2 Material accounting policies
(i) Classification of assets and liabilities into current/non-
current
Assets and Liabilities in the balance sheet have been
classified as either current or non-current.
An asset has been classified as current if (a) it is expected
to be realized in, or is intended for sale or consumption
in, the Company’s normal operating cycle; or (b) it is
held primarily for the purpose of being traded; or (c) it is
expected to be realized within twelve months after the
reporting date; or (d) it is cash or cash equivalent unless
it is restricted from being exchanged or used to settle a
liability for at least twelve months after the reporting date.
All other assets have been classified as non-current.
A liability has been classified as current when (a) it is
expected to be settled in the Company’s normal operating
cycle; or (b) it is held primarily for the purpose of being
traded; or (c) it is due to be settled within twelve months
after the reporting date; or (d) the Company does not have
an unconditional right to defer settlement of the liability for
at least twelve months after the reporting date. All other
liabilities have been classified as non-current.
Deferred tax assets and liabilities are classified as non¬
current assets and liabilities.
An operating cycle is the time between the acquisition of
assets for processing and their realization in cash or cash
equivalents. The Company has identified twelve months as
its operating cycle.
(ii) Property, plant and equipment
Property, plant and equipment (PPE) are stated at cost, net
of accumulated depreciation and accumulated impairment
losses, if any. The cost comprises purchase price, freight,
duties, taxes, borrowing costs, if recognition criteria are
met, and any directly attributable cost incurred to bring the
asset to its working condition for the intended use. Any
trade discounts and rebates are deducted in arriving at the
purchase price.
Subsequent expenditure is capitalised only if it is probable
that the future economic benefits associated with the
expenditure will flow to the Company. When significant
parts of plant and equipment are required to be replaced
at intervals, the Company depreciates them separately
based on their specific useful lives. Likewise, when a
major inspection is performed, its cost is recognised
in the carrying amount of the plant and equipment as a
replacement if the recognition criteria are satisfied. All
other repair and maintenance costs are recognised in profit
or loss as incurred. Replaced assets held for disposal are
stated at lower of their carrying amount and fair value less
costs to sell, and depreciation on such assets ceases and
shown under "Assets held for sale”.
Items of stores and spares that meet the definition of PPE
are capitalized at cost. Otherwise, such items are classified
as inventories.
Gains or losses arising from derecognition of the assets
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.
Expenditure on new projects and substantial expansion
Expenditure directly relating to construction activity is
capitalized. Other indirect expenditure incurred during the
construction period which are not related to the construction
activity nor are incidental thereto are charged to the statement
of profit and loss. Income earned during construction period,
if any, is deducted from the total of the indirect expenditure.
(iii) Depreciation on property, plant and equipment
a. Depreciation on property, plant and equipment is
calculated on a straight-line basis using the rates
arrived at based on the useful lives estimated by
the Management. The identified components are
depreciated separately over their useful lives; the
remaining components are depreciated over the life of
the principal asset. The Company has used the following
useful life to provide depreciation on its property, plant
and equipment based on technical evaluation done.
If significant parts of an item of property, plant and
equipment have different useful lives, then they are
accounted for as separate component of property,
plant and equipment. These are estimated by the
management supported by independent assessment
by professionals.
The company has used the following useful life
to provide depreciation on its property, plant and
b. Premium on land held on leasehold basis considered
as Right of Use Asset is amortized over the
period of lease.
c. The classification of plant and machinery into
continuous and non-continuous process is done as
per technical certification by the management and
depreciation thereon is provided accordingly.
d. The residual values and useful lives of property, plant
and equipment are reviewed at each financial year
end and adjusted prospectively, if appropriate.
(iv) Intangible assets and amortisation
Intangible assets acquired separately are measured on
initial recognition at cost. Following initial recognition,
intangible assets are carried at cost less accumulated
amortization and accumulated impairment losses, if
any. Intangible assets with finite lives are amortised on
a straight line basis over the estimated useful economic
life. The amortization period and the amortization method
for an intangible asset with a finite useful life are reviewed
at least once at the end of each reporting period. If the
expected useful life of the asset is different from previous
estimates, the amortization period is changed accordingly.
