5. MATERIAL ACCOUNTING POLICIES
5.1 Inventories
5.1.1 Raw-materials, Stores & Spares, Fuel, Packing materials etc., are valued at cost, computed on a moving weighted average basis
including the cost incurred in bringing the inventories to their present location and condition after providing for obsolescence
and other losses or net realisable value whichever is lower. Inventories are usually written down to net realisable value, if the
finished products, in which they will be used, are expected to be sold below cost. However, the inventories are considered to
be realizable at cost, if the finished products, in which they will be used, are expected to be sold at or above cost.
5.1.2 Process stock is valued at moving weighted average cost including the cost of conversion with systematic allocation of
production overheads, or net realisable value whichever is lower. Factory administration overheads to the extent attributable
to bring the inventories to their present location and condition are also included in the valuation of Process stock.
5.1.3 Finished goods are valued at cost or net realisable value whichever is lower. Cost includes cost of conversion and other costs
incurred in bringing the inventory to their present location and condition. Finished goods include stock-in-trade also which
comprises cost of purchase and other cost incurred in bringing the inventories to the present location and condition. Cost is
determined on a moving weighted average basis.
Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and
estimated costs necessary to make the sale.
5.2 Statement of Cash Flows
5.2.1 Cash flows from operating activities is presented using Indirect Method.
5.2.2 Cash and cash equivalents for the purpose of Statement of Cash Flows comprise cash and cheques in hand, bank balances,
demand deposits with banks where the original maturity is three months or less and other short-term highly liquid investments,
which are subject to insignificant risk of changes in value.
5.2.3 Bank overdrafts / Cash Credit, which are repayable on demand, form an Integral part of the Company’s cash management.
5.3 Income Taxes
5.3.1 Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable
tax rates, the provisions of the Income Tax Act, 1961 and other applicable tax laws at the reporting date including the relevant
transfer pricing regulations prescribed thereunder, read with applicable judicial precedents or interpretations, wherever
relevant.
5.3.2 Current tax assets and liabilities are offset, when the Company has legally enforceable right to set off the recognised amounts
and intends to settle the asset and the liability on a net basis.
5.3.3 Deferred tax is recognised using the balance sheet approach on temporary differences between the tax bases of assets and
liabilities and their carrying amounts for financial reporting at the reporting date.
5.3.4 Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year where 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.
5.3.5 Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by same governing tax laws and the
Company has legally enforceable right to set off current tax assets against current tax liabilities.
5.3.6 Both current tax and deferred tax relating to items recognised outside the Profit or Loss is recognised either in “Other
Comprehensive Income” or directly in “Equity” as the case may be.
5.4 Property, Plant and Equipments (PPE)
5.4.1 PPEs are stated at cost of acquisition or construction (net of GST wherever eligible and applicable) less accumulated
depreciation / amortisation and impairment losses if any, except freehold land which is carried at cost. The cost comprises
of purchase price, borrowing cost if capitalisation criteria are met and directly attributable cost of bringing the asset to its
working condition for the intended use.
Subsequent expenditures are recognised as a separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the company and the cost of the item can be measured reliably.
Spares which meet the definition of PPE are capitalised from the date when it is available for use. Other expenses on
fixed assets, including day-today repair and maintenance expenditure and cost of replacing parts that does not meet
the capitalisation criteria are charged to the Statement of Profit and Loss for the period during which such expenses are
incurred
Capital Expenditure on tangible assets for research and development is classified as PPE and is depreciated based on the
estimated useful life. Other expenditure incurred for research and development are expensed under the respective heads of
accounts in the year in which it is incurred.
5.4.3 PPE acquired in full or part exchange for another asset are recorded at the fair market value or the net book value of the
asset given up, adjusted for any balancing cash transaction. Fair market value is determined either for the assets acquired or
asset given up, whichever is more clearly evident.
5.4.4 PPEs are eliminated from the financial statements on disposal or when no further benefit is expected from its use and
disposal. Gains or losses arising from disposal, measured as the difference between the net disposal proceeds and the carrying
amount of such assets, are recognised in the Statement of Profit and Loss. Amount received towards PPE that are impaired
and derecognized in the financial statements, are recognized in Statement of Profit and Loss, when the recognition criteria
are met.
