A) SIGNIFICANT ACCOUNTING POLICIES
The Company has applied following accounting policies to all periods presented in
the Ind AS Financial Statement.
a) Revenue Recognition
Revenue is measured at the fair value of the consideration received or
receivable, net of discounts, volume rebates, outgoing sales taxes and other
indirect taxes.
Revenue from sales is recognized when all significant risks and rewards of
ownership of the commodity sold are transferred to the customer which generally
coincides with delivery. Revenues from sale of by-products are included in
revenue.
b) Property, Plant and Equipment
i) Property, plant and equipment
The Company has applied Ind AS 16 with retrospective effect for all of its
property, plant and equipment as at the transition date, viz., March 31, 2016.
The initial cost of property, plant and equipment comprises its purchase price,
including import duties and non-refundable purchase taxes, attributable
borrowing cost and any other directly attributable costs of bringing an asset to
working condition and location for its intended use. It also includes the
present value of the expected cost for the decommissioning and removing of
an asset and restoring the site after its use, if the recognition criteria for a
provision are met.
Expenditure incurred after the property, plant and equipment have been put
into operation, such as repairs and maintenance, are normally charged to the
statements of profit and loss in the period in which the costs are incurred.
Major inspection and overhaul expenditure is capitalized if the recognition
criteria are met.
Gains and losses on disposal of an item of property, plant and equipment are
determined by comparing the proceeds from disposal with the carrying
amount of property, plant and equipment, and are recognized net within other
income/other expenses in statement of profit and loss.
An item of property, plant and equipment and any significant part initially
recognized is derecognized upon disposal or when no future economic
benefits are expected from its use or disposal. Any gain or loss arising on
derecognition 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 derecognized.
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.
ii) Depreciation
Assets in the course of development or construction and freehold land are not
depreciated.
Other property, plant and equipment are stated at cost less accumulated
depreciation and any provision for impairment. Depreciation commences
when the assets are ready for their intended use. Depreciation is calculated
on the depreciable amount, which is the cost of an asset less its residual
value on WDV method.
c) Intangible assets
Intangible assets acquired are measured on initial recognition at cost. Following
initial recognition, intangible assets are carried at cost less any accumulated
amortization and accumulated impairment losses.
The useful lives of intangible assets are assessed as either finite or indefinite.
The Company currently does not have any intangible assets with indefinite useful
life. Intangible assets are amortized over the useful economic life and assessed
for impairment whenever there is an indication that the intangible asset may be
impaired. The amortization period and the amortization method for an intangible
asset are reviewed at least at the end of each reporting period. 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 amortization period
or method, as appropriate, and are treated as changes in accounting estimates.
The amortization expense on intangible assets is recognized in the statement of
profit and loss unless such expenditure forms part of carrying value of another
asset.
Gains or losses arising from derecognition of an intangible asset are measured
as the difference between the net disposal proceeds and the carrying amount of
the asset and are recognized in the statement of profit and loss when the asset is
derecognized.
d) 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
Initial recognition and measurement
All financial assets are recognized initially at fair value plus, in the case of
financial assets not recorded at fair value through statement of profit and loss,
transaction costs that are attributable to the acquisition of the financial asset.
Purchases or sales of financial assets that require delivery of assets within a time
frame established by regulation or convention in the market place (regular way
trades) are recognized on the trade date, i.e., the date that the Company commits
to purchase or sell the asset.
Subsequent Measurement
Subsequent measurement of financial assets is described below - Debt
instruments at amortized cost
A 'debt instrument' is measured at the amortized cost if both the following
conditions are met:
a) The asset is held within a business model whose objective is to hold assets
for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that
are solely payments of principal and interest (SPPI) on the principal amount
outstanding.
After initial measurement, such financial assets are subsequently measured at
amortized cost using the effective interest rate (EIR) method. Amortized cost is
calculated by taking into account any discount or premium on acquisition and
fees or costs that are an integral part of the EIR. The EIR amortization is included
in finance income in the statement of profit and loss. The losses arising from
impairment are recognized in the statement of profit and loss. This category
generally applies to trade and other receivables.
Debt instrument at FVTOCI
A ‘debt instrument’ is classified as at the FVTOCI if both of the following criteria
are met:
a) The objective of the business model is achieved both by collecting contractual
cash flows and selling the financial assets, and
b) The asset’s contractual cash flows represent SPPI.
Debt instruments included within the FVTOCI category are measured initially as
well as at each reporting date at fair value. Fair value movements are recognized
in the other comprehensive income (OCI). However, the Company recognizes
interest income, impairment losses & reversals and foreign exchange gain or loss
in the P&L. On derecognition of the asset, cumulative gain or loss previously
recognized in OCI is reclassified from the equity to P&L. Interest earned whilst
holding FVTOCI debt instrument is reported as interest income using the EIR
method.