If there has been a change in the expected pattern of
economic benefits from the asset, the amortization method
is changed to reflect the changed pattern. Such changes
are accounted for in accordance with Ind AS-8 "Accounting
Policies, Changes in Accounting Estimates and Errors”.
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.
The following are the acquired intangible assets:
Software:
The management of the Company assessed the
useful life of software as finite and cost of software is
amortized over their estimated useful life of three years on
straight line basis.
(v) Impairment of Non-Financial Assets
The Company assesses at each reporting date whether
there is an indication that an asset (except inventories and
deferred tax assets) 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. Value in use
is based on the estimated future cash flows, 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 CGU (or the asset).The
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. Where 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.
After impairment, depreciation is provided on the revised
carrying amount of the asset over its remaining useful life.
(vi) Leases
At inception of the contract, the Company assesses
whether a contract is, or contains, a lease. A contract
is, or contains, a lease if the contract coveys the right to
control the use of an identified asset for a period of time in
exchange for consideration. To assess whether a contract
conveys the right to control the use of an identified asset,
the Company assesses whether:
- The contract involves use of an identified asset,
whether specified explicitly or implicitly;
- The Company has the right to obtain substantially
all of the economic benefits from use of the asset
throughout the period of use;
- The Company has right to direct the use of the asset by
either having right to operate the asset or the Company
having designed the asset in a way that predetermines
how and for what purpose it will be used.
The Company recognizes a right-of-use asset and a lease
liability at the lease commencement date. The right-of-use
asset is initially measured at cost, which comprises the
initial amount of the lease liability adjusted for any lease
payments made on or before the commencement date,
plus any initial direct costs incurred and an estimate of cost
to dismantle and remove the underlying asset or to restore
the underlying asset or the site on which it is located, less
any lease incentive received.
The right-of-use asset is subsequently measured at cost
less accumulated depreciation, accumulated impairment
losses, if any and adjusted for any remeasurement of the
lease liability. The right-of-use asset is depreciated using
straight line method from the commencement date to the
earlier of the end of the useful life of the right-of-use asset or
the end of lease term. The estimates of useful lives of right-
of-use assets are determined on the same basis as those of
property, plant and equipment. In addition, the right-of-use
asset is periodically reduced by impairment losses, if any,
and adjusted for certain remeasurements of lease liability.
The lease liability is initially measured at the present value of
the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease
or, if that rate cannot be readily determined, the Company’s
incremental borrowing rate. The lease liability is subsequently
measured at amortised cost. The lease payments shall
include fixed payments, variable lease payments, residual
value guarantees, exercise price of a purchase option where
the Company is reasonably certain to exercise that option and
payment of penalties for terminating the lease, if the lease
term reflects the lessee exercising an option to terminate
the lease. The lease liability is subsequently remeasured by
increasing the carrying amount to reflect interest on lease
liability, reducing the carrying amount to reflect the lease
payments made and remeasuring the carrying amount to
reflect any reassessment or lease modifications or to reflect
revised in-substance fixed lease payments.
The Company has elected not to recognize right-of-use
asset and lease liabilities for short term leases that have
a lease term of 12 months or less and leases of low value
assets. The Company recognizes the lease payments
associated with these leases as an expense on straight line
basis over the lease term.
(vii) Foreign currency transactions
(a) 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 Company
operates ('the functional currency’). The financial
statements are presented in Indian Rupee (H), which
is Company’s functional and presentation currency.
(b) Initial recognition
Transactions in foreign currencies are initially
recorded by the Company at the functional currency
spot rates at the date the transaction.
(c) Conversion
Foreign currency monetary items are translated
using the functional currency spot rates of exchange
at the reporting date. Non-monetary items that are
measured in terms of historical cost denominated in
a foreign currency are translated using the exchange
rate at the date of the initial recognition.
d) Exchange differences
Exchange differences arising on settlement or
translation of monetary items are recognised in the
statement of profit and loss.
(viii) Derivative financial instruments
Initial recognition and subsequent measurement
The Company uses derivative financial instruments, such
as forward currency contracts to hedge its foreign currency
risks. Such derivative financial instruments are initially
recognised at fair value on the date on which a derivative
contract is entered into and are subsequently re-measured
at fair value at the end of each reporting period. Derivatives
are carried as financial assets when the fair value is
positive and as financial liabilities when the fair value is
negative. Any gains or losses arising from changes in the
fair value of derivatives are taken directly to profit and loss.
