3. Material Accounting Policy Information3.1. Property, Plant and Equipment (PPE)3.1.1. Recognition
Property, Plant and Equipment including Capital Work in Progress (CWIP) are stated in the Balance Sheet at cost,
less accumulated depreciation and accumulated impairment losses, if any.
The Company has elected to use the exemption available under Ind AS 101 to continue the carrying value for all
of its Property, Plant and Equipment as recognized in the financial statements as at the date of transition to Ind AS,
measured as per the previous GAAP and use that as its deemed cost as at the date of transition (1st April 2015).
3.1.2. Cost of Property, Plant and Equipment
Parts of an item of PPE which are having different useful life and cost of which can be measured reliably are
accounted as separate components.
Catalyst whose useful life is more than one year is capitalised as Property, Plant and Equipment.
Stores and Spares which qualifies as Property, Plant and Equipment are capitalised based on materiality threshold
(if any) [Refer para 4.3].
Item of PPE purchased under assets on hire at residence of employee scheme are capitalized based on Company's
policy for the applicable scheme.
Item of PPE having basic value not exceeding ? 1,000/- (other than assets on hire at residence of employee) are
fully charged to statement of Profit and Loss in the year of purchase.
Directly identifiable expenditure on overhaul and repairs on account of planned shutdown (other than replacement
spare) which are of significant value i.e. 5% of the gross value of particular asset / unit or ? 10 million or more
for a particular asset /unit whichever is lower is capitalized as component of relevant items of PPE and will be
depreciated over the period till next planned shutdown on straight line basis. All replacement spares procured and
consumed during overhaul and repairs on account of planned shutdown are capitalised.
Environment responsibility related obligations directly attributable to projects are recognized as project cost on
the basis of progress of project or on actual incurrence, whichever is higher. The said obligations are discounted
at appropriate and applicable discount rates wherever the effect of time value of money is material and a reliable
estimate of timing of future outflow of resources can be made. In case of discounting, the obligation is increased
over a period of time and the differential is recognized in the statement of profit and loss as finance cost.
In respect of the capital goods common for both GST and non-GST products, the GST input tax credit is taken on
the eligible portion based on GST and non-GST product ratio in the month of accounting and the ineligible portion
is capitalized. Subsequently, this ratio is reviewed every month as per the GST provisions and the differential GST
amount (if any) arising due to changes in the ratio is capitalized when it is beyond the materiality threshold [Refer
para 4.3].
3.1.3. Useful Life
The useful life of PPE (other than assets on hire at residence of employee) and their components are either based on
useful life as stated in Schedule II to the Companies Act, 2013 or based on technical assessment by the Company.
The useful life of assets purchased under assets on hire at residence of employee are based on Company's policy
for the applicable scheme.
In respect of immovable assets constructed on leasehold land, useful life as per Schedule II or lease period of land
(including renewable/likely renewable period) whichever is earlier is considered.
The estimated useful life is reviewed at the end of each reporting period, with the effect of any changes in estimate
accounted for on a prospective basis.
Estimated useful life of the Assets are as follows:
3.1.4. Residual Value
The Company has assessed the estimated residual value of its Property, Plant and Equipment and has adopted the
same as prescribed in Schedule II i.e. up to 5% except for the assets purchased under assets on hire at residence of
employee scheme are based on Company's policy (10% to 20%).
3.1.5. Depreciation
Depreciation is provided on the cost of PPE (other than Freehold Land and Properties under construction) less
their residual values over their useful lives, using Straight Line Method.
Catalysts are depreciated over the guaranteed useful life as specified by the supplier /technical evaluation
(whichever is earlier) when the catalyst is put to use.
Planned shutdown cost which are recognized as PPE are depreciated over the period till next planned shutdown
on straight line basis.
Depreciation on stores and spares which are capitalised as Property, Plant and Equipment are depreciated over the
period starting when it is available for use i.e. from date of acceptance of material and continuing over the shorter
of its useful life or the remaining expected useful life of the asset to which it relates.
The depreciation for assets purchased under assets on hire at residence of employee scheme are based on
Company's policy for the applicable scheme.
Depreciation on additions to PPE during the year is provided for on a pro-rata basis with reference to the date
of additions except low value items not exceeding basic value of ? 5,000/- per unit (other than assets on hire at
residence of employee) which are fully depreciated at the time of addition.
