in correlation to the
underlying transaction either in Other comprehensive
income (OCI) or directly in equity.
Management periodically evaluates positions taken
in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation
and considers whether it is probable that a taxation
authority will accept an uncertain tax treatment. The
Company shall reflect the effect of uncertainty for each
uncertain tax treatment by using either most likely
method or expected value method, depending on which
method predicts better resolution of the treatment.
Deferred tax
Deferred tax is provided using the liability method on
temporary differences between the tax bases of assets
and liabilities and their carrying amounts for financial
reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable
temporary differences, except:
• When the deferred tax liability arises on an asset
or liability in a transaction that is not a business
combination and, at the time of the transaction,
affects neither the accounting profit nor taxable
profit or loss and does not give rise to equal
taxable and deductible temporary differences.
Deferred tax assets are recognised for all deductible
temporary differences, the carry forward of unused
tax credits and any unused tax losses. Deferred tax
assets are recognised to the extent that it is probable
that taxable profit will be available against which
the deductible temporary differences, and the carry
forward of unused tax credits and unused tax losses can
be utilized, except:
• When the deferred tax asset relating to the
deductible temporary difference arises from
the initial recognition of an asset or liability in a
transaction that is not a business combination
and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss and
does not give rise to equal taxable and deductible
temporary differences.
The carrying amount of deferred tax assets is reviewed
at each reporting date and reduced to the extent that it
is no longer probable that sufficient taxable profit will
be available to allow all or part of the deferred tax asset
to be utilised.
Deferred tax assets and liabilities are measured at the
tax rates that are expected to apply in the year when
the asset is realised or the liability is settled, based
on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit
or loss is recognised outside profit or loss. Deferred tax
items are recognised in correlation to the underlying
transaction either in OCI or directly in equity.
The Company offsets deferred tax assets and deferred
tax liabilities if and only if it has a legally enforceable
right to set off current tax assets and current tax
liabilities and the deferred tax assets and deferred
tax liabilities relate to income taxes levied by the
same taxation authority on either the same taxable
entity or different taxable entities which intend either
to settle current tax liabilities and assets on a net
basis, or to realise the assets and settle the liabilities
simultaneously, in each future year in which significant
amounts of deferred tax liabilities or assets are
expected to be settled or recovered.
Goods and Service taxes paid on acquisition of assets
or on incurring expenses
Expenses and assets are recognised net of the amount
of Goods and service taxes paid, except:
• When the tax incurred on a purchase of assets
or services is not recoverable from the taxation
authority, in which case, the tax paid is recognised
as part of the cost of acquisition of the asset or as
part of the expense item, as applicable
• When receivables and payables are stated with
the amount of tax included
The net amount of tax recoverable from, or payable to,
the taxation authority is included as part of receivables
or payables in the balance sheet.
f) Property, plant, and equipment
Capital work in progress is stated at cost, net of
accumulated impairment loss, if any. Plant and
equipment is stated at cost, net of accumulated
depreciation, and accumulated impairment losses, if
any. Items such as spare parts, stand-by equipment,
and servicing equipment are recognized as property,
plant, and equipment when they meet the definition of
property, plant, and equipment. Otherwise, such items
are classified as inventory. When significant parts of
plant and equipment are required to be replaced at
intervals, the Company depreciates them separately
based on their specific useful lives. Such cost includes
the cost of replacing part of the plant and equipment and
borrowing costs for long-term construction projects
if the recognition criteria are met. Likewise, when a
major inspection is performed, its cost is recognized in
the carrying amount of the plant and equipment as a
replacement if the recognition criteria are satisfied. All
other repair and maintenance costs are recognized in
the Statement of profit or loss as incurred.
The present value of the expected cost for the
decommissioning of an asset after its use is included
in the cost of the respective asset if the recognition
criteria for a provision are met.
Depreciation on Property, plant, and equipment
is provided on the straight-line method over the
useful lives of assets estimated by the management.
Depreciation for assets purchased/ sold during a year
is proportionately charged. Leases relating to land
are amortized equally over the year of lease. Leased
mines are depreciated over the estimated useful
life of the mine or lease year, whichever is lower.