Debt instrument at FVTPL
FVTPL is a residual category for debt instruments. Any debt instrument, which
does not meet the criteria for categorization as at amortized cost or as FVTOCI,
is classified as at FVTPL.
In addition, the Company may elect to designate a debt instrument, which
otherwise meets amortized cost or FVTOCI criteria, as at FVTPL. However, such
election is allowed only if doing so reduces or eliminates a measurement or
recognition inconsistency (referred to as ‘accounting mismatch’). The Company
has designated its investments in debt instruments as FVTPL. Debt instruments
included within the FVTPL category are measured at fair value with all changes
recognized in the P&L.
Financial Assets - Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a
group of similar financial assets) is primarily derecognized (i.e. removed from the
Company’s balance sheet) when:
• The rights to receive cash flows from the asset have expired, or
• The Company has transferred its rights to receive cash flows from the asset
or has assumed an obligation to pay the received cash flows in full without
material delay to a third party under a ‘pass-through’ arrangement; and either
(a) the Company has transferred substantially all the risks and rewards of the
asset, or (b) the Company has neither transferred nor retained substantially
all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset
or has entered into a pass- through arrangement, it evaluates if and to what
extent it has retained the risks and rewards of ownership. When it has neither
transferred nor retained substantially all of the risks and rewards of the asset, nor
transferred control of the asset, the Company continues to recognize the
transferred asset to the extent of the Company’s continuing involvement. In that
case, the Company also recognizes an associated liability. The transferred asset
and the associated liability are measured on a basis that reflects the rights and
obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred
asset is measured at the lower of the original carrying amount of the asset and
the maximum amount of consideration that the Company could be required to
repay.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL)
model for measurement and recognition of impairment loss on the financial
assets that are debt instruments, and are measured at amortized cost e.g., loans,
debt securities, deposits and trade receivables or any contractual right to receive
cash or another financial asset that result from transactions that are within the
scope of Ind AS 18.
The Company follows 'simplified approach' for recognition of impairment loss
allowance on trade receivables. The application of simplified approach does not
require the Company to track changes in credit risk. Rather, it recognizes
impairment loss allowance based on lifetime ECLs at each reporting date, right
from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure,
the Company determines that whether there has been a significant increase in
the credit risk since initial recognition. If credit risk has not increased significantly,
12-month ECL is used to provide for impairment loss. However, if credit risk has
increased significantly, lifetime ECL is used. If, in a subsequent period, credit
quality of the instrument improves such that there is no longer a significant
increase in credit risk since initial recognition, the Company reverts to recognizing
impairment loss allowance based on 12-month ECL.
Lifetime ECL are the expected credit losses resulting from all possible default
events over the expected life of a financial instrument. The 12-month ECL is a
portion of the lifetime ECL which results from default events that are possible
within 12 months after the reporting date.
ECL is the difference between all contractual cash flows that are due to the
Company in accordance with the contract and all the cash flows that the entity
expects to receive (i.e., all cash shortfalls), discounted at the original EIR.
ECL impairment loss allowance (or reversal) recognized during the period is
recognized as income/ expense in the statement of profit and loss. This amount is
reflected under the head 'other expenses' in the statement of profit and loss. The
balance sheet presentation for various financial instruments is described below:
• Financial assets measured as at amortized cost: ECL is presented as an
allowance, i.e., as an integral part of the measurement of those assets in the
balance sheet. The allowance reduces the net carrying amount. Until the
asset meets write-off criteria, the Company does not reduce impairment
allowance from the gross carrying amount.
• Debt instruments measured at FVTPL: Since financial assets are already
reflected at fair value, impairment allowance is not further reduced from its
value. The change in fair value is taken to the statement of Profit and Loss.
• Debt instruments measured at FVTOCI: Since financial assets are already
reflected at fair value, impairment allowance is not further reduced from its
value. Rather, ECL amount is presented as 'accumulated impairment amount'
in the OCI.
For assessing increase in credit risk and impairment loss, the Company
combines financial instruments on the basis of shared credit risk characteristics
with the objective of facilitating an analysis that is designed to enable significant
increases in credit risk to be identified on a timely basis.
The Company does not have any purchased or originated credit-impaired (POCI)
financial assets, i.e., financial assets which are credit impaired on purchase/
origination.
Financial liabilities - Recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair
value through statement of profit and loss, loans and borrowings, payables, or as
derivatives designated as hedging instruments in an effective hedge, as
appropriate.
All financial liabilities are recognized initially at fair value and, in the case of loans
and borrowings and payables, net of directly attributable transaction costs.
The Company’s financial liabilities include trade and other payables, loans and
borrowings including bank overdrafts, financial guarantee contracts and
derivative financial instruments.
