2. SIGNIFICANT ACCOUNTING POLICIES
Accounting Policies have been consistently applied except where a newly issued
accounting standard is initially adopted or a revision to an existing accounting standard
required a change in the accounting policy hitherto in use.
2.2 Basis of preparation of financial statements
The standalone financial statements of Oriental Trimex Limited (“the Company”) comply
in allmaterial aspects with Indian Accounting Standards (“Ind AS”) as prescribed under
section 133 of the Companies Act, 2013 (“the Act”), as notified under the Companies
(Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting
Standards) Amendment Rules, 2016, as amended and other accounting principles
generally accepted in India.
The financial statements have been prepared under the historical cost convention on
accrual basis and the following items, which are measured on following basis on each
reporting date:
• Certain financial assets and liabilities that is measured at fair value.
• Defined benefit liabilities/(assets): present value of defined benefit obligation
less fair value of plan assets.
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,
regardless of whether that price is directly observable or estimated using another
valuation technique. In estimating the fair value of an asset or a liability, the Company
takes into account the characteristics of the asset or liability, if market participants
would take those characteristics into account when pricing the asset or liability at the
measurement date.
2.3 Functional and presentation currency
These financial statements are presented in Indian National Rupee (‘INR’), which is
the Company’s functional currency. All amounts have been rounded to the nearest
lakhs, unless otherwise indicated.
2.3 Business combinations and goodwill
Business combinations are accounted for using the acquisition method. At the acquisition
date, identifiable assets acquired and liabilities assumed are measured at fair value.
For this purpose, the liabilities assumed include contingent liabilities representing present
obligation and they are measured at their acquisition date fair values irrespective of
the fact that outflow of resources embodying economic benefits is not probable. The
consideration transferred is measured at fair value at acquisition date and includes the
fair value of any contingent consideration However, deferred tax asset or liability and
any liability or asset relating to employee benefit arrangements arising from a business
combination are measured and recognised in accordance with the requirements of Ind
AS 12, ‘Income Taxes’ and Ind AS 19, ‘Employee benefits respectively. Where the
consideration transferred exceeds the fair value of the net identifiable assets acquired
and liabilities assumed, the excess is recorded as goodwill. Alternatively, in case of a
bargain purchase wherein the consideration transferred is lower than the fair value of
the net identifiable assets acquired and liabilities assumed, the difference is recorded
as a gain in other comprehensive income and accumulated in equity as capital reserve.
The costs of acquisition excluding those relating to issue of equity or debt securities
are charged to the Statement of Profit & Loss in the period in which they are incurred.
2.5 Classification of Assets and Liabilities as Current and Non-Current
The Company presents assets and liabilities in the balance sheet based on current/
non-current classification. An asset/liability is treated as current when it is:
• Expected to be realised/settled or intended to be sold or consumed in normal
operating cycle;
• Held primarily for the purpose of trading and manufacturing;
• Expected to be realised/settled within twelve months after the reporting period,
or
• Cash and Cash equivalents unless restricted from being exchanged or used to
settle a liability for at least twelve months after the reporting period or there is no
unconditional right to defer the settlement of the liability for at least twelve months
All other assets/liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current.
The operating cycle is the time between the acquisition of the assets for processing
and theirrealisation in cash and cash equivalents.
2.6 Property, Plant and Equipment (Fixed Assets)
Recognition and Measurement
Items of property, plant and equipment are stated at cost less accumulated depreciation
andaccumulated impairment loss , if any. The cost of assets comprises of purchase
price and directly attributable cost of bringing the assets to working condition for its
intended use including borrowing cost and incidental expenditure during construction
incurred upto the date when the assets are ready to use. Capital work in progress
includes cost of assets at sites, construction expenditure and interest on the funds
deployed less any impairment loss, if any. If significant parts of an item of property,
plant and equipment have different useful lives, then they are accounted for as a separate
item (major components) of property, plant and equipment.
Subsequent Measurement
Subsequent expenditure is capitalised only if it is probable that there is an increase in
the future economic benefits associated with the expenditure will flow to the Company.
Depreciation
Depreciation is calculated on Straight Line Method using the rates arrived at on the
basis of estimated useful lives given in Schedule II of the Companies Act, 2013 except
for the following which has been determined on the basis of technical evaluation.
Particulars Useful Life
Plant and Machinery 15 Years
Vehicles- Car & Truck 8 Years
Furniture & Fixture 10 Years
Office equipment 5 Years
Computers 3 Years
Depreciation on additions to or on disposal of assets is calculated on pro-rata basis.
LeaseholdImprovements are being amortised over the period of 5 to 10 years.
