2.1 SIGNIFICANT ACCOUNTING POLICIES:
The following are the significant accounting policies
applied by the Company in preparing its financial
statements:
a) Property, Plant and Equipment:
• Property, plant and equipment are stated
at cost less accumulated depreciation and
impairment losses, if any. Historical cost
includes expenditure that is directly attributable
to the acquisition of the item.
• Leasehold Land are a part of property, plant
and equipment, such arrangements result
in transfer of control and the present value
of the lease payments is likely to represent
substantially all of the fair value of the land.
• Subsequent costs are included in the asset's
carrying amount or 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 item can be measured reliably.
• The gain or loss arising on the disposal or
retirement of an item of property, plant and
equipment is determined as the difference
between the sales proceeds and the carrying
amount of the asset and is recognized in the
Statement of Profit and Loss on the date of
disposal or retirement.
• Capital Work in Progress: Assets under
installation/commissioning are shown under
the head Capital Work -in Progress.
• Depreciation on the property, plant and
equipment is provided on the straight line value
basis over the useful life of assets as specified
in Schedule II to the Companies Act, 2013.
Property, plant and equipment which are added
/ disposed off during the year, depreciation is
provided on pro-rata basis with reference to the
month of addition/deletion.
b) Intangible Assets
Intangible assets are stated at cost less accumulated
amortization and impairment. Intangible assets
are amortized over their respective individual
estimated useful lives on a straight line value basis,
from the date that they are available for use. The
estimated useful life of an identifiable intangible
asset is based on a number of factors including the
effects of obsolescence, demand, competition, and
other economic factors (such as the stability of the
industry, and known technological advances), and
the level of maintenance expenditures required to
obtain the expected future cash flows from the asset.
Amortization methods and useful lives are reviewed
periodically including at each financial year end.
c) Current and Non-Current Classification:
The Company presents assets and liabilities in
the balance sheet based on Current/Non-current
classification.
An asset is classified as current when it is:
• Expected to be realized or intended to sold or
consumed in normal operating cycle
• Held primarily for the purpose of trading
• Expected to be realized within twelve months
after the reporting period, or
• Cash or cash equivalent unless restricted from
being exchanged or used to settle a liability
for at least twelve months after the reporting
period.
• All other assets are classified as non-current.
A liability is classified as current when:
• It is expected to be settled in normal operating
cycle
• It is held primarily for the purpose of trading
• It is due to be settled within twelve months after
the reporting period, or
• There is no unconditional right to defer the
settlement of the liability for at least twelve
months after the reporting period
• All other liabilities are classified as non-current.
The operating cycle is the time between the
acquisition of assets for processing and their
realization in cash or cash equivalents. Deferred tax
Assets and Liabilities are classified as Non-Current
Assets and Liabilities.
d) Cash and cash equivalents:
For the purpose of presentation in statement of cash
flows, cash and cash equivalents includes cash on
hand, deposit held at call with financial institution,
other short term, highly liquid investments with
original maturities of 3 months or less that are readily
convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value,
and bank overdraft. Fixed Deposit in the form of
margin money for Letter of Credit and Guarantee are
classified as other bank balances.
e) Financial Instruments:
Financial Assets:
> Initial recognition and measurement
All financial assets are recognised initially at
fair value plus, in the case of financial assets
not recorded at fair value through profit or loss,
transaction costs that are attributable to the
acquisition of the financial asset.
Financial assets are classified, at initial
recognition, as financial assets measured at
fair value or as financial assets measured at
amortised cost.
> Subsequent Measurement
For purