2, Significant Accounting Policies
(a) Statement of compliance:
The financial statements of the Company have been prepared in accordance with
Indian Accounting Standards (“Jnd AS") notified under the Companies (Indian
Accounting Standards) Rules, 20151 notified under Sec 133 of The Companies
Act, 2013. The Accounting policies have been consistently applied except where
a newly issued accounting standard is initially adopted or a revision to art existing
standard requires a change in the accounting policies hitherto in use,
(b) Basis of preparation and presentation:
These financial statements have been prepared on a historical cost basis,
except for certain financial instruments and net defined benefit liability that are
measured at fair value at the end of each reporting period, as explained in the
accounting policies below..
(c) Critical accounting estimates and judgments
The preparation of financial statements in conformity with IndAS requires
management to make judgements, estimates and assumptions that affect the
application of accounting policies and thereported amounts of assets and
liabilities disclosures of contingent liabilities at the date or the financial
siaiements and the reported amounts of revenue and expenses for the years
presented. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected,
fn particular, information about significant areas of estimation uncertainty and
criiica' Judgments in applying accounting policies ihni have the mosi significant
effect on the amounts recognized in the financial statements pertain to:
Useful lives of property, plant and equipmeiUand intangible assets: The
Company has estimated useful life of each class of assets based on the nature of
assets, Ihe estimated usage of the asset, the operating condition of the asset,
past history of replacement, anticipated technological changes, etc. The
Company reviews Ihe carrying amount of property, plant and equipment and
intangible assets at the Balance Sheet date This reassessment may result in
change in depreciation expense in future periods.
Impairment testing: Property, plant and equipment and Intangible assets are
tested for impairment when events occur or changes in circumstances indicate
that the recoverable amount of the cash generating unit is less than its carrying
value The recoverable amount of cash generating units is higher of value-in-use
and fair value fess cost to soil. The caiculalion involves use of significant
estimates and assumptions which includes turnover and earnings multiples,
growth rates and net margins used to calculate projected future cash Hows, risk-
adjusted discoun! rate, future economicartd market conditions.
Income Taxes: Deferred tax assets are recognized to the extent that it is
regarded as probable that deductible temporary differences can be realized. The
Company estimates deferred tax assets and labilities based on current tax laws
and rates and in certain cases, business plans, including management s
expectations regarding the manner and timing of recovery of the related assets.
Changes in these estimates may affect Ihe amount of deferred tax liabilities or the
valuation of deterred tax assets and there the tax charge in ihe statement of profit
or loss,
Provision for tax liabilities require Judgments on the interpretation of lax
legislation, developments in case law and the potential outcomes of tax audits
and appeals which may be subject to significant uncertainty. Therefore the actual
results may vary from expectations resulllnn In adjustments to provisions, the
valuation of deferred tax assets, cash tax settlements and therefore the tax
charge tn the statement of profit or loss.
* Fair vafue measurement financial instruments: The fair value of financial tnslruments
that are not traded in an active market is determined by using valuation techniques This
Involves significant judgments to select a variety of methods and make assumptions that
are mainly based on market conditions existing at the Balance Sheet date. Fair value of
financial instruments that are traded in active market is determined from market prices as
reduced by estimated cost of trading
* Litigation: From time to time, the Company is subject to loyal proceedings the ultimate
outcome of each being always subject to many uncertainiies inherent in litigation. A
provision for litigation is made when it is considered probable that a payment will be made
and Ihe amount of the loss can be reasonably estimated. Significant judgment is made
when evaluating among other factors the probability of unfavorable outcome and the
ability to make a reasonable estimate of the amount of potential loss. Litigation provisions
are reviewed at each accounting period and revisions made for the changes in facts and
circumstances. 1
Revenue is measured at the fair value of the consideration received or recetvable.