Depreciation on subsequent expenditure on PPE arising on account of capital improvement or other factors is
provided for prospectively over the remaining useful life.
The Company depreciates significant components of the main asset (which have different useful lives as compared
to the main asset) based on the individual useful life of those components.
3.1.6.De-recognition
An item of Property, Plant and Equipment is derecognised upon disposal or when no future economic benefits
are expected from its use or disposal. The gain or loss arising on de-recognition of an item of Property, Plant and
Equipment is determined as the difference between the net disposal proceeds (if any) and the carrying amount of
the item.
In the event of replacement of spare, the written down value of the old spare is charged to the Statement of Profit
and Loss as and when replaced.
3.2. Leases
To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses
whether:
(i) The contract involves use of an identified asset
(ii) The company has substantially all the economic benefits from the use of the asset through the period of
the lease and
(iii) The company has the right to direct the use of the asset.
Company as a Lessee:
At the date of commencement of the lease, the Company recognizes a Right-of-Use Asset (ROU Asset) and a
corresponding Lease Liability for all lease contracts / arrangements in which it is a lessee, except for lease with a
term of twelve months or less (i.e. short term leases) and lease of low value assets.
Certain lease arrangements include the options to extend or terminate the lease before the end of the lease term.
Right-of-Use Assets and Lease Liabilities include these options when it is reasonably certain that they will be
exercised.
The Lease Liability is initially measured at present value of the future lease payments over the reasonably certain
lease term. The lease payments are discounted using the interest rate implicit in the lease, if it is not readily
determinable, using the incremental borrowing rate. For leases with similar characteristics, the Company, on a lease
by lease basis applies either the incremental borrowing rate specific to the lease or the incremental borrowing rate
for the portfolio as a whole.
The Right-of-Use Assets are initially recognized at cost, which comprises the amount of the initial measurement of
the lease liability adjusted for any lease payments made at or before the inception date of the lease along with any
initial direct costs, restoration obligations and lease incentives received.
Subsequently, the Right-of-Use Assets are measured at cost less any accumulated depreciation and accumulated
impairment losses, if any. The Right-of-Use Assets are depreciated using the straight-line method, except in case
of leasehold lands where the ownership will be transferred to the Company, from the commencement date over
the shorter of lease term or useful life of Right-of-Use Assets. However, in case of ownership of such right-of-use
asset transfers to the lessee at the end of the lease term, such assets are depreciated over the useful life of the
underlying asset. The Company applies Ind AS 36 to determine whether a Right-of-Use Asset are impaired and
accounts for any identified impairment loss as described in the accounting policy below on "Impairment of Non¬
Financial Assets".
The interest cost on Lease Liability (computed using effective interest method) is expensed in the Statement of
Profit and Loss unless eligible for capitalization as per accounting policy below on "Borrowing or Finance costs".
The Company accounts for each lease component within the contract as a lease separately from non-lease
components of the contract in accordance with Ind AS 116 and allocates the consideration in the contract to each
lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand¬
alone price of the non-lease components.
Right-of-Use Assets are derecognized upon completion or cancellation of the lease contract.
Lease Liability and Right-of-Use Assets have been separately presented in the Balance Sheet and lease payments
have been classified as financing activity in the Statement of Cash Flows.
Lease modification impact is on prospective basis.
The Company has elected not to apply Ind AS 116 "Leases" to intangible assets.
3.3. Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the
business less accumulated impairment losses, if any.
Goodwill arising on amalgamation of a business is carried at cost as established at the date of acquisition of the
business less accumulated impairment losses, if any.
The Company has elected to use the exemption available under Ind AS 101 to continue the carrying value for
goodwill as recognized in the financial statements as at the date of transition to Ind AS, measured as per the
previous GAAP and use that as its deemed cost as at the date of transition (151 April 2015).
3.4. Intangible Assets3.4.1. Intangible Assets other than Goodwill
Intangible Assets with finite useful lives that are acquired separately are carried at cost less Accumulated
amortisation and Accumulated impairment losses, if any. Amortisation is recognised on a straight-line basis over
their estimated useful lives. Intangible assets with indefinite useful lives that are acquired separately are not
subject to amortization and are carried at cost less Accumulated impairment losses if any.
