2.3 Material accounting policies

(i) Revenue Recognition

(a) Sale of products

The Company derives revenue primarily from
sale of Graphite Electrodes.

Revenue from the sale of goods is recognized
when the performance obligation in accordance
with the provisions of the contract is fulfilled.
Performance obligations are fulfilled at the point
in time when control of the goods is transferred
to the customer which is usually on dispatch/
delivery and the amount of revenue can be
measured reliably and recovery of consideration
is probable.

Revenue is measured based on the transaction
price (net of variable consideration) which is
adjusted for volume discounts, rebates, scheme
allowances, price concessions, incentives, and
returns, if any, as specified in the contracts with
the customers. Revenue excludes taxes collected
from customers on behalf of the government.
Due to short nature of credit period given to
customers, there is no financing component in
the contract.

(b) Power

Revenue from power generation is recognized
on transmission of electricity to State Electricity
Board or third parties at rate stipulated by SEB's
and/or IEX at market rate equivalent.

(c) Other Operating Revenues

(i) Entitlements to Renewal Energy Certificates
owing to generation of power at Tawa
hydel plant are recognized at actual rate of
realization.

(ii) Export entitlements are recognised when
the right to receive credit as per the terms
of the schemes is established in respect
of the exports made by the Company and
where there is no significant uncertainty
regarding the ultimate collection of the
relevant export proceeds.

(d) Interest Income

- Interest Income from customers is recognized
on a time proportion basis taking into account
the amount outstanding and the applicable
interest rate.

- Interest Income from financial asset is
recognized when it is probable that economic
benefits will flow to the company and
amount of income can be measured reliably.
Interest income is accrued on time basis, by
reference to principal outstanding and at
effective interest rate applicable, which is the
rate that exactly discounts estimated future
cash receipts through the expected life of
financial asset to that asset's net carrying
amount on initial recognition.

(e) Other Income

(i) Dividend income is recognized when the
right to receive payment is established and
the amount of dividend can be measured
reliably.

(ii) Other income is recognized when no
significant uncertainty exists with regard to
the amount to be realized and the ultimate
collection thereof.

(ii) Inventories

Inventories are valued at cost or net realizable
value, whichever is lower except by products
which are valued at net realizable value. The raw
materials and other supplies held for use in the
production are valued at net realisable value
only if the finished products in which they are to
be incorporated are expected to be sold below
cost. The cost in respect of the various items of
inventory is computed as under:

(i) In case of finished goods and work-in¬
progress, cost of inventories comprises
of cost of purchase, cost of conversion
and other costs incurred in bringing them
to their respective present location and
condition.

(ii) In case of stores, spares and raw material at
weighted average cost. The cost includes
cost of purchase and other costs incurred
in bringing the inventories to their present
location and condition.

(iii) Obsolete stocks are identified at each
reporting date on the basis of technical
evaluation and are charged off to revenue.

Net Realisable Value is the estimated
selling price in ordinary course of business
less estimated cost of completion and
estimated cost necessary to make the sales.

(iii) Property, Plant and Equipment

The cost of an item of property, plant and
equipment is recognised as an asset when
it is probable that future economic benefits
associated with the item will flow to the entity
and the cost of the item can be measured
reliably.

Freehold Land is carried at historical cost.
All other items of property, plant and equipment
are stated at cost less accumulated depreciation
and accumulated impairment losses, if any.

Cost includes its purchase price (net of taxes
and duty recoverable), after deducting trade
discounts and rebates. It includes other costs
directly attributable to bringing the asset to the
location and condition necessary for it to be
capable of operating in the manner intended
by management and the borrowing costs for
qualifying assets and the initial estimate of
restoration cost if the recognition criteria are met.

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.

Subsequent cost relating to property, plant and
equipment are included in the assets carrying
value or recognised as separate assets as
appropriate, only when it is probable that future
economic benefits associated with the item will
flow to the company and the costs of the item
can be measured reliably. All other repairs and
maintenance costs are charged to the standalone
statement of profit and loss when incurred.

An item of Property, Plant and Equipment is
derecognised upon disposal or when no future
economic benefits are expected from its use.
Any gain or loss arising on de-recognition of
the asset, measured 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 derecognized.
Fully depreciated assets still in use are retained
in financial statements.

Property, plant and equipment which are not
ready for intended use at each balance sheet
date are disclosed as "Capital work-in-progress"
and advances paid towards the acquisition of
Property, plant and equipment outstanding at
each balance sheet date are classified as Capital
advances under "Other non-current assets".
Directly attributable expenditure (including
finance costs relating to borrowed funds for
construction or acquisition of property, plant

and equipment) incurred on projects under
implementation are treated as pre-operative
expenses and are included in Capital work-in¬
progress.

(iv) Investment property

Investment Properties comprises freehold land
and building that are held for long-term rental
yields or for capital appreciation or both.