Revenue comprise of sale of sugar and olhersugar auxiliary products Revenue
is recognised when following conditions are satisfied:
* the company transfers to the buyer the significant risks and rewards of ownership of the
goods
* the entity retains neither continuing managerial involvement to the degree usually
associated with ownership nor effect ve control over the goods sold;
* the amount of revenue can be measured reliable
* it is probable that Ihe economic benefits associated with the transaction will flow to the
entity; and
* the costs incurred or to be incurred in respect of the transaction can be measured reliably
Revenue from sales of goods or rendering of services is nel of Indirect taxes returns
and discounts,.
Interest
Interest income is accrued on a time proportion basis using the effective interest rale
method.
Dividend
Dividend income ts recognized on cash basis.
(f) Employee Benefits (other than lor persons engaged through contractors);
i Provident Fund: The eligible employees of the Company are entitled to receive
benefits under the provident fund, a defined contribution plan, in which both
employees and the Company make monthly contributions at a specified
percentage of the covered employees' salary (currently 12% of employees'
salary), which is recognised as an expense in the Statement of Profit and Loss
during the year. Amounts collected under the provident fund plan are deposited
with Government administered provident fund. The Company has no further
obligation to the pfan beyond its n ionthly contributions.
it, Gratuity Fund Gratuily is a defined benefit plan provided in respect ot
pastservices based or the actuarial valuation carried out by UC of India and
corresponding contribution to the fund is expensed in the year of such
contribution.The scheme is funded by the company for employees and the liability
is recognized on the basis of contribution payable to the Insurer i.e ihe Life
Insurance Corporation of India. However, the disclosure of information as
required under Ind As -19 have been made in accordance with Ihe actuarial
valuation The unfunded liability is recognized on the basis of report submitted by
a private actuarial valuer
ill Compensated Absences
Entitlement lo annual leave is recognised based on actuarial valuation. The
Company determines the liability for such accumulated leave at each Balance
Sheet date and Lhe same is charged to revenue accordingly
Contribution to defined benefit scheme with LIC towards retirement benefit in the
form of superannuation is recognised as expenses In the statement of profit and loss
during the period in which employee renders the related service.
v. Other Employee Benefits
Other benefits* comprising of discretionary Long Service Awards are determined on
an undiscounled basis and recognised based on the entitlement thereof
A defined contribution plan is a post-employment benefif plan under which an entity
pays fixed contributions Into a separate entity and will have no legal or constructive
obligation to pay further amounts The Company makes specified contributions
towards superannuation scheme- Obligations for contributions to defined
contribution plans are recognized as an employee benefit expenses in profit or loss in
the periods during which ihe related services are rendered by employees.
(g) Property, Plant and Equipment:
Property, plant and equipment are stated at cost less accumulated depreciation and
accumulated impairment losses, if any.
All property, plant and equipment are initially recorded at cost. Cost includes ihe
acquisition cost or the cost of construction: Including duties and taxes (other than
those refundable), expenses directly related to the location of assets and making
Them operational for their intended use and, in the case of qualifying assets the
attributable borrowing costs (refer note no 2(p) below). Initial estimate shall also
include costs of dismantling and removing the item and restoring the site on which it is
located.
Subsequent expenditure relating to property plant and equipment is capitalised only
when it is probable that future economic benefits associated with these will flow to the
Company and Ihe cost of the item can be measured reliably.
An assets' carrying amount is written down immediately to its recoverable amount if
Ihe asset's carrying amount is greaterlhal its estimated recoverable amount
Depreciation is charged to statement of profil and loss so as to write ofr the cost or
assets (other than freehold tand and properties under construction) less their
residual values over their useful lives, using Ihe straight-fine method except for asset
situated at Registered Office which are depreciated by written down value
method The estimated useful lives, residual values and depreciation method are
reviewed at the Balance Sheet date, wflh the effect of any charges in estimate
accounted for on a prospective basis. The estimated useful lives of the depreciable
assets is in accordance with ailes prescribed under part M C ‘of Schedule II to the
Companies Act, 2013
An item of property, plant and equipment is derecognized upon disposal or when no
future economic benefits are expected to arise from the continued use of the asset
Any gain or loss arising on the disposal or retirement of an item of property, plant and
equipment is determined as Ihe difference between the sales proceeds and Ihe
carrying amount of the asset and is recognized in the Statement of Profit and Loss.