(ix) Fair value measurement
The Company measures financial instruments, such as,
derivatives, 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 assets and liabilities that are recognised in the
financial statements on a recurring basis, the Company
determines whether transfers have occurred between
levels in the hierarchy by re-assessing categorisation
(based on the lowest level input that is significant to the
fair value measurement as a whole) at the end of each
reporting period.
The Company’s management determines the policies and
procedures for both recurring fair value measurement,
such as derivative instruments and unquoted financial
assets measured at fair value, and for non-recurring
measurement, such as assets held for distribution in
discontinued operation.
External valuers are involved for valuation of significant
assets, and significant liabilities, if any.
At each reporting date, the management analyses the
movements in the values of assets and liabilities which
are required to be re-measured or re-assessed as per
the Company’s accounting policies. For this analysis, the
management verifies the major inputs applied in the latest
valuation by agreeing the information in the valuation
computation to contracts and other relevant documents.
The management, in conjunction with the Company’s
external valuers, also compares the change in the fair value
of each asset and liability with relevant external sources to
determine whether the change is reasonable.
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 summarises accounting policy for fair value. Other
fair value related disclosures are given in the relevant notes.
(x) 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 except trade receivables are recognised
initially at fair value plus, in the case of financial assets not
recorded at fair value through profit and loss, transaction
costs that are attributable to the acquisition of the financial
asset. Transaction costs of financial assets carried at fair
value through profit or loss are expensed in profit and loss.
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
recognised on the trade date, i.e., the date that the Company
commits to purchase or sell the asset. Trade receivables are
measured at transaction price in accordance with Ind AS 115.
Subsequent measurement:
Financial assets being financial instruments:
Subsequent measurement of financial instruments
depends on the Company’s business model for managing
the asset and the cash flow characteristics of the asset.
For the purposes of subsequent measurement, financial
instruments are classified in three categories:
- Financial instruments at amortised cost;
- Financial instruments at fair value through other
comprehensive income (FVTOCI)
- Financial instruments at fair value through profit
and loss (FVTPL).
Financial instruments at amortised cost:
A financial instrument is measured at the amortised 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 amortised cost using the effective interest rate (EIR)
method. Amortised 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 amortisation is included in
finance income in the profit or loss. The losses arising from
impairment are recognised in the profit or loss.
Financial instrument at FVTOCI:
A financial 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 sole
payments of principal and interest (SPPI).
Financial 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 profit and loss. On derecognition of the
asset, cumulative gain or loss previously recognised in OCI is
reclassified from the equity to the statement of profit and loss.
Interest earned whilst holding FVTOCI financial instrument is
reported as interest income using the EIR method.
Financial instrument at FVTPL:
FVTPL is a residual category for financial instruments.
Any financial instrument, which does not meet the criteria
for categorisation as at amortised cost or as FVTOCI, is
classified as at FVTPL. In addition, the Company may elect
to designate a financial 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’). Financial instruments included
within the FVTPL category are measured at fair value with
all changes recognized in the statement of profit and loss.
Derecognition:
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is
primarily derecognised 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.
Impairment of Financial Assets:
The Company assesses on a forward looking basis the
expected credit losses (ECL) associated with its assets
carried at amortised cost and FVTOCI financial instruments.
The impairment methodology applied depends on whether
there has been a significant increase in credit risk since
initial recognition.
For trade receivables only, the Company applies the
simplified approach permitted by Ind AS 109 'Financial
Instruments', which requires expected lifetime losses to be
recognised from initial recognition of the receivables.
The application of simplified approach does not require
the Company to track changes in credit risk. Rather, it
recognises 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, then the Company reverts to recognising
impairment loss allowance based on 12-month ECL.
Financial Liabilities
Initial recognition and measurement:
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans
and borrowings, payables, or as derivatives. All financial
liabilities are recognised 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 derivative financial instruments.
Subsequent Measurement:
The measurement of financial liabilities depends on their
classification, as described below:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss
(FVTPL) include financial liabilities held for trading and
financial liabilities designated upon initial recognition as
at fair value through profit or 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 'Financial instruments'.