Investment properties are measured initially
at cost, comprising the purchase price and
directly attributable expenditure. Subsequently,
investment property is carried at cost model,
which is cost less accumulated depreciation and
accumulated impairment losses, if any, in similar
lines of Ind AS 16.

An investment property is derecognized on
disposal or when the investment property is
permanently withdrawn from use and no future
economic benefits are expected from its disposal.
Gains or losses arising on de-recognition of
investment property are measured as the
difference between the net disposal proceeds
and the carrying amount of the asset and are
recognised in standalone statement of profit and
loss in the period of the retirement or disposal.

(v) Other Intangible Assets

An Intangible asset is recognized when it is
probable that the expected future economic
benefits that are attributable to the asset will
flow to the entity; and the cost of the asset can
be measured reliably.

Intangible assets are stated at cost less
accumulated amortization and accumulated
impairment losses, if any. The cost of intangible
asset comprises of its purchase price, net of
recoverable taxes and any directly attributable
cost of preparing the asset for its intended use.

Subsequent expenditure is capitalised only
when it increases the future economic benefits
embodied in the specific asset to which it relates.
All other expenditure is recognised in standalone
statement of profit and loss as incurred.

The cost and related accumulated amortization
are eliminated from Standalone Financial

(B) Investment property

Depreciation on investment properties
is provided on the written down value
method over its useful life of 58 years which
has been determined based on internal
assessment and independent technical
evaluation carried out by external valuer.

The depreciation charge for each period
is recognised in the Statement of Profit
and Loss. The useful lives and method of
depreciation are reviewed at the end of
each financial year and the effect of any
changes in estimate accounted for on a
prospective basis.

(vii) Amortization

Other Intangible Assets

Other Intangible assets are amortized over
their respective individual useful lives on a
straight line basis from date they are available.
The estimated useful life is based on number
of factors including effect of obsolescence and
other economic factors and is as under:

Description of Asset Useful Life

Computer Software 05 Years

Amortisation method and useful lives are
reviewed at the end of each financial year and
the effect of any changes in estimate accounted
for on a prospective basis.

(viii) Impairment of Non-Financial Assets

Property, Plant and Equipment and Investment
property are evaluated for recoverability
whenever events or changes in circumstances
indicate that their carrying amounts may not
be recoverable. For the purpose of impairment
testing, the recoverable amount (i.e. the higher
of the fair value less cost to sell and the value-in¬
use) is determined on an individual asset basis
unless the asset does not generate cash flows
that are largely independent of those from other
assets. In such cases, the recoverable amount is
determined for the Cash Generating Unit (CGU)
to which the asset belongs.

If such assets are considered to be impaired, the
impairment to be recognized in the standalone

Provident Fund and Miscellaneous
Provisions Act, 1952 which is a
defined contribution plan and
contribution paid or payable is
recognized as an expense in the
period in which services are rendered
by the employee.

(ii) Superannuation

The Company makes contribution
in regard to superannuation to a
separate trust and contribution paid
or payable is recognized as an expense
in the period in which services are
rendered by the employee.

(b) Defined Benefit Plan
Gratuity

The Company provides for gratuity, a
defined benefit retirement plan covering
eligible employees. The gratuity plan
provides for lump sum payment to
vested employee at retirement, death,
incapacitation or termination of employee,
based on the respective employee's salary
and the tenure of employment.

The liability or asset recognised in the
balance sheet in respect of the defined
benefit plan is the present value of the
defined benefit obligation at the end of the
reporting period less the fair value of plan
assets. The liability/asset is determined
using projected unit credit method,
through actuarial valuation carried out at
the end of each annual reporting period.

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. Such net
interest cost along with the current service
cost and, if applicable, the past service cost
and settlement gain/loss, is included in
employee benefit expense in the statement
of profit and loss.

Re-measurement gains and losses arising
from experience adjustments and changes
in actuarial assumptions, comprising

actuarial gains/losses and return on plan
assets (excluding the amount recognised
in net interest on the net defined liability),
are recognised in the period in which they
occur, directly in other comprehensive
income. They are included in retained
earnings in the statement of changes in
equity and in the balance sheet.

(B) Short term employee benefits

Short term employee benefits including
non-accumulated absences are charged
to standalone statement of profit and loss
on an undiscounted, accrual basis for the
period during which services are rendered
by the employee.

(C) Other long term employee benefits-
Compensated Absences

The expected cost of accumulating
compensated absences is determined
by actuarial valuation performed by an
independent actuary at each balance sheet
date using projected unit credit method
and is recognized in employee benefit
expense in the statement of profit and loss..

(xi) Leases

Company as a lessee

The Company's lease assets primarily consist
of leases for land and Building. 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: (i) the contract involves the
use of an identified asset (ii) the Company has
substantially all of the economic benefits from
use of the asset through the period of the lease
and (iii) the Company has the right to direct the
use of the asset.

At the date of commencement of the lease, 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 of low value leases.
For these short-term and low value leases, the
Company recognizes the lease payments as an
operating expense on a systematic basis over the
term of the lease.

