1. SUMMARY OF MATERIAL ACCOUNTING
POLICY INFORMATION
(i) Property, Plant and Equipment:
Recognition and measurement:
An item of property, plant and equipment is
recognised as an asset if it is probable that the
future economic benefits associated with
the item will flow to the Company and its
cost can be measured reliably. Items of
property, plant and equipment are measured
at cost less accumulated depreciation and
impairment, if any. The cost of property, plant
and equipment includes purchase price,
including freight, duties, taxes and expenses
incidental to acquisition and installation. If
significant parts of an item of property, plant
and equipment have different useful lives,
then they are accounted for as separate items
(major components) of property, plant and
equipment.
Items such as spare parts, stand-by
equipment and servicing equipment that
meet the definition of property, plant and
equipment are capitalized at cost and
depreciated over their useful life.
Capital work-in-progress includes cost of
property, plant and equipment not ready for
the intended use as at the balance sheet
date.
Government grants related to the acquisition or
construction of tangible assets are recognized
when there is reasonable assurance that the
grant will be received and the company will
comply with the conditions attached to the
grant. Such grants are recognized in the
financial statements either as deferred income
or by deducting the grant from the carrying
amount of the asset. If the grant is deducted
from the carrying amount of the asset, it
reduces the depreciation charge over the
asset's useful life. When the grant is deducted
from the carrying amount of the asset, the
reduced carrying amount is depreciated over
the asset's remaining useful life.
Property, plant and equipment are dere¬
cognized from financial statements, either on
disposal or when no economic benefits are
expected from its use or disposal. The gain or
losses arising from disposal of property, plant
and equipment are recognized in the
Statement of Profit and Loss in the year of
occurrence.
Subsequent expenditures:
Subsequent expenditures related to an item
of property, plant and equipment are added to
its carrying value only when it is probable that
the future economic benefits from the asset
will flow to the Company and cost can be
reliably measured. All other repair and
maintenance costs are recognized in the
Statement of Profit and Loss during the year in
which they are incurred.
Depreciation and Amortisation:
Depreciation is provided on all property, plant
and equipment is provided on pro rata basis
using on straight-line method except in case
of plant and factory building of edible oil
refinery and solvent extraction units and
Sulphuric Acid Plants, where the depreciation
is provided on written down value method over
the useful lives of the assets as prescribed in
the Schedule II to the Companies Act, 2013,
unless otherwise specified.
Impairment :-
The carrying amount of assets is reviewed at
each Balance Sheet date if there is any
indication of impairment based on internal /
external factors.
If the carrying amount of assets exceeds its
estimated recoverable amount, an impairment
loss is recognized in the Statement of Profit &
Loss to the extent the carrying amount
exceeds recoverable amount.
(ii) Intangible Assets :-
Intangible assets are initially recognized at
cost. Following initial recognition, intangible
assets are carried at cost less any
accumulated amortization and accumulated
impairment losses. The amortization period
and the amortization method for an intangible
asset are reviewed at least at the end of each
reporting period. 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. Intangible assets are amortized
over its useful life of five years.
Lease Liabilities & Right of use assets :-
The Company implemented a single acco¬
unting model as per Ind AS 116, requiring
lessees to recognize assets and liabilities for
all leases excluding exceptions listed in the
standard. The Company elected to apply
exemptions to short term leases or for leases
for which the underlying asset is of low value.
Right of use assets is evaluated for reco¬
verability whenever events or changes in
circumstances indicate that their carrying
amounts may not be recoverable.
The lease liability is initially measured at
amortized cost at the present value of the
future lease payments. The lease payments are
discounted using the interest rate implicit in the
lease or, if not readily determinable, using the
incremental borrowing rates in the country of
domicile of the leases. Lease liabilities are re¬
measured with a corresponding adjustment to
the related right of use asset if the company
changes its assessment if whether it will
exercise an extension or a termination option.
Lease liability and ROU asset shall be
separately presented in the Balance Sheet
and lease payments shall be classified as
financing cash flows.
(iii) Leases:
At the inception of an arrangement, the
Company determines whether the arra¬
ngement is or contains a lease and whether it
is a finance lease or an operating lease. If
substantially all the risks and rewards
incidental to ownership of the leased asset
are transferred to the Company as lessee the
arrangement is treated as a finance lease
otherwise it is considered as an operating
lease. The Company which has an operating
lease (as a lessee) recognises the lease
rentals as expense in the statement of Profit &
Loss on a straight-line basis with reference to
lease terms and other considerations.