Capital work in progress represents projects under which the property, plant and
equipment's are not yet ready for their intended use and are carried at cost
determined as aforesaid.
intangible assets include cost of acquired software and designs, and cost incurred for
development of the Company's websile and certain contract acquisition costs. Intangible
assets are initially measured at acquisition cost including any directly attributable costs of
preparing the asset tor its Intended use Internally developed intangibles are capitalised If,
and only it all the following criteria can be demonstrated:
I) the technical feasibility and Company's intention and ability of completing the
project;
it) the probability lhatthe project will generate future economic benefits;
iii) the availability of adequate technical financial and other resources to complete
the project; and
lv) the ability to measure ihe development expenditure reliably,
Expenditure on projects which are not yet ready for intended use are carried as intangible
assets under development.
Intangible assets with finite lives are amortized over their estimated useful economic fife and
assessed for impairment whenever there is an indication that the intangible asset may be
impaired. The amortisation periods are reviewed and impairment evaluations are earned out
at least once a year The estimated useful life used for amortising intangible assets are as
under
An intangible asset is derecognized on disposal, or when no future economic benefits are
expected from use of disposal. Gains or losses arising from derecognition of an intangible
asset, measured as the difference between Ihe net disposal proceeds and the carrying
amount of the asset, and are recognized in the Statementof Profit and Loss when the asset is
derecognized.
(i) Impairment of assets:
Assets that have an indefinite useful life are not subject to amortisation and are tested
annually foi Impairment Assets that are subject to amortisation are reviewed for impairment
whenever events or changes in circumstances indicate lhat the carrying amount may not be
recoverable. An irnpainment toss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount.
Recoverable amount is the higher of fair value less costs of disposal and value in use.In
assessing value in use, the estimated future cash flows are discounted lo their present value
using a pre-tax discount rale that reflects cunrenl market assessments of the time value of
money a nd the risks specific to the asset for which the estimates of future cash flows have not
been adjusted
Ifihe recoverable amount of an asset (or cash-generating unit) is eslimated to be less than its
carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its
recoverable amou nt. An impairment loss is recognized immediately in the Statement of Profit
and Loss,
When an impairment loss subsequently reverses, the carrying amount of the asset (or a
cash-generating unit) is increased to the revised estimate of its recoverable amount, but so
that the increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognized for the asset tor cash-generating
unit] in prior years A reversal of an impairment toss is recognized immediately in Statement
off Profit and Loss,
(j) Foreign CurrencyTranslation:
Initial Recognition
On Initial recognition. all foreign currency transactions are recorded by applying lo the foreign
currency amounl the exchange rale between the reporting currency and the foreign currency
at the date of the transaction.
Subsequent Recognition
As at the reporting date, non-monetary items which are carried at historical cost and
denominated in a foreign currency are reported using the exchange rale at the date of the
transaction All non-monetary items which are carried at farr value or other simitar valuation
denominated in a foreign currency are reported using the exchange rates that existed when
the values were the fair value measured
All monetary assets and liabilities in foreign currency are restated at the end of accounting
period. Exchange differences on restatement of olher monetary items are recognised in the
S tatement of Profit and Loss.
(k) Assets taken on lease;
Leases are classified as finance lease whenever the terms of the lease transfer substantially
all the risk and rewards of ownership to the lessee Alt the olher leases are classified as
operating leases.
Operating lease payments are recognized as expenditure in the Statement of Profit and Loss
on a straighHine basis, unless another basis is more representative of ihe time pattern of
benefits reccivod from the use of the assets taken on lease ortho payments of lease ronlats
are in line with the expected general inflation compensating fhe lessor for expected
inflationary cost. Contingent rentals ansmg under operating leases are recognized as an
expense in the period in which they are incurred.
