a) Property, plant and equipment
i) Recognition and measurement
Freehold land is carried at historical cost. All
other items of property, plant and equipment
are measured at cost, less accumulated
depreciation and accumulated impairment
losses, if any.
Capital work-in-progress are measured at
cost less accumulated impairment losses, if
any.
ii) Depreciation
Depreciation on property, plant and equipment
is provided on the Straight-Line Method
based on the useful life of assets estimated by
the Management which coincide with the life
specified under Schedule II of the Companies
Act, 2013.
The Company has estimated the useful lives
different from the lives prescribed in schedule
II of Companies Act, 2013, in the following
cases:
- Plant and machinery (Continuous Process
Plant) 15 years
- Special Plant and machinery (used in
manufacture of chemicals) 15 years
Leasehold land is being amortised over the
lease period and Cost of improvement on
leasehold building is being amortised over the
lease period or useful life whichever is lower,
unless the entity expects to use the assets
beyond the lease term.
Based on assessment made by technical
experts, the Management believes that the
useful lives as given above best represent
the period over which it expects to use these
assets.
b) Intangible assets
i) Recognition and measurement
Goodwill
Goodwill is not amortised but it is tested for
impairment annually, or more frequently if
events or changes in circumstances indicate
that it might be impaired and is carried at
cost less accumulated impairment losses.
Intangible assets acquired separately
Intangible assets that are acquired by the
Company are measured on initial recognition
at cost. Subsequently, intangible assets are
carried at cost less accumulated amortisation
and accumulated impairment losses, if any.
Internally generated intangible assets -
Research and development
Research costs are expensed as incurred.
Development costs are capitalised only if
the expenditure can be measured reliably,
the product or process is technically and
commercially feasible, future economic
benefits are probable and the Company
intends to and has sufficient resources to
complete development and to use or sell
the asset. The expenditures to be capitalised
include the cost of materials and other costs
directly attributable to preparing the asset
for its intended use. Other development
expenditures are recognised in statement of
profit and loss as incurred.
ii) Amortisation
Amortisation is recognised in statement
of profit and loss on a straight-line basis
over the estimated useful lives of intangible
assets or on any other basis that reflects the
pattern in which the asset’s future economic
benefits are expected to be consumed by
the Company. Intangible assets that are not
available for use are amortised from the date
they are available for use.
The estimated useful lives are as follows:
Computer Software 6 years
Product development 5 years
Supply Agreement 3 years
c) Impairment of non-financial assets
Goodwill and intangible assets (including
intangible assets under development) that have an
indefinite useful life are not subject to amortisation
and are tested annually for impairment, or more
frequently if events or changes in circumstances
indicate that they might be impaired. Other
assets are tested for impairment whenever events
or changes in circumstances indicate that the
carrying amount may not be recoverable.
d) Financial instruments
i. Initial recognition
The Company recognises financial assets and
financial liabilities when it becomes a party to
the contractual provisions of the instrument. All
financial assets and liabilities are recognised at
fair value on initial recognition, except for trade
receivables (which do not contain a significant
financing component) which are initially measured
at transaction price. Transaction costs that are
directly attributable to the acquisition or issue of
financial assets and financial liabilities that are not
at fair value through profit or loss are added to the
fair value on initial recognition.
ii. Subsequent measurement
i) Financial assets carried at amortised cost
A financial asset (which includes loans and
advances, security deposits, deposits with
Banks and Financial institutions, deposits
lodged with excise and sales tax department,
insurance claim recoverable, cash and cash
equivalents, bank balance other than cash
and cash equivalents and trade receivables)
is subsequently measured at amortised
cost if it is held within a business model
whose objective is to hold the asset 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 on
the principal amount outstanding. When the
financial asset is derecognised or impaired,
the gain or loss is recognised in the statement
of profit and loss.
ii)Financial assets at fair value through
other comprehensive income (FVTOCI)
A financial asset (which includes derivative
financial instruments designated as cash flow
hedge) is subsequently measured at fair value
through other comprehensive income if it is
held within a business model whose objective
is achieved by both collecting contractual
cash flows and selling financial assets and
the contractual terms of the financial asset
give rise on specified dates to cash flows
that are solely payments of principal and
interest on the principal amount outstanding.
Movements in the carrying amount are taken
through OCI, except for the recognition of
impairment gains or losses, interest revenue
and foreign exchange gains and losses which
are recognised in statement of profit and loss.
When the financial asset is derecognised, the
cumulative gain or loss previously recognised
in OCI is reclassified from equity to statement
of profit and loss and recognised in other
income.