Depreciation methods, useful lives and residual values are reviewed in each financial
year end and changes, if any, are accounted for prospectively.
De-recognition
An item of property, plant and equipment is de-recognised 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 the difference between net disposal proceeds and the
carrying amount of the asset and is recognised in the statement of profit and loss.
Leases
Operating Leases:
The determination of whether an arrangement is (or contains) a lease is based on the
substance of the arrangement at the inception of the lease. The arrangement is (or
contains) a lease if fulfilment of the arrangement is dependent on the use of a specific
asset or assets and the arrangement conveys a right to use the asset or assets, even
if that right is not explicitly specified in an arrangement.
Company as a lessor
Leases in which the Company does not transfer substantially all the risks and rewards
of ownership of an asset are classified as operating leases. Rental income from operating
leases is recognised on a straight-line basis over the term of the relevant lease. Initial
direct costs incurred in negotiating and arranging an operating lease are added to the
carrying amount of the leased asset and recognised over the lease term on the same
basis as rental income. Contingent rents are recognised as revenue in the period in
which they are earned.
Leases are classified as finance leases when substantially all of the risks and rewards
of ownership are transferred from the Company to the lessee. Amounts due from lessees
under finance leases are recorded as receivables at the Company’s net investment in
the leases. Finance lease income is allocated to accounting periods so as to reflect a
constant periodic rate of return on the net investment outstanding in respect of the
lease.
Company as a lessee
The Company assesses whether a contract is or contains a lease, at inception of the
contract. The Company recognises a right-of-use asset and a corresponding lease
liability with respect to all lease arrangements in which it is the lessee, except for short¬
term leases (defined as leases with a lease term of 12 months or less) and leases of
low value assets. For these leases, the Company recognises the lease payments as an
operating expense on a straight-line basis over the lease term, unless another systematic
basis is more representative of the time pattern in which economic benefits from the
leased assets are consumed. Contingent and variable rentals are recognised as expense
in the periods in which they are incurred.
Lease Liability
The lease payments that are not paid at the commencement date, are discounted
using the interest rate implicit in the lease. If that rate cannot be readily determined,
which is generally the case for leases in theCompany, the lessee’s incremental borrowing
rate is used, being the rate that the individual lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value as that of right-of-use asset in a
similar economic environment with similar terms, security and conditions.
Lease payments included in the measurement of the lease liability comprise:
• Fixed lease payments (including in-substance fixed payments) payable during
the lease term and under reasonably certain extension options, less any lease
incentives;
• Variable lease payments that depend on an index or rate, initially measured
using the index or rate at the commencement date;
• The amount expected to be payable by the lessee under residual value
guarantees;
• The exercise price of purchase options, if the lessee is reasonably certain to
exercise the options; and
• Payments of penalties for terminating the lease, if the lease term reflects the
exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the Balance Sheet. The lease
liability is subsequently measured by increasing the carrying amount to reflect interest
on the lease liability (using the effective interest method) and by reducing the carrying
amount to reflect the lease payments made.
The Company re-measures the lease liability (and makes a corresponding adjustment
to the related right-of-use asset) whenever:
• The lease term has changed or there is a change in the assessment of exercise
of a purchase option, in which case the lease liability is re-measured by
discounting the revised lease payments using a revised discount rate
• A lease contract is modified and the lease modification is not accounted for as a
separate lease, in which case the lease liability is re-measured by discounting
the revised lease payments using a revised discount rate.
Right of Use (ROU) Assets
The ROU assets comprise the initial measurement of the corresponding lease liability,
lease payments made at or before the commencement day and any initial direct costs.
They are subsequently measured at cost less accumulated depreciation and impairment
losses. Whenever the company incurs an obligation for costs to dismantle and remove a
leased asset, restore the site on which it is located or restore the underlying asset to the
condition required by the terms and conditions of the lease, a provision is recognised and
measured under Ind AS 37- Provisions, Contingent Liabilities and Contingent Assets. The
costs are included in the related right-of-use asset.
ROU assets are depreciated over the shorter period of the lease term or useful life of
the underlying asset. If the company is reasonably certain to exercise a purchase option,
the right-of-use asset is depreciated over the underlying asset’s useful life. The
depreciation starts at the commencement date of the lease.
The ROU assets are presented as a separate line in the Balance Sheet and details of
assets are given ROU note under Notes forming part of the Financial Statement. The
Company applies Ind AS 36- Impairment of Assets to determine whether a right-of-use
asset is impaired and accounts for any identified impairment loss as per its accounting
policy on ‘property, plant and equipment’. As a practical expedient, Ind AS 116 permits
lessee not to separate non-lease components when bifurcation of the payments is not
available between the two components, and instead account for any lease and
associated non-lease components as a single arrangement. The Company has used
this practical expedient.