Assets held under finance lease are capitalised at the inception of the lease wilh
corresponding liability being recognised for the fair value of the [eased assets or. iF lower the
preseni value ol the minimum lease payments. Lease payments are apportioned between
the reduction of the lease liability and finance charges in the statement of Profit or Loss so as
to achieve 8 constant rate of interest on the remaining balance of the liability. Assets held
under finance leases are depreciated over the shorter of the estimated useful life of the asset
and the lease term
([) Inventories:
* Finished goods are valued as follows:
- All finished goods are valued at lower of weighted average cost or net realizable
value.
- Molasses, a byproduct is valued at estimated net realizable value
- Crops under cultivation are valued at cost
* Work In progress is valued at lower of weighted average cost or net realisable value of Ihe
finished goods duly adjusted according to the percentage of progress.
Ý Raw materials, stores, spares, materials in transit are valued at weighted average cost.
Howevei when Ihe net realizable value of the finished goods they are used In is less than
the cost of the finished goods and if the replacement cost of such materials etc. is less than
their holding cost in such an event, they are valued at replacement cost
(m) Government Grants
Government grants are recognised in the period to which they relate when there is
reasonable assurance that me grant will be received and that the Company will comply with
the attached conditions
Government grants are recognised In the Statement of Profit and Loss on a systematic basis
over the periods in which the Company recognises as expenses tine related costs for which
the grants are intended to compensate.
(n) Income Taxes:
Income tax expense comprises current tax expense and the net change In Ihe deferred tax
asset or liability during the year Current and deferred tax are recognised in profit or loss,
except when they relate to items (hat are recognised in other comprehensive income or
direcily in equity, in which case, the current and deferred rax are also recognised in other
comprehensive income or directly in equity, respectively.
(i) CurrentTax:
Current Tax expenses are accounted in the same period to which the revenue and expenses
relate Provision for cu nent income tax is made for the tax liability payable on taxable income
after considering tax allowances, deductions and exemptions determined In accordance with
the applicable tax rates and the prevailing tax laws.
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.
(ii) Deferred Tax:
Deferred income tax is recognised using the balance sheet approach. Deferred income tax
assets and liabilities are recognised for deductible and taxable temporary differences arising
between Ihe tax base of assets and liabilities and their carrying amount in financial
statements, except when ihe deferred income tax arises from the initial recognition of
goodwill, an asset or liability iff a transaction that is nol a business combination and affects
neither accounting nor taxable profits or loss a l the time of the transaction,
Deferred income 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 carryforward of
unused lax credits and unused lax losses can be utilised.
Deferred tax liabilities are generally recognized for alt taxable temporary differences except
m respect of taxable temporary differences associated with investments in subsidiaries,
associates rind Interests in joint ventures where the tinning of the reversal of the temporary
difference can be controlled and it is probable that the temporary difference will not reverse in
the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each Balance Sheet date and
reduced to the extent that it is no longer probable that sufficient taxable profits will be
available toatJowall or part of the deferred income tax asset to be utilised
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in
the period in which the liability is settled or the assel realized, based on tax rates (and tax
taws) that have been enacted or substantively enacted by the Balance Sheet date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off
current tax assets against current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Company intends to settle its current tax assets and
liabilities on a net basis
1
Defined benefit plans: The cost of the defined bei :efil plans and the present value of the
defined benefit obligation are based on actuarial valuation using the projected unit credit
melhod An actuarial valualion involves making various assumptions that may differ from
actual developments fn the future. These include Ihe determination of the discount rate,
future salary increases and mortality rates. Due to the complexities involved in the
valuaiion and its long term nature, a defined benefit obligation is highly sensitive lo
chances in these assumptions All assumptions are reviewed at each Balance Sheet date.
|d) Functional currency:
These financial statements are presented in Indian Rupees (!NR) which is also
the Compare's functional currencies.
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