The Management estimates the useful lives for the
Property, plant, and equipment, except lease mines and
leasehold land, as follows:
* For these class of assets, based on internal assessment, the
management believes that the useful lives as given above best
represent the year 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. The management believes that these
estimated useful lives are realistic and reflect fair approximation of
the year over which the assets are likely to be used.
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.
An item of property, plant and equipment and any
significant part initially recognised is derecognised
upon disposal or when no future economic benefits
are expected from its use or disposal. Any gain or loss
arising on the derecognition of the asset (calculated
as the difference between the net disposal proceeds
and the carrying amount of the asset) is included in the
income statement when the asset is derecognised.
;) Intangible assets
Intangible assets acquired separately are measured
on initial recognition at cost. Following initial
recognition, intangible assets are carried at cost less
any accumulated amortisation and accumulated
impairment losses.
Intangible assets with finite lives are amortised over
the useful economic life and assessed for impairment
whenever there is an indication that the intangible
asset may be impaired. The amortisation year and
the amortisation method for an intangible asset
with a finite useful life are reviewed at least at the
end of each reporting year. Changes in the expected
useful life or the expected pattern of consumption
of future economic benefits embodied in the asset
are considered to modify the amortisation year or
method, as appropriate, and are treated as changes
in accounting estimates. The amortisation expense on
intangible assets with finite lives is recognised in the
statement of profit and loss unless such expenditure
forms part of carrying value of another asset.
Intangible assets comprising of computer software
with finite useful life are amortised on straight line
basis over estimated useful life of three years
An intangible asset is de-recognised upon disposal (i.e.,
at the date the recipient obtains control) or when no
future economic benefits are expected from its use or
disposal. Any gain or loss arising upon de-recognition
of the asset (calculated as the difference between the
net disposal proceeds and the carrying amount of the
asset) is included in the statement of profit and loss
when the asset is de-recognized.
h) Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of an asset that necessarily
takes a substantial year of time to get ready for its
intended use or sale are capitalized as part of the cost
of the asset. All other borrowing costs are expensed
in the period in which they occur. Borrowing costs
consist of interest and other costs that an entity
incurs in connection with the borrowing of funds.
Borrowing cost also includes exchange differences
to the extent regarded as an adjustment to the
borrowing costs.
i) Leases
The Company assesses at contract inception whether
a contract is, or contains, a lease. That is, if the contract
conveys the right to control the use of an identified asset
for a year of time in exchange for consideration.
Company as a lessee
The Company applies a single recognition and
measurement approach for all leases, except for
short-term leases and leases of low-value assets. The
Company recognizes lease liabilities to make lease
payments and right-of-use assets representing the
right to use the underlying assets.
i) Right-of-use assets
The Company recognizes right-of-use assets at
the commencement date of the lease (i.e., the
date the underlying asset is available for use).
Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses,
and adjusted for any remeasurement of lease
liabilities. The cost of right-of-use assets includes
the amount of lease liabilities recognized, initial
direct costs incurred, and lease payments made
at or before the commencement date less any
lease incentives received. Right-of-use assets
are depreciated on a straight-line basis over the
shorter of the lease term and the estimated useful
lives of the assets, as follows:
• Buildings 1 to 9 years
• Salt Works 30 years
The right-of-use assets are also subject to
impairment. Refer to the accounting policies in
section (l) Impairment of non-financial assets
ii) Lease Liabilities
At the commencement date of the lease, the
Company recognizes lease liabilities measured
at the present value of lease payments to be
made over the lease term. The lease payments
include fixed payments (including in substance
fixed payments) less any lease incentives
receivable, and amounts expected to be paid
under residual value guarantees. Variable lease
payments that do not depend on an index or a
rate are recognised as expenses (unless they are
incurred to produce inventories) in the period
in which the event or condition that triggers the
payment occurs
In calculating the present value of lease payments,
the Company uses its incremental borrowing rate
at the lease commencement date because the
interest rate implicit in the lease is not readily
determinable. After the commencement date, the
amount of lease liabilities is increased to reflect
the accretion of interest and reduced for the
lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there
is a modification, a change in the lease term or a
change in the lease payments.
iii) Short-term leases and leases of low-value assets
The Company applies the short-term lease
recognition exemption to its short-term leases
of machinery and equipment (i.e., those leases
that have a lease term of 12 months or less from
the commencement date and do not contain a
purchase option). The Company applies the low-
value asset recognition exemption on a lease-by¬
lease basis, if the lease qualifies as leases of low-
value assets, with a value when new of up to INR
4 lakhs. In making this assessment, the Company
also factors below key aspects:
• The assessment is conducted on an absolute
basis and is independent of the size, nature,
or circumstances of the lessee.