5.4.5 Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life on a straight line method.
The depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less 5% being its residual value
or any value whichever is less, except for process control systems whose residual value is considered as Nil.
5.4.6 Depreciation for PPE on additions is calculated on pro-rata basis from the date of such additions. For deletion/disposals, the
depreciation is calculated on pro-rata basis up to the date on which such assets have been discarded / sold.
5.4.7 The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each reporting
date and adjusted prospectively, if appropriate.
Capital Work in progress / Capital Advances
5.4.8 Capital work in progress includes cost of property, plant and equipment under installation, under development including
related expenses and attributable interest as at the reporting date.
5.4.9 Advances given towards acquisition / construction of PPE, outstanding as at the reporting date are disclosed as ‘Capital
Advances’ under ‘Other Non-Current Assets’.
5.5 Leases
Company as a Lessee
5.5.1 The company recognises 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 at
or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove
the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
5.5.2 The right-of-use asset is subsequently depreciated using the 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 the lease term.
5.5.3 The estimated 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 re-measurements
of the lease liability.
5.5.4 The Company presents right-of-use assets that do not meet the definition of investment property in ‘Property, Plant and
Equipment’ and Lease liabilities in ‘Financial Liabilities’ in the Balance sheet.
5.5.5 The Company has opted not to recognise right-of-use assets and lease liabilities for short-term leases that have a lease term
of 12 months or less. The company recognises the lease payments associated with these leases as an expense on a straight-line
basis over the lease term.
Company as a Lessor
5.5.6 Operating lease receipts are recognised in the Statement of Profit and Loss on straight line basis over the lease terms except
where the payments are structured to increase in line with the general inflation to compensate for the expected inflationary
cost increases.
5.6 Revenue from Operations
5.6.1 Sale of products
Revenue from product sales is recognised at the fair value of consideration received or receivable upon transfer of significant
risks and rewards of ownership of goods which coincides with the delivery of goods. It comprises of invoice value of goods
after deducting discounts, volume rebates and applicable taxes on sale including GST. The company provides discounts to
customers on achievement of the performance criteria based on agreed terms and conditions. There is no significant financing
component with regard to sale of products for the company as per Ind AS 115. The Company do not have any non-cash
consideration.
5.6.2 Project Revenue recognition
Contract revenue from Project activity on fixed price contracts is recognized when the outcome of the contract is ascertained
reliably, contract revenue is recognized at cost of work performed on the contract plus proportionate margin, using percentage
of completion method. Percentage of completion is determined based on work certified by the customer.
5.6.3 Power generated from Windmills
Power generated from windmills that are covered under wheeling & banking arrangement with TANGEDCO/BESCOM/PGVCL
are consumed at factories and unutilized units are sold to concerned distribution companies. The monetary values of such
power generated that are captively consumed are not recognised as revenue for the company.
Power generated from windmills that are covered under power purchase agreement with TANGEDCO /BESCOM/PGVCL are
sold to State Electricity Boards at the rate fixed by respective State Electricity Regulatory Commissions and the income is
recognised as Sale of surplus power generated from windmills
5.6.4 Scrap sale
Scrap sale is recognised at the fair value of consideration received or receivable upon transfer of significant risk and rewards.
5.7 Other Income
a. Interest income is recognised using the Effective Interest Rate (EIR) method. 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, the gross carrying amount of the financial asset or to the amortised cost of a financial liability.
b. Dividend income is recognised when the Company’s right to receive dividend is established.
c. Rental income from lease on investment properties is recognised on a straight line basis over the term of the relevant
lease
d. Value of Carbon credits are recognised when the Company’s right to receive the same is established.
5.8 Employee Benefits
Short term employee benefits
5.8.1 Short-term employee benefits viz., Salaries and Wages are recognized as an expense at the undiscounted amount in the
Statement of Profit and Loss for the year in which the related service is rendered.
Post-employment benefits
Defined Contribution Plan
5.8.2 Defined Contribution Plan viz., Contributions to Provident Fund and Superannuation Fund are recognized as an expense in the
Statement of Profit and Loss for the year in which the employees have rendered services.
5.8.3 The Company contributes monthly to Employees’ Provident Fund & Employees’ Pension Fund administered by the Employees’
Provident Fund Organisation, Government of India, at 12% of employee’s basic salary. The Company has no further obligations.