Equity instruments are subsequently measured
at fair value. On initial recognition of an equity
investment that is not held for trading, the
Company may irrevocably elect to present
subsequent changes in the investment’s
fair value in OCI (designated as FVTOCI —
equity investment). This election is made on
an investment by investment basis. Fair value
gains and losses recognised in OCI are not
reclassified to statement of profit and loss.
However, dividend on such equity investments
are recognised in statement of profit and loss
when the Company’s right to receive payment
is established.
iii) Financial assets at fair value through
profit or loss (FVTPL)
A financial asset (which includes investments
in mutual funds) which is not classified in any
of the above categories are subsequently fair
valued through profit or loss.
iv) Financial liabilities
Financial liabilities (which includes borrowings,
trade payables and other financial liabilities
(other than derivative financial instruments))
are subsequently carried at amortised cost
using the effective interest method.
v) Investment in subsidiaries
Investment in subsidiaries is carried at cost less
impairment, if any, in the separate financial
statements. Where an indication of impairment
exists, the carrying amount of the investment is
assessed and written down to its recoverable
amount.
vi) Derivative financial instruments
The Company is exposed to exchange rate
risk which arises from its foreign exchange
revenues. The Company uses foreign
exchange forward contracts (derivative
financial instruments), to hedge its foreign
currency risk.
Derivatives are initially measured at fair value.
Subsequent to initial recognition, derivatives
are measured at fair value and accounted as
follows:
Cash flow hedges
Derivatives are held to hedge the foreign
currency risk associated with highly probable
forecasted transactions and are classified as
being part of cash flow hedge relationships.
For an effective hedge, gains and losses from
changes in the fair value of derivatives are
recognised in other comprehensive income.
Any ineffective element of the hedge is
recognised in statement of profit and loss. The
amount accumulated in other comprehensive
income is subsequently taken to the statement
of profit and loss at the same time as the
related cash flow.
Derivatives for which hedge accounting in
not applied
Derivatives not classified as cash flow hedge
accounting are carried at fair value with
changes being recognised in statement of
profit and loss.
vii) Offsetting
Financial Assets and Financial Liabilities are
offset and the net amount is presented in
the balance sheet when and only when, the
Company has a legally enforceable right to set
off the amount and it intends, either to settle
them on a net basis or to realise the asset and
settle the liability simultaneously.
e) Revenue Recognition
i) Sale of goods
The Company manufactures and sells a range of
products to various customers and also engages
in custom synthesis and manufacturing (CSM)
services for other companies in the industry.
Revenue is recognised over the period of time for
contracts wherein the Company's performance
does not create an asset with alternative use to the
Company and the Company has an enforceable
right to payment for performance completed till
date. Management has determined that it is highly
probable that there will be no rescission of the
contract and a significant reversal in the amount
of revenue recognised will not occur. Accordingly,
revenue is recognised for these contracts based
on Input method wherein amount of revenue
to be recognised is determined based on the
actual cost incurred till date and the estimated
margin on the contract because there is a direct
relationship between the Company’s effort (i.e.,
based on the material consumed and labour
hours incurred) and the enforceable right to
payment for performance completed till date.
For remaining contracts, Revenue is recognised
at a point in time when control of the products
has transferred, being when the products are
delivered to the customer (or, where contractually
specified, upon shipment), the customer has full
discretion over the channel and price to sell the
products and there is no unfulfilled obligation that
could affect the customer’s acceptance of the
products.
Revenue towards satisfaction of a performance
obligation is measured at the amount of transaction
price (net of variable consideration) allocated
to that performance obligation. The transaction
price includes fixed consideration and estimates
of variable consolidation, such as sales return,
discounts and rebates, which are estimated using
the expected value method. Revenue is recognised
only to the extent that it is highly probable that a
significant reversal will not occur. Accumulated
experience is used to estimate discounts and
returns and these estimates are reassessed at
each reporting date. A refund liability (included in
other current liabilities) and a right to recover the
returned goods (included in other current assets)
are recognised for the products expected to be
returned. Liability (included in other financial
liabilities) is recognised for expected discounts
and rebates payable to customers in relation to
sales made until the end of the reporting period.
Contract assets are recognised when there
is excess of revenue earned over billings on
contracts.
Amounts disclosed as revenue are net of returns,
discounts, volume rebates and net of goods and
service tax.