Gains or losses on liabilities held for trading are recognised
in the profit or loss.
Loans and borrowings
After initial recognition, interest-bearing loans and
borrowings are subsequently measured at amortised cost
using the EIR method. Gains and losses are recognised in
profit or loss when the liabilities are derecognised as well
as through the EIR amortisation process. Amortised 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 amortisation is included as finance costs
in the statement of profit and loss.
Derecognition:
A financial liability is derecognised when the obligation
under the liability is discharged or cancelled or expires. When
an existing financial liability is replaced by another financial
liability 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 recognised in the statement of profit and loss.
Offsetting 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 recognised
amounts and there is an intention to settle on a net basis, to
realise the assets and settle the liabilities simultaneously.
(xi) Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise
cash at banks and on hand and short-term deposits with
an original maturity of three months or less, that are readily
convertible to known amount of cash and which are subject
to an insignificant risk of changes in value.
(xii) Inventories
i. Inventories are valued at the lower of cost and net
realizable value.
ii. The cost is determined as follows:
(a) Raw Materials, Stores, Spare Parts,
Chemical, Fuel Oil and Packing Materials:
Weighted average method
(b) Intermediaries: Material cost on weighted
average method and appropriate manufacturing
overheads based on normal operating capacity
(c) Finished goods (manufactured): Material cost
on weighted average method and appropriate
manufacturing overheads based on normal
operating capacity
(d) Traded goods: Weighted average method
iii. By-products such as treated gypsum are measured
at net realizable value, adjusted against the cost
of main product.
iv. Net realizable value is the estimated selling price
including applicable subsidy in the ordinary course of
business less estimated costs of completion and the
estimated costs necessary to make the sale.
v. Materials and other items held for use in the
production of inventories are not written down below
cost if the finished products in which they will be
incorporated are expected to be sold at or above cost.
(xiii) Borrowing cost
Borrowing costs include interest and other ancillary costs
incurred in connection with the arrangement of borrowings.
Borrowing cost also includes exchange differences to the
extent regarded as an adjustment to the borrowing costs.
Borrowing costs directly attributable to the acquisition
or construction of an asset that necessarily takes a
substantial period of time to get ready for its intended
use are capitalized as part of the cost of the respective
asset. All other borrowing costs are expensed in the
period they occur.
(xiv) Revenue Recognition
The Company earns revenue primarily from sale of
fertilizers. The following specific criteria must also be met
before revenue is recognised:
Sale of goods
At contract inception, Company assess the goods promised
in a contract with a customer and identify as a performance
obligation each promise to transfer to the customer.
Revenue is recognised upon transfer of control of promised
products to customers in an amount of the transaction
price that is allocated to that performance obligation and
that reflects the consideration which the Company expects
to receive in exchange for those products.
The Company considers the terms of the contract and its
customary business practices to determine the transaction
price. The transaction price is the amount of consideration
to which an entity expects to be entitled in exchange for
transferring promised goods to a customer net of returns,
excluding amounts collected on behalf of third parties (for
example, taxes) and excluding discounts and incentives, as
specified in the contract with customer.
With respect to sale of products revenue is recognised
at a point in time when the performance obligation is
satisfied and the customer obtains the control of goods
which is usually dispatch/delivery of goods, based on
contracts with customers. There is no significant financing
components involved on contract with customers. Invoices
are usually payable within the credit period as agreed with
respective customers.
Contract balances
Contract assets
A contract asset is the right to consideration in exchange
for goods transferred to the customer. If the Company
performs by transferring goods to a customer before the
customer pays consideration or before payment is due, a
contract asset is recognised for the earned consideration
that is conditional.
Trade receivables
A receivable represents the Company's right to an amount
of consideration that is unconditional (i.e., only the passage
of time is required before payment of the consideration is
due). Refer to accounting policies of financial assets in note
(x) to material accounting policies on Financial instruments
- initial recognition and subsequent measurement.
Contract liabilities
A contract liability is the obligation to transfer goods
to a customer for which the Company has received
consideration (or an amount of consideration is due) from
the customer. If a customer pays consideration before
the Company transfers goods to the customer, a contract
liability is recognised when the payment is made or the
payment is due (whichever is earlier). Contract liabilities
are recognised as revenue when the Company performs
under the contract.