Cost incurred on computer software, licenses and any other technology development resulting in future economic
benefits, other than specific software that are integral part of the related hardware, are capitalized as Intangible
Asset. However, where such assets are under development or are not yet ready for use, accumulated cost incurred
on such items are accounted as "Intangible Assets Under Development".
The Company has elected to use the exemption available under Ind AS 101 to continue the carrying value for all
of its intangible assets as recognized in the financial statements as at the date of transition to Ind AS, measured as
per the previous GAAP and use that as its deemed cost as at the date of transition (1st April 2015).
3.4.2. De-recognition of Intangible Assets
An Intangible Asset is derecognised on disposal, or when no future economic benefits are expected from use or
disposal. Gains or losses arising from derecognition of an Intangible Asset, measured as the difference between
the net disposal proceeds and the carrying amount of the asset, and are recognised in Statement of Profit and Loss
when the asset is derecognised.
3.4.3. Useful lives of Intangible Assets
Estimated useful life of the Intangible Assets are as follows:
3.5. Impairment of Non-Financial Assets
The Company reviews the carrying amounts of its Non-financial assets other than inventories, deferred tax assets,
non-current assets classified as held for sale and goodwill at the end of each reporting period to determine whether
there is any significant indication that those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).
When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the
recoverable amount of the Cash Generating Unit (CGU) to which the asset belongs.
Recoverable amount is the higher of fair value less costs of disposal and value in use.
Fair value less cost of disposal are determined in line with 'Fair Value Measurement.
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
for which the estimates of future cash flows have not been adjusted.
3.6. Inventories
Inventories are valued at lower of cost and net realizable value. Cost of inventories comprises of purchase cost and
other costs incurred in bringing inventories to their present location and condition. The cost formula is as under:
Cost of Stock-in-Process is determined based on Raw Material cost and Proportionate Conversion Cost.
Cost of Finished Goods is determined based on Raw Material cost and Conversion Cost.
Excise duty on Finished Goods lying at manufacturing location is provided for at the assessable value based on
applicable duty.
Customs duty on Raw Materials lying in bonded warehouse is provided for at the applicable rates.
Obsolete, Slow Moving, Surplus and Defective Stocks are identified at the time of physical verification of stocks
and where necessary, provision is made for such stocks.
3.7. Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or
equity instrument of another entity. Financial assets and financial liabilities are recognized when the Company
becomes a party to the contractual provisions of the instruments.
A financial asset is any asset that is either cash or an equity instrument of another entity or a contractual right to
receive cash or another financial asset from another entity or to exchange financial assets or financial liabilities
with another entity under conditions that are potentially favourable to the entity or a contract that will or may be
settled in the entity's own equity instruments and is a non-derivative for which the entity is or may be obliged to
receive a variable number of the entity's own equity instruments.
A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another
entity or a contract that will or may be settled in the entity's own equity instruments and is a non-derivative for
which the entity is or may be obliged to deliver a variable number of the entity's own equity instruments.
An Equity Instrument is any contract that evidences a residual interest in the assets of an entity after deducting all
of its liabilities.
3.7.1.Initial recognition and measurement
Financial Assets and Financial Liabilities are initially measured at fair value. However, trade receivables that do not
contain a significant financing component are measured at transaction price. Transaction costs that are directly
attributable to the acquisition or issue of Financial Assets and Financial Liabilities (other than Financial Assets and
Financial Liabilities at fair value through profit or loss) are added to or deducted from the fair value of the Financial
Assets or Financial Liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the
acquisition of Financial Assets or Financial Liabilities at Fair Value through profit or loss (FVTPL)are recognised
immediately in Statement of Profit and Loss [Refer para 4.3].
When the Company receives Financial Guarantee from its holding company, initially it measures guarantee fees
at the fair value. The Company records the difference between the fair value of Corporate Guarantee received and
the consideration paid by the company as "Deemed Equity" from Holding Company with a corresponding asset
recorded as prepaid guarantee charges or by debiting to statement of Profit and Loss as the case may be. Such
deemed equity is presented under the head 'Other Equity' in the Balance Sheet. Prepaid guarantee charges are
recognized in the Statement of Profit and Loss over the period of Financial Guarantee received.