5.8.4 The Company also contributes for superannuation a sum equivalent to 15% of the eligible officer’s annual basic salary. The
company is remitting contribution for superannuation subject to maximum of ' 1.5 Lakhs per annum to Ramco Industries
Limited Officer’s Superannuation Fund administered by trustees and managed by LIC of India. There are no further obligations
in respect of the above contribution plan.
Defined Benefit Plan
5.8.5 The Company has its own Defined Benefit Plan viz., an approved Gratuity Fund. It is in the form of lump sum payments to
vested employees on resignation, retirement, death while in employment or on termination of employment, for an amount
equivalent to 15 days basic salary for each completed year of service. Vesting occurs upon completion of five years of
continuous service. The Company makes annual contributions to “Ramco Industries Limited Employees’ Gratuity Fund”
administered by trustees and managed by LIC of India, based on the Actuarial Valuation by an independent external Actuary
as at the Balance Sheet date using Projected Unit Credit method. The Company presents the entire compensated absences as
‘Short-term provisions’ since employee has an unconditional right to avail the leave at any time during the year.
5.8.6 Re-measurement of net defined benefit asset / liability comprising of actuarial gains or losses arising from experience
adjustments and changes in actuarial assumptions are charged / credited to other comprehensive income in the period in
which they arise and immediately transferred to retained earnings. Other costs are accounted in the Statement of Profit and
Loss.
Other long term employee benefits
5.8.7 The Company provides for expenses towards compensated absences provided to its employees. The expense is recognized at
the present value of the amount payable determined based on an independent external actuarial valuation as at the Balance
Sheet date, using Projected Unit Credit method. The Company presents the entire compensated absences as ‘Short-term
provisions’ since employee has an unconditional right to avail the leave at any time during the year.
5.9 Government Grants
5.9.1 This being in the nature of Government grants, which are recognised at fair value when the Company’s right to receive the
same is established with reasonable assurance.
5.9.2 In case of revenue related grant, the income is recognised on a systematic basis over the period for which it is intended
to compensate an expense and is disclosed under “Other operating revenue” or netted off against corresponding expenses
wherever appropriate. Receivables of such grants are shown under “Other Financial Assets”.
5.9.3 Export benefits are accounted for in the year of exports based on eligibility and when there is no uncertainty in receiving the
same. Receivables of such benefits are shown under “Other Financial Assets”.
5.10 Foreign currency transactions
5.10.1 The financial statements are presented in Indian Rupees, which is also the Company’s functional currency.
5.10.2 All transactions in foreign currency are recorded on initial recognition at their functional currency exchange rates prevailing
on that date.
5.10.3 Monetary assets and liabilities in foreign currencies outstanding at the reporting date are translated to the functional currency
at the exchange rates prevailing on the reporting date and the resultant gains or losses are recognised during the year in the
Statement of Profit and Loss.
5.10.4 Non-monetary items which are carried at historical cost denominated at functional currency are reported using the exchange
rates at the date of transaction.
5.10.5 Foreign Branch Operations
Income and expenditure transactions are translated to functional currency using monthly moving average exchange rate.
Monetary assets and liabilities of foreign branch as at the reporting date are translated to the functional currency at the
exchange rates prevailing on the reporting date and the resultant gains or losses are recognised during the year in the
Statement of Profit and Loss.
Non-monetary items of foreign branch are carried at historical cost denominated at functional currency and are reported
using the exchange rates at the transaction date.
5.11 Impairment of Non-Financial Assets
5.11.1 The carrying values of assets include property, plant and equipment, investment properties, cash generating units and
intangible assets are reviewed for impairment at each Balance Sheet date, if there is any indication of impairment based on
internal and external factors.
5.11.2 Non-financial assets are treated as impaired when the carrying amount of such asset exceeds its recoverable value. After
recognition of impairment loss, the depreciation for the said assets is provided for remaining useful life based on the revised
carrying amount, less its residual value if any, on straight line basis.
5.11.3 An impairment loss is charged to the Statement of Profit and Loss in the year in which an asset is identified as impaired.
5.11.4 An impairment loss is reversed when there is an indication that the impairment loss may no longer exist or may have
decreased.
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