Subsidy income
Concessions in respect of Urea as notified under the
New Pricing Scheme is recognized with adjustments
for escalation/de-escalation in the prices of inputs and
other adjustments as estimated by the management in
accordance with the known policy parameters in this regard.
Subsidy for DAP, Muriate of Potash (MOP) and Complex
Fertilizers are recognized as per rates notified by the
Government of India in accordance with Nutrient Based
Subsidy Policy and other guidelines issued from time to
time, where there is reasonable assurance of complying
with the conditions of the policy.
Subsidy on freight charges for DAP, MOP and Complex
Fertilizers is recognized based on rates notified by the
Government of India with the known policy parameters in
this regard and included in subsidy.
(xiv) (a) Interest Income
For all financial instruments measured at amortised
cost, interest income is recorded using the effective
interest rate (EIR). EIR is the rate that exactly discounts
the estimated future cash payments or receipts over
the expected life of the financial instrument or a
shorter period, where appropriate, to the gross carrying
amount of the financial asset or to the amortised cost
of a financial liability. When calculating the effective
interest rate, the Company estimates the expected
cash flows by considering all the contractual terms
of the financial instrument (for example, prepayment,
extension, call and similar options) but does not
consider the expected credit losses. Interest income
is included in finance income in the statement of
profit and loss. Interest income is recognized on a
time proportion basis taking into account the amount
outstanding and the applicable EIR. Claims receivable
on account of interest from dealers on delayed
payments are accounted for to the extent the Company
is reasonably certain of their ultimate collection.
(xiv) (b) Dividend Income
Dividend income is recognised when the Company’s
right to receive the payment is established.
(xiv) (c) Insurance claims
Claims receivable on account of insurance are
accounted for to the extent the Company is reasonably
certain of their ultimate collection.
(xv) Government grants and subsidies
Grants and subsidies [other than subsidy income
considered in point (xiv) above] from the government are
recognized when there is reasonable assurance that (i) the
Company will comply with the conditions attached to them,
and (ii) the grant/ subsidy will be received.
Where the grant or subsidy relates to revenue, it is recognized
as income on a systematic basis in the statement of profit
and loss over the periods necessary to match them with
the related costs, which they are intended to compensate.
Where the grant relates to an asset, it is recognized as
deferred income and released to income in equal amounts
over the expected useful life of the related asset.
(xvi) Employee benefits
Share-based payments
Share-based compensation benefits are provided to
employees via PPL Employees Stock Option Plan 2021
("ESOP 2021”). The fair value of the options granted under
ESOP 2021 is recognised as an employee benefits expense
in the statement of profit and loss with a corresponding
increase in equity. The fair value at grant date is determined
using the Black Scholes Model which takes into account
the exercise price, the term of the option, the share price
at grant date and expected price volatility of the underlying
share, the expected dividend yield and risk-free interest
rate for the term of the option.
The total expense is recognised over the vesting period,
which is the period over which all of the specified vesting
conditions are to be satisfied. At the end of each period,
the entity revises its estimates for the remaining vesting
period of the number of options that are expected to vest
based on the service conditions. It recognises the impact
of the revision to original estimates in the remaining
vesting period, if any, in the statement of profit or loss, with
a corresponding adjustment to equity.
Short term employee benefits
Short-term employee benefit obligations are measured on
an undiscounted basis and are expensed as the related
service is provided. A liability is recognised for the amount
expected to be paid, if the Company has a present legal or
constructive obligation to pay this amount as a result of
past service provided by the employee, and the amount of
obligation can be estimated reliably.
Defined Contribution Plan
Retirement benefit in the form of contribution to pension
fund, superannuation fund and national pension scheme
are defined contribution scheme. The Company has no
obligation, other than the contribution payable to these
schemes. The Company recognizes contribution payable to
these fund schemes as an expenditure, when an employee
renders the related service. If the contribution payable to the
scheme for service received before the balance sheet date
exceeds the contribution already paid, the deficit payable to
the scheme is recognized as a liability after deducting the
contribution already paid. If the contribution already paid
exceeds the contribution due for services received before
the balance sheet date, then excess is recognized as an
asset to the extent that the pre- payment will lead to, for
example, a reduction in future payment or a cash refund.