The measurement of financial liabilities depends on their classification, as
described below:
• Financial liabilities at fair value through statement of profit and loss
Financial liabilities at fair value through statement of profit and loss include
financial liabilities held for trading and financial liabilities designated upon
initial recognition as at fair value through statement of profit and loss.
Financial liabilities are classified as held for trading if they are incurred for the
purpose of repurchasing in the near term. This category also includes
derivative financial instruments entered into by the Company that are not
designated as hedging instruments in hedge relationships as defined by Ind
AS 109. Separated embedded derivatives are also classified as held for
trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognized in the statement
of profit and loss. Financial liabilities designated upon initial recognition at fair
value through statement of profit and loss are designated as such at the initial
date of recognition, and only if the criteria in Ind AS 109 are satisfied. For
liabilities designated as FVTPL, fair value gains/ losses attributable to
changes in own credit risk is recognized in OCI. These gains/ losses are not
subsequently transferred to statement of profit and loss. However, the
Company may transfer the cumulative gain or loss within equity. All other
changes in fair value of such liability are recognized in the statement of profit
and loss. The Company has not designated any financial liability as at fair
value through statement of profit and loss.
• Loans and Borrowings
After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortized cost using the effective interest rate
(hereinafter referred as EIR) method. Gains and losses are recognized in
statement of profit and loss when the liabilities are derecognized as well as
through the EIR amortization process.
Amortized cost is calculated by taking into account any discount or premium
on acquisition and fees or costs that are an integral part of the EIR. The EIR
amortization is included as finance costs in the statement of profit and loss.
Financial liabilities - Derecognition
A financial liability is derecognized when the obligation under the liability is
discharged or cancelled or expires. When an existing financial liability is replaced
by another from the same lender on substantially different terms, or the terms of
an existing liability are substantially modified, such an exchange or modification is
treated as the derecognition of the original liability and the recognition of a new
liability. The difference in the respective carrying amounts is recognized in the
statement of profit and loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported
in the balance sheet if there is a currently enforceable legal right to offset the
recognized amounts and there is an intention to settle on a net basis, to realize
the assets and settle the liabilities simultaneously.
e) Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on
hand and short-term deposits with an original maturity of three months or less,
which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents
consist of cash and short-term deposits, as defined above.
f) Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production
of an asset that necessarily takes a substantial period 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.
g) 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.
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 groups of 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 post- 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.
Impairment losses of continuing operations, including impairment on inventories,
are recognized in the statement of profit and loss.
An assessment is made at each reporting date to determine whether there is an
indication that previously recognized 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 recognized 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 recognized. The reversal
is limited so that the carrying amount 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 recognized for the
asset in prior years. Such reversal is recognized in the statement of profit and
loss.
h) Government Grants
Government grants are recognized where there is reasonable assurance that the
grant will be received and all attached conditions will be complied with. When the
grant relates to an expense item, it is recognized as income on a systematic
basis over the periods that the related costs, for which it is intended to
compensate, are expensed. When the grant relates to an asset, it is treated as
deferred income and released to the statement of profit and loss over the
expected useful lives of the assets concerned. When the Company receives
grants of non-monetary assets, the asset and the grant are recorded at fair value
amounts and released to statement of profit and loss over the expected useful life
in a pattern of consumption of the benefit of the underlying asset. When loans or
similar assistance are provided by governments or related institutions, with an
interest rate below the current applicable market rate, the effect of this favorable
interest is regarded as a government grant. The loan or assistance is initially
recognized and measured at fair value and the government grant is measured as
the difference between the initial carrying value of the loan and the proceeds
received. The loan is subsequently measured as per the accounting policy
applicable to financial liabilities
i) Inventories
Inventories are valued at the lower of cost including incidental cost if any or net
realizable value except scrap and by products which are valued at net realizable
value.
j) Taxation
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.
Current income tax relating to items recognized outside profit or loss is
recognized outside profit or loss (either in other comprehensive income or in
equity). Current tax items are recognized 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.
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
recognized for all taxable temporary differences, except when it is probable that
the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, the
carry forward of unused tax credits and any unused tax losses. Deferred tax
assets are recognized to the extent that it is probablethat 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.
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 utilized.
Unrecognized deferred tax assets are re-assessed at each reporting date and are
recognized to the extent that it has become probable that future taxable profits
will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected
to apply in the year when the asset is realized or the liability is settled, based on
tax rates (and tax laws) that have been enacted or substantively enacted at the
reporting date.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives
future economic benefits in the form of adjustment to future income tax liability, is
considered as an asset if there is convincing evidence that the Company will pay
normal income tax. Accordingly, MAT is recognized as an asset in the Balance
Sheet when it is probable that future economic benefit associated with it will flow
to the Company.
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