2.7 Intangible assets
Intangible Assets (Other than Goodwill) acquired separately are stated at cost less
accumulated amortization and impairment loss, if any. Intangible assets are amortized
on straight line method basis over the estimated useful life. Estimated useful life of the
software is considered as 5 years Amortisation methods, useful lives and residual values
are reviewed at each financial year end and changes, if any, are accounted for
prospectively.
An intangible asset is de-recognised on disposal, or when no future economic benefits
are expected from use or disposal. Gains or losses arising from de-recognition of an
intangible asset, measured as the difference between the net disposal proceeds and
the carrying amount of the asset are recognised in the Statement of Profit & Loss when
the asset is derecognised.
2.8 Non-current assets held for sale
Non-current assets are classified as held-for sale if it is highly probable that they will
be recovered primarily through sale rather than through continuing use. Such assets
are generally measured at the lower of their carrying amount and fair value less costs
to sell. An impairment loss is recognised for any initial or subsequent write-down of the
asset to fair value less costs to sell. A gain is recognised for any subsequent increases
in fair value less costs to sell of an asset, but not in excess of any cumulative impairment
loss previously recognised. A gain or loss not previously recognised by the date of the
sale of the non-current asset is recognised at the date of de-recognition. Once classified
as held-for-sale, intangible assets and property, plant and equipment are no longer
amortised or depreciation.
2.9 Impairment of non-financial assets
At each reporting date, the Company reviews the carrying amounts of its non-financial
assets (other than inventories and deferred tax assets) to determine whether there is
any indication on impairment. If any such indication exists, then the recoverable amount
of assets is estimated. Impairment loss in respect of assets other than goodwill is
reversed only to the extent that the assets carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation or amortisation, if no
impairment loss had been recognised in prior years. A reversal of impairment loss is
recognised immediately in the Statement of Profit & Loss.
2.10 Borrowing Cost
Borrowing costs directly attributable to the acquisition, construction of qualifying assets
are capitalised as part of the cost of such assets upto the assets are substantially
ready for their intended use.
The loan origination costs directly attributable to the acquisition of borrowings (e.g.
loan processing fee, upfront fee) are amortised on the basis of the Effective Interest
Rate (EIR) method over the term of the loan.
All other borrowing costs are recognised in the Statement of Profit & Loss in the period
in which they are incurred.
2.11 Foreign currency transactions
(i) Foreign currency transactions are recorded at the exchange rate prevailing on
the date of the transaction.
(ii) Gains/losses arising out of fluctuation in the exchange rates are recognized in
the period in which they arise.
(iii) Monetary assets and liabilities denominated in foreign currency are translated at
the relevant rates of exchange prevailing at the year end and the resultant gain
or loss is recognized in the Statement of Profit and Loss, except in the case of
gain where significant uncertainties exist in relation to the actual realisation.
(iv) Premium / discount on forward exchange contracts (including options), which
are not intended for trading or speculation purposes, are amortized over the
period of the contract. There are no outstanding forward exchange contracts
(including options) as at the Balance Sheet date.
(v) Any profit or loss arising on cancellation or settlement of forward exchange
contracts (including options) is recognized as income or expense of the year.
2.12 Revenue Recognition :
The Company recognises revenue when it satisfies a performance obligation in
accordance with the provisions of contract with the customer. Sales of products are
recognized when the products are shipped and are stated inclusive of excise duty but
net of sales tax, trade discounts and sales returns.
Revenue is recognized when no significant uncertainties exist in relation to the amount
of eventual receipt. The Company generally follows mercantile system of accounting
and all income and expenditure items having a material bearing on the financial
statements are recognized on accrual basis. Interest incomes are recognised on an
accrual basis using the effective interest method. Dividends are recognised at the time
the right to receive payment is established.
2.13 Inventories
Inventories are valued at lower of cost and net realisable value except waste/scrap
which is valued at net realisable value. Cost of manufactured finished goods and stock
in process is determined by taking cost of purchases, material consumed, labour and
related overheads. Cost of raw materials, traded goods and stores & spare parts are
computed on weighted average basis. Net realisable value is the estimated selling
price in the ordinary course of business, less estimated costs of completion and to
make the sale.
2.14 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and short-term deposits
with an original maturity of three months or less. For the purposes of the Cash Flow
Statement, cash and cash equivalents is as defined above, net of outstanding bank overdrafts.
In the balance sheet, bank overdrafts are shown within borrowings in current liabilities.
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