Material accounting policies
2 BASIS OF PREPARATION
The 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), as applicable to the financial
statements.
The financial statements have been prepared on a
historical cost basis, except for certain financial assets
and liabilities measured at fair value (refer accounting
policy regarding financial instruments). The financial
statements are presented in Indian Rupees "INR" which
is also the company's functional currency and all values
are rounded to the nearest Millions (Rupees Millions) up
to two Decimals, except when otherwise indicated.
2.01 Property, plant and equipment
All items of property, plant and equipment are stated
at historical cost less accumulated depreciation and
accumulated impairment losses. Historical cost includes
expenditure that is directly attributable to the acquisition
of the items. Cost includes its purchase price including
non-refundable taxes and duties, directly attributable
costs of bringing the asset to its present location and
condition.
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.
The carrying amount of any component accounted for as
a separate asset is derecognised when replaced. All other
repairs and maintenance are charged to the statement of
profit or loss during the reporting period in which they
are incurred.
An asset’s carrying amount is written down immediately
to its recoverable amount if the asset’s carrying amount
is greater than its estimated recoverable amount.
The residual values and useful lives of property, plant and
equipment are reviewed at each financial year end and
changes, if any, are accounted in the line with revisions to
accounting estimates.
Depreciation on property, plant and equipment is
provided on straight line method, which is in line with
the estimated useful life as specified in Schedule II of the
Companies Act, 2013.
Depreciation commences when the assets are ready for
their intended use. The assets residual values and useful
lives are reviewed, and adjusted if appropriate, at the end
of each reporting period.
Gains and losses on disposals are determined by
comparing net disposal proceeds with carrying amount.
These are included in the statement of profit and
loss.
2.02 Impairment of property, plant and equipment
Consideration is given at each balance sheet date to
determine whether there is any indication of impairment
of the carrying amount of the company each class of the
property, plant and equipment. If any indication exists, an
asset's recoverable amount is estimated. An impairment
loss is recognised whenever the carrying amount of an
asset exceeds its recoverable amount. The recoverable
amount is the greater of the net selling price and value in
use. In assessing value in use, the estimated future cash
flows are discounted to their present value based on an
appropriate discount factor.
2.03 Current versus non-current classification
The company presents assets and liabilities in the balance
sheet based on current/non-current classification.
An asset is treated as current when it is:
? Expected to be realized or intended to be sold or
consumed in normal operating cycle
? Held primarily for the purpose of trading
? Expected to be realized within twelve months after
the reporting period, or
? Cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least
twelve months after the reporting period
? All other assets are classified as non-current.
A liability is current when:
? It is expected to be settled in normal operating cycle
? It is held primarily for the purpose of trading
? It is due to be settled within twelve months after the
reporting period, or
? There is no unconditional right to defer the
settlement of the liability for at least twelve months
after the reporting period"
The company classifies all other liabilities as non¬
current.
Deferred tax assets and liabilities are classified as non¬
current assets and liabilities.
The operating cycle is the time between the acquisition
of assets for processing and their realisation in cash and
cash equivalents. The company has identified twelve
months as its operating cycle."
2.04 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 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 economic
best 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, maximising the
use of relevant observable inputs and minimising the use
of unobservable inputs
All assets and liabilities for which fair value is measured
or disclosed in the financial statements are categorised
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 financial assets and liabilities maturing within one
year from the balance sheet date and which are not carried
at fair value, the carrying amount approximates fair value
to due to short term maturity of these instruments.
The company recognises the transfer between the levels
of fair value hierarchy at the end of the reporting period
during which the changes has occurred.
"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 summaries accounting policy for fair value.
Other fair value related disclosures are given in the
relevant notes.
? Quantitative disclosures of fair value measurement
hierarchy (Note 32)
? Financial instruments (including those carried at
amortised cost) (Note 32)
2.05 Revenue from contract with customers
Revenue from contracts with customers is recognised
when control of the goods is transferred to the customer
at an amount that reflects the consideration entitled in
exchange for those goods. The company is generally
the principal as it typically controls the goods before
transferring them to the customer.
Generally, control is transferred upon shipment of goods
to the customer or when the goods is made available to
the customer, provided transfer of title to the customer
occurs and the company has not retained any significant
risks of ownership or future obligations with respect to
the goods shipped.
Revenue from inter-company arrangement is recognised
based on transaction price which is at arm's length
arrangement. Revenue is measured based on the
transaction price, which is the consideration, adjusted for
volume discounts, price concessions and incentives, if any,
as specified in the contract with the customer. Revenue
also excludes taxes collected from customers.