(iv) Inventories:
Inventories consist of raw materials, stores
and spares, packing material, traded goods,
work-in-progress and finished goods. Net
realisable value represents the estimated
selling price (including subsidy income, where
applicable) of inventories less all estimated
costs of completion and costs necessary to
make the sale.
Inventories are valued as under: -
Raw material, Work in process and Pac¬
king Materials: -
At Cost on First in First out (FIFO) basis or net
realizable value whichever is lower. Raw
material and work in process are not written
down below cost if the finished products in
which they will incorporated are expected to
be sold at or above cost.
Finished Goods: -
At cost or net realizable value whichever is
lower. The cost is computed on annual
weighted average method and includes cost
of materials, cost of conversion and other
costs incurred in acquiring the inventory and
bringing them to their present location and
condition.
Traded Goods :-
At cost on First in First out (FIFO) basis or net
realizable value whichever is lower.
Stores & Spares: -
At Cost on FIFO Basis.
(v) Provision for Doubtful trade Receivables:
The Company maintains an allowance for
impairment of doubtful accounts based on
financial condition of the customer, receivable
and over dues, and historical experience of
collections from customers adjusted for
current estimates.
In accordance with Ind AS , the Company uses
the expected credit loss (“ECL”) model for
measurement and recognition of impairment
loss on its trade receivables. For this purpose,
the Company uses a provision matrix to
compute the expected credit loss amount for
trade receivables. The provision matrix takes
into account external and internal credit risk
factors and historical data of credit losses
from various customers adjusted for forward
looking estimates.
The amount recognized as a provision is the
best estimate of the consideration required to
settle the present obligation at reporting date,
taking into account the risks and uncertainties
surrounding the obligation.
(vi) Revenue Recognition:
The Company is primarily into manufacturing
of Fertilizer, Sulphuric Acid, Micro Nutrients
and Soya oil . Sales are made at a point in
time in accordance with IND AS 115-Revenue
from Contracts with Customers is recognised
when goods are dispatched and the control
over the goods sold is transferred to
customers The Company does not expect to
have any contracts where the period between
the transfer of goods and payment by
customer exceeds one year. Hence, the
Company does not adjust revenue for the time
value of money.
Sale of goods & Subsidy
(a) Sale of goods
Revenue, in respect of sale of products
is recognised when the significant risks
and rewards of ownership of the goods
are passed on to the buyer. Amounts
disclosed as revenue are net of returns
and allowances, trade discounts and
rebates. The Company collects Goods
and Service Tax (GST) on behalf of the
government and, therefore, it is not an
economic benefit flowing to the
Company. Hence, it is excluded from
revenue.
(b) Government Subsidy: -
Subsidy is recognized as per Ind AS 20
'Accounting for Government Grants and
Disclosure of Government Assistance'
on the basis of the rates notified from
time to time by the Government of India
in accordance with the Nutrient Based
Subsidy (NBS) policy on the quantity of
fertilisers sold during the year by the
Company for the period for which
notification has been issued and on the
basis of the notification received from
the ministry of Chemicals and fertilizers
from time to time
Other income :-
(C) Insurance Claims :- Revenue in respect
of insurance / other claims are reco¬
gnized only when it is reasonably certain
that the ultimate collection will be
made.
(d) Interest Income :- Interest income is
recognized when it is probable that the
economic benefits will flow to the
Company and the amount of income
can be measured reliably. Interest
income is accounted on accrual basis ,
using effective interest rate method.
(vii) Employee benefits:
Short term employee benefits:
All employee benefits payable wholly within
twelve months of rendering the service are
classified as short-term employee benefits
and they are recognized in the period in which
the employee renders the related service.
Short term employee benefits are recognized
as an expense at the amount disclosed in the
Statement of Profit and Loss for the period in
which the related service rendered.
Post employment benefits & long term
employee benefits:
Post employment benefits are determined
using the projected unit credit method, with
actuarial valuation being carried out at
Balance sheet date. Actuarial gains and
losses are recognised in full in the Statement
of Profit and Loss for the period in which they
occur.