The Company does not have any contracts
where the period between the transfer of the
promised goods or services to the customer and
payment by the customer exceeds one year. As
a consequence, the Company does not adjust
any of the transaction prices for the time value of
money.
ii) Sale of services
Revenue from sale of services is recognised
over the period of time as per the terms of
the contract with customers based on the
stage of completion when the outcome of the
transactions involving rendering of services can
be estimated reliably.
iii) Export Incentives
Incentives on exports are recognised in
books after due consideration of certainty of
utilisation/ receipt of such incentives.
3B Other Accounting Policies
a) Foreign currency transactions
Initial recognition
Transactions in foreign currencies are translated
into the Company’s functional currency at the
exchange rates at the dates of the transactions.
Conversion
Monetary assets and liabilities denominated in
foreign currencies are translated into the functional
currency at the exchange rate at the reporting
date. Non-monetary assets and liabilities that
are measured at fair value in a foreign currency
are translated into the functional currency at
the exchange rate when the fair value was
determined. Non-monetary assets and liabilities
that are measured based on historical cost in a
foreign currency are translated at the exchange
rate at the date of the transaction.
Exchange difference
Exchange differences on settlement of foreign
currency transactions and translation of foreign
currency monetary assets and liabilities are
recognised in statement of profit and loss, except
exchange differences arising from the translation
of the following items which are recognised in
OCI:
- equity investments designated at fair value
through OCI (FVTOCI); and
- qualifying cash flow hedges to the extent that
the hedges are effective
b) Derecognition of property, plant and
equipment and Intangible assets
An item of property, plant and equipment and
intangible assets is derecognised when no
future economic benefit benefits are expected
to arise from the continued use of the asset or
upon disposal. Any gain or loss on disposal is
recognised in the statement of profit and loss.
c) Lease
At inception of a contract, the Company assesses
whether a contract is, or contains, a lease. A
contract is, or contains, a lease if the contract
conveys the right to control the use of an
identified asset for a period of time in exchange
of consideration.
i. As a lessee
The company leases various offices,
warehouses, IT equipment and vehicles.
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.
Generally, the Company uses its incremental
borrowing rate as the discount rate, being the
rate that the Company would have to pay to
borrow the funds necessary to obtain an asset
of similar value to the right-of-use asset in a
similar economic environment with similar
terms, security and conditions.
Short-term lease and leases of low value
assets
Short-term leases are leases with a lease term
of 12 months or less. Low-value assets comprise
IT equipment and small items of office furniture.
The Company has elected not to recognise
right-of-use assets and lease liabilities for short¬
term leased and leases of low value assets. The
payments associated with short-term leases of
equipment and vehicles and all leases of low-
value assets are recognised on a straight-line
basis in statement of profit and loss.
ii.As a lessor
When the company acts as a lessor, it
determines at lease inception whether each
lease is a finance lease or an operation lease.
If lease transfers substantially all of the risks
and rewards incidental to ownership of
underlying assets it is classified as finance
lease or otherwise as an operating lease. Rental
income from operating lease is recognised
on a straight-line basis over the term of the
relevant lease.
d) Borrowing costs
Borrowing costs are interest and other costs
(including exchange differences relating to
foreign currency borrowings to the extent that
they are regarded as an adjustment to interest
costs) incurred in connection with the borrowing
of funds. Borrowing costs directly attributable
to acquisition or construction of an asset which
necessarily take a substantial period of time to get
ready for their intended use are capitalised as part
of the cost of that asset. Other borrowing costs are
recognised as an expense in the period in which
they are incurred using effective interest method.
Investment income earned on the temporary
investment of specific borrowings pending their
expenditure on qualifying assets is deducted from
the borrowing costs eligible for capitalisation.
e) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank
and on hand and short-term deposits with original
maturities of three months or less that are readily
convertible to known amounts of cash and which
are subject to an insignificant risk of changes in
value.
Cash flow statement
Cash flow statements are prepared in accordance
with "Indirect Method" as explained in the Indian
Accounting Standard on Statement of Cash Flows
(Ind AS - 7). The cash flows from regular revenue
generating, financing and investing activity of the
Company are segregated.
f) Inventories
Cost of Raw Materials, Packing Materials, Stores
and Spares, Stock in Trade and other products are
determined on weighted average basis and are
net of goods and service tax credit.
Cost of Work in progress and Finished Goods
is determined on weighted average basis
considering direct material cost and appropriate
portion of manufacturing overheads based on
normal operating capacity.
The Company recognises provision against
obsolete/ slow and non-moving inventory items
which are identified as no longer suitable for
sale or use. Obsolete and slow-moving items are
valued at cost or estimated net realisable value,
whichever is lower. Any write-down of inventory is
recognised as an expense during the year.
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