3.7.2.Subsequent Measurement
Financial Assets
All recognised Financial Assets are subsequently measured in their entirety at either amortised cost or fair value,
based on the business model for managing the financial assets and the contractual cash flow characteristics.
(i) Financial Assets at amortised cost
Financial Assets are subsequently measured at amortised cost using the effective interest method if these
financial assets are held within a business whose objective is to hold these assets in order to collect contractual
cash flows and the contractual terms of the Financial Asset give rise on specified dates to Cash Flows that are
solely payments of principal and interest (SPPI) on the principal amount outstanding.
(ii) Financial Assets at Fair value through Other Comprehensive Income (FVOCI)
Financial Assets are measured at fair value through Other Comprehensive Income if these Financial Assets are
held within a business whose objective is achieved by both selling Financial Assets and collecting contractual
Cash Flows, the contractual terms of the Financial Asset give rise on specified dates to Cash Flows that are
solely payments of principal and interest (SPPI) on the principal amount outstanding.
(iii) Financial Assets at Fair value through Profit or Loss (FVTPL)
Financial Assets are measured at fair value through profit or loss unless it is measured at amortised cost or at
fair value through Other Comprehensive Income.
After initial measurement, any fair value changes including any interest income, impairment loss and other
net gains and losses are recognized in the Statement of Profit and Loss.
(iv) Cash and Cash Equivalents
The Company considers all highly liquid financial instruments, which are readily convertible into known
amounts of cash that are subject to an insignificant risk of change in value and having original maturities of
three months or less from the date of purchase, to be Cash Equivalents. Cash and Cash equivalents consist of
balances with banks which are unrestricted for withdrawal and usage.
(v) Equity Investments:
Equity Investments (Other than Subsidiaries, Joint Ventures (JV) and Associates):
All Equity Investments in the scope of Ind AS 109 are measured at Fair value. Equity Instruments which are held
for trading are classified as at FVTPL. For all other such equity investments, the Company decides to classify
the same either as FVOCI or FVTPL. The Company makes such election on an instrument-by-instrument basis.
The classification is made on initial recognition and is irrevocable.
Equity Investments (In subsidiaries, Joint Ventures (JV) and Associates):
I nvestment in Subsidiaries, Joint Ventures (JV) and Associates are accounted for at cost in Standalone
Financial Statements.
Financial Liabilities
(i) Financial liabilities at amortised cost:
Financial Liabilities are measured at amortised cost at the end of subsequent accounting periods. The
carrying amounts of Financial Liabilities that are subsequently measured at amortised cost are determined
based on the Effective Interest method. Interest expense that is not capitalised as part of costs of an asset is
included in the 'Finance Costs' line item.
(ii) Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include derivatives. Financial liabilities at FVTPL are
measured at fair value and net gains and losses, including any interest expense, are recognised in profit or
loss.
Equity Instruments
Equity instruments issued by the Company are recognised at the proceeds received. Incremental costs directly
attributable to the issuance of new ordinary equity shares are recognized as a deduction from equity, net of tax
effects.
3.7.3.Impairment
Financial Assets
The Company assesses at each Balance Sheet date whether a Financial Asset or a group of Financial Assets is
impaired. Ind AS 109 requires expected credit losses to be measured through a loss allowance. The Company
recognises lifetime expected credit losses for trade receivables that do not constitute a financing transaction. For
all other financial assets, expected credit losses are measured at an amount equal to 12 month expected credit
losses or at an amount equal to lifetime expected losses, if the credit risk on the financial asset has increased
significantly since initial recognition.
3.7.4.De-recognition
Financial Assets
The Company derecognises a Financial Asset when the contractual rights to the cash flows from the asset expire,
or when it transfers the Financial Asset and substantially all the risks and rewards of ownership of the asset to
another party.
On derecognition of a Financial Asset in its entirety, the difference between the asset's carrying amount and the
sum of the consideration received and receivable is recognised in the Statement of Profit and Loss.
Financial Liabilities
The Company derecognises Financial Liabilities when, and only when, the Company's obligations are discharged,
cancelled or have expired. The difference between the carrying amount of the Financial Liability derecognised and
the consideration paid and payable is recognised in the Statement of Profit and Loss.
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