• The assessment is based on the value of the
asset when new, regardless of the asset's
age at the time of the lease.
• The lessee can benefit from the use of
the underlying asset either independently
or in combination with other readily
available resources, and the asset is not
highly dependent on or interrelated
with other assets.
• If the asset is subleased or expected to
be subleased, the head lease does not
qualify as a lease of a low-value asset.
Based on the above criteria, the Company
has classified leases of IT equipment for
individual employees, and leases of office
furniture and water dispensers as leases of
low value assets.
j) Inventories
Inventories are valued at cost or net realizable value,
whichever is lower. Costs incurred in bringing each
product to its present location and condition are
accounted for as follows:
• Raw materials: cost includes cost of purchase and
other costs incurred in bringing the inventories
to their present location and condition.
Cost is determined on moving weighted
average cost basis.
• Finished goods (Including goods in transit) &
Work in progress: Cost includes material cost,
cost of conversion, depreciation, other overheads
to the extent applicable. Cost is determined on
weighted average basis.
• Stock in trade: cost includes cost of purchase and
other costs incurred in bringing the inventories
to their present location and condition. Cost is
determined on weighted average basis.
• Stores and spares: are stated at cost less
provision, if any, for obsolescence. Cost is
determined on moving weighted average cost
basis and cost includes cost of purchase and
other costs incurred in bringing the inventories to
their present location and condition.
Net realisable value is the estimated selling price in
the ordinary course of business, less estimated costs
of completion and the estimated costs necessary
to make the sale.
k) Impairment of non-financial assets
The Company assesses, at each reporting date, whether
there is an indication that an asset may be impaired.
If any indication exists, or when annual impairment
testing for an asset is required, the Company estimates
the asset's recoverable amount. An asset's recoverable
amount is the higher of an asset's or cash-generating
unit's (CGU) fair value less costs of disposal and its
value in use. The recoverable amount is determined for
an individual asset, unless the asset does not generate
cash inflows that are largely independent of those from
other assets or Company's assets. When the carrying
amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written
down to its recoverable amount.
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. In determining fair value less costs
of disposal, recent market transactions are taken into
account. If no such transactions can be identified, an
appropriate valuation model is used. These calculations
are corroborated by valuation multiples, quoted share
prices for publicly traded companies or other available
fair value indicators.
The Company bases its impairment calculation on
detailed budgets and forecast calculations, which are
prepared separately for each of the Company's CGUs
to which the individual assets are allocated. These
budgets and forecast calculations generally cover a
period of three years. For longer years, a long-term
growth rate is calculated and applied to project future
cash flows after the third year. To estimate cash flow
projections beyond years covered by the most recent
budgets/forecasts, the Company extrapolates cash
flow projections in the budget using a steady or
declining growth rate for subsequent years, unless an
increasing rate can be justified. In any case, this growth
rate does not exceed the long-term average growth
rate for the products, industries, or country or countries
in which the entity operates, or for the market in which
the asset is used.
Impairment losses of continuing operations, including
impairment on inventories, are recognised in profit and
loss section of the statement of profit and loss.
An assessment is made at each reporting date
to determine whether there is an indication that
previously recognised impairment losses no longer
exist or have decreased. If such indication exists, the
Company estimates the asset's or CGU's recoverable
amount. A previously recognised impairment loss
is reversed only if there has been a change in the
assumptions used to determine the asset's recoverable
amount since the last impairment loss was recognised.
The reversal is limited so that the carrying of the asset
does not exceed its recoverable amount, nor exceed
the carrying amount that would have been determined,
net of depreciation, had no impairment loss been
recognised for the asset in prior years. Such reversal is
recognised in the statement of profit and loss.
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