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 accumulated impairment losses, if any.

Right-of-use assets are depreciated from the
commencement date on a straight-line basis
over the shorter of the lease term and useful life
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.
For the purpose of impairment testing, the
recoverable amount (i.e. the higher of the fair
value less cost to sell and the value-in-use) is
determined on an individual asset basis unless
the asset does not generate cash flows that
are largely independent of those from other
assets. In such cases, the recoverable amount is
determined for the Cash Generating Unit (CGU)
to which the asset belongs.

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
lessee's incremental borrowing rate.

Lease Liability and Right-of-Use Asset have
been separately presented in the Balance Sheet.
The interest expense on the lease liability has
been separately presented as a component of
finance costs in the statement of profit and loss.
The payments of principal portion and interest
portion of lease liability have been classified
under financing activities in the statement of
cash flows.

The payments for short-term leases and leases
of low-value assets have been recognized in the
statement of profit and loss have been classified
under operating activities in the statement of
cash flows.

Company 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.

For operating leases, lease payments received
are recognized on systematic basis over the term
of the relevant lease as a part of other income.

(xii) Segment Reporting

Segments are identified based on the manner
in which the Company's Chief Operating
Decision Maker ('CODM') decides about resource
allocation and reviews performance.

(1) Segment Revenue includes sales and other
income directly identifiable with/ allocable
to the segment including inter- segment
revenue.

(2) Expenses and Incomes that are directly
identifiable with/ allocable to the segments
are considered for determining the
segment result. Expenses and Income not
allocable to segments are included under
unallocable category.

(3) Segment results includes margin on inter
segment sales.

(4) Segment assets and Liabilities include
those directly identifiable with the
respective segments. Assets and liabilities
not allocable to any segment are classified
under unallocable category.

Tax Expense

Tax expense comprises of current and deferred
tax. Tax expense is recognised in statement of
Profit and Loss except to the extent that it relates
to items recognised in other comprehensive
income or directly in equity. In this case, the tax is

also recognised in other comprehensive income

or directly in equity, as the case may be.

(1) Current tax

Current tax is the tax payable/receivable
on the taxable profit/loss for the year
using the tax rates and tax laws that have
been enacted or substantively enacted
by the end of the reporting period and
any adjustment to taxes in respect of
previous years. Interest expenses related
to income tax are included in finance cost.
Interest Income related to income tax is
included in other income.

The current tax assets and current tax
liabilities have been set off to the extent
(a) there is a legally enforceable right to set
off the recognised amounts; and (b) the
Company intends either to settle on a net
basis, or to realise the asset and settle the
liability simultaneously.

(2) Deferred Tax

Deferred Tax assets and liabilities are
recognized using the balance sheet
approach on temporary differences at
the reporting date between the tax bases
of assets and liabilities and their carrying
amounts in financial statements.

Deferred income tax assets and liabilities
are measured using tax rates and tax
laws that are expected to apply to period
in which the temporary differences are
expected to be recovered or settled, based
on tax rates (and tax laws) that have been
enacted or substantively enacted by the
end of the reporting period. The effect of
changes in tax rates on deferred tax assets
and liabilities is recognized as income or
expense in the period as and when there is
change in tax rates.

A deferred tax asset is recognized to the
extent that it is probable that future taxable
profit will be available against which the
deductible temporary differences and tax
losses can be utilized.

Deferred tax assets are reviewed at each
reporting date and reduced to the extent
that it is no longer probable that related
tax benefits will be realized to allow all or
part of the deferred tax assets to be utilised.
Unrecognised deferred tax assets, if any, are
reassessed at each reporting date and are
recognised to the extent that it has become
probable that future taxable profits will
allow deferred tax assets to be recovered.

Deferred tax assets and deferred tax
liabilities have been set off as it relates to
income taxes levied by the same taxation
authority.

(xiii) Government grants

Government grants are not recognized until
there is reasonable assurance that all attached
conditions will be complied with and the grant
will be received.

When the grants relates to an expense item, it is
recognised in the Statement of profit and loss by
way of reduction from the related cost, which the
grants are intended to compensate.

Government grants that become receivable as
compensation for expenses or losses already
incurred or for the purpose of giving financial
support to the Company with no related costs is
recognised in the Statement of profit or loss of
the period in which it becomes receivable under
'Other operating income'/'Other income' based
on the nature of grant.

Government grants relating to the purchase of
property, plant and equipment are deducted
from its gross value and are recognised in profit
or loss on a systematic over the expected useful
lives of the related assets by way of reduced
depreciation.

(xiv) Borrowing Costs

Borrowing costs directly attributable to the
acquisition or construction of items of qualifying
assets, which are the assets that necessarily takes
a substantial period of time to get ready for its
intended use are capitalized as part of the cost
of the asset until such time as the assets are not
ready for their intended use. All other borrowing

costs are charged to the standalone statement
of profit and loss in the period in which they are
incurred.