Defined Benefit Plans
i) Liability for Gratuity and Post Retirement Medical
Benefits are provided for on the basis of actuarial
valuation carried at the end of each financial year.
The gratuity plan and post employment medical
benefit plan has been funded by policy taken from
Life Insurance Corporation of India.
ii) Liability for Provident fund is provided for on the
basis of actuarial valuation carried at the end of each
financial year. The difference between the actuarial
valuation of the provident fund of employees at the
year end and the balance of own managed fund is
provided for as liability in the books in terms of the
provisions under Employee Provident Fund and
Miscellaneous Provisions Act, 1952.
iii) The present value of the defined benefit obligation
is determined by discounting the estimated future
cash outflows by reference to market yields at the
end of the reporting period on government bonds
that have terms approximating to the terms of the
related obligation.
The net interest cost is calculated by applying the
discount rate to the net balance of the defined benefit
obligation and the fair value of plan assets. This
cost is included in employee benefits expense in the
statement of profit and loss.
Remeasurement gains and losses arising from
experience adjustments and changes in actuarial
assumptions are recognised in the period in which
they occur, directly in other comprehensive income
and such re-measurement gain / (loss) are not
reclassified to the statement of profit and loss in the
subsequent periods. They are included in retained
earnings in the statement of changes in equity.
Other long term benefits
Liability for accumulated compensated absences are
provided for on the basis of actuarial valuation carried at
the end of each financial year. The Company measures the
expected cost of accumulated compensated absences
as the additional amount that it expects to pay as a result
of the unused entitlement that has accumulated at the
reporting date. The Company treats accumulated leave
expected to be carried forward beyond twelve months as
long term employee benefit for measurement purpose.
(xvii)Income tax
Tax expense comprises current income tax and deferred
tax. Current income-tax expense is measured at the amount
expected to be paid to the taxation authorities in accordance
with the Income-tax Act, 1961 enacted in India. 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).
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
recognised for all taxable temporary differences, except
when the deferred tax liability arises from an asset or liability
in a transaction that at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss;
Deferred tax assets are recognised for all deductible
temporary differences, the carry forward of unused tax
credits and any unused tax losses. Deferred 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 carry forward of unused tax
credits and unused tax losses can be utilised.
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
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 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 realised or the liability is settled, based on tax rates (and
tax laws) that have been enacted or substantively enacted
at the reporting date.
Deferred tax relating to items recognised outside profit
or loss is recognised outside profit or loss (either in other
comprehensive income or in equity).
Deferred tax assets and deferred tax liabilities are offset if a
legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred taxes relate
to the same taxable entity and the same taxation authority.
Deferred tax is not recognised for:
- temporary differences on the initial recognition
of assets or liabilities in a transaction that is not
a business combination and at the time of the
transaction (i) affects neither accounting nor taxable
profit or loss and (ii) does not give rise to equal
taxable and deductible temporary differences
- taxable temporary differences arising on the initial
recognition of goodwill.
(xviii) Segment Reporting Policies
Operating segments are reported in a manner consistent
with the internal reporting provided to the Chief Operating
Decision Maker. Chief Operating Decision Maker review
the performance of the Company according to the nature
of products manufactured, traded and services provided,
with each segment representing a strategic business unit
that offers different products and serves different markets.
The analysis of geographical segments is based on the
locations of customers.
The Company prepares its segment information in
conformity with the accounting policies adopted for
preparing and presenting financial statements of the
Company as a whole.
(xix) Earnings per share
Basic earnings per share are calculated by dividing the net
profit or loss for the year attributable to equity shareholders
of the Company by the weighted average number of the
equity shares outstanding during the year.
For the purpose of calculating diluted earnings per
share, net profit or loss for the year attributable to equity
shareholders of the Company and the weighted average
number of shares outstanding during the year are adjusted
for the effect of all dilutive potential equity shares.
(xx) Contingent liabilities
A contingent liability is a possible obligation that arises from
past events and the existence of which will be confirmed
only by the occurrence or non-occurrence of one or more
uncertain future events not wholly within the control of the
enterprise. A contingent liability is also a present obligation
that arises from past events but outflow of resources
embodying economic benefits is not probable.
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