Defined contribution plans:
Contributions paid/payable to defined
contribution plans comprising of Provident
Funds for certain employees covered under
the respective Schemes are recognised in the
profit or loss each year when employees have
rendered service entitling them to the
contributions.
Defined benefit plans:
The liability recognized in the balance sheet in
respect of defined benefit plans is the present
value of the defined benefit obligation at the
end of the reporting period. The defined
benefits obligation is calculated annually by
actuaries using the projected unit credit
method.
The Company operates defined benefit plan
for Gratuity. The cost of providing such defined
benefit is determined using the projected unit
credit method of actuarial valuation made at
the end of the year. The Company has created
an Employees Group Gratuity Fund which has
taken a Group Gratuity Assurance Scheme
with the Life Insurance Corporation of India.
Actuarial gains and losses are recognised in
other comprehensive income for gratuity and
recognised in the Statement of Profit & Loss
for leave encashment.
Remeasurement gain and losses arising from
experience adjustments, changes in actuarial
assumptions are recognized in the period in
which they occur, directly in other comp¬
rehensive income (OCI). They are included in
retained earnings in the statement of change
in equity and in the balance sheet.
Compensated absences :
Obligations on leave encashment are
provided using the projected unit credit
method of actuarial valuation made at the end
of the year.
The Code on Social Security, 2020 ('Code')
relating to employee benefits during
employment and post-employment benefits
received Presidential assent in September
2020. The Code has been published in the
Gazette of India. However, the date on which
the Code will come into effect has not been
notified. The Company will assess the impact
of the Code when it comes into effect and will
record any related impact in the period the
Code becomes effective.
(viii) Borrowing costs:
Borrowing costs attributable to the acquisition,
construction or production of qualifying
assets, which are assets that necessarily take
a substantial period of time to get ready for
their intended use or sale, are added to the
cost of those assets, until such time as the
assets are substantially ready for their
intended use or sale. All other borrowing costs
are recognized in profit or loss in the period in
which they are incurred.
(ix) Segment reporting:
Operating segments are reported in a manner
consistent with the internal reporting provided
to the Chief Operating Decision Maker.
The Chief Operating Decision Maker monitor
the operating results of the business
Segments separately for the purpose of
making decisions about resource allocation
and performance assessment. Segment
performance is evaluated based on profit or
loss and is measured consistently with profit
or loss in the financial statements.
The Operating segments have been identified
on the basis of the nature of products.
Segment revenue includes sales and other
income directly identifiable with/ allocable to
the Segment.
Expenses that are directly identifiable with /
allocable to segments are considered for
determining the segment result. Expenses
which relate to the Company as a whole and
not allocable to segments are included under
unallocable expenditure. Income which
relates to the Company as a whole and not
allocable to segments is included in
unallocable income.
Segment result represent the profit before
interest and tax earned by each segment
without allocation of central administrative
costs.
Segment assets and liabilities include those
directly identifiable with the respective
segments. Unallocable assets and liabilities
represent the assets and liabilities that relate
to the Company as a whole and not allocable
to any segment.
The company has disclosed Business
Segments as its primary segments. Reporting
segments have been identified as Fertilizers,
Micro Nutrients & Chemicals and Oil, taking
into accounts the nature of product, the
different risk and returns, the organizational
structure and the internal reporting system.
The company caters mainly to the need of
domestic market. The direct export turnover is
Nil during the year. As such there are no
reportable geographical segments.
(x) Foreign Currency Transactions: -
Initial Recognition:
On initial recognition, transactions in foreign
currencies entered into by the Company are
recorded in the functional currency (i.e. Indian
Rupees), by applying to the foreign currency
amount, the spot exchange rate between the
functional currency and the foreign currency
at the date of the transaction. Exchange
differences arising on foreign exchange
transactions settled during the year are
recognized in the Statement of Profit and
Loss.
Measurement of foreign currency items
at reporting date:
Foreign currency monetary items of the
Company are translated at the closing
exchange rates. Non-monetary items that are
measured at historical cost in a foreign
currency, are translated using the exchange
rate at the date of the transaction. Non¬
monetary items that are measured at fair
value in a foreign currency, are translated
using the exchange rates at the date when the
fair value is measured. Exchange differences
arising out of these translations are reco¬
gnized in the Statement of Profit and Loss
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