Generally, the credit period varies as per the contractually
agreed period from the shipment or delivery of goods as
the case may be. The company does not adjust short¬
term advances received from the customer for the effects
of significant financing component if it is expected at the
contract inception that the promised good or service will
be transferred to the customer within a period of one
year.
2.06 Other income
Interest income:
Interest income is accrued on time basis, by reference
to the principal outstanding and at the effective interest
rate applicable, which is the rate that exactly discounts
estimated future cash receipts through the expected life
of the financial asset to that asset's net carrying amount
on initial recognition.
Profit/ (Loss) on derivatives:
Profit/ (Loss) on derivatives contracts on account of fair
value changes are recognised as either income or expenses
as the case may be through Profit and loss.
Duty drawback/Export incentives:
Duty drawback income is recognised when right to
receive such benefits is established. Further, in cases
where there is uncertainty of such benefits, revenue is
recognised when benefits are received.
2.07 Inventories
Inventories are valued at the lower of cost or net
realisable value.
Costs incurred in bringing each product to its present
location and condition are accounted for as follows:
? Finished goods and work in progress: cost
includes cost of direct materials and labour and a
proportion of manufacturing overheads based on the
normal operating capacity but excluding borrowing
costs. Cost is determined on first in, first out basis.
? Traded goods: 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.
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.
? Stock in Transit: cost comprises the purchase price
and other costs incurred to bring the inventory to its
present location and condition.
The company accounts for agricultural produce which is
harvested produce of the biological asset
1. Initial recognition and measurement
The entity recognizes a biological asset or agricultural
produce when, and only when
? the entity controls the asset as a result of past
events;
? it is probable that future economic benefits
associated with the asset will flow to the entity;
and
? the fair value or cost of the asset can be measured
reliably.
Agricultural produce harvested from an entity's
biological assets is measured at its fair value less costs
to sell at the point of harvest. Such measurement
value is the cost at that date when applying Ind AS
2. Inventories. The carrying amounts of agricultural
produce is carried at cost when the company expects
the impact of the biological transformation on price
to be not material.
2.08 Taxes
Current income tax assets and liabilities are measured
at the amount expected to be recovered from or paid to
the taxation authorities in accordance with the Income
Tax Act 1961. The tax rates and tax laws used to compute
the amount are those that are enacted or substantively
enacted, at the reporting date.
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 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 establishes provisions where appropriate.
Current tax assets and current tax liabilities are offset
when there is a legally enforceable right to set off the
recognised amounts and there is an intention to settle the
asset and the liability on a net basis.
Deferred Tax
Deferred tax is recognised using balance sheet approach
at the reporting date between the tax bases of assets
and liabilities and their carrying amounts for financial
reporting purpose at the reporting date.
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 profits will be
available to allow all or part of the deferred tax asset to be
utilised. Unrecognised deferred tax assets are re-assessed
at each reporting date and are recognised to the extent
that it has become probable that future taxable profits
will allow the deferred tax assets to be recovered.
Deferred tax assets and liabilities are measured using the
tax rates that are expected to apply in a year when asset
is realized or the liability is expected to be settled based
on the tax rates and tax laws that have been enacted or
substantively enacted by the reporting date.
Deferred tax assets and deferred tax liabilities are offset
when there is a legally enforceable right to set off assets
against liabilities representing current tax where the
deferred tax assets and deferred tax liabilities relate to
taxes on income levied by the same governing taxation
laws.
2.09 Current and deferred tax for the year
Current and deferred tax are recognised in the statement
of profit or loss, except when they relate to items that are
recognised in other comprehensive income or directly
in equity, in which case, the current and deferred tax
are also recognised in other comprehensive income or
directly in equity respectively.
2.10 Foreign Currency translation
Functional and Presentation currency
Items included in the financial statements of the company
are measured using the currency of the primary economic
environment in which the entity operates ('the functional
currency’). The financial statements are presented in
Indian rupee (INR), which is functional and presentation
currency of the company.
Transaction and balances
Transactions in foreign currencies are initially recognised
in the financial statements using exchange rates prevailing
on the date of transaction. Monetary assets and liabilities
denominated in foreign currencies are translated to the
functional currency at the exchange rates prevailing at
the reporting date and foreign exchange gain or loss are
recognised in profit or loss.
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated
using the exchange rates at the dates of the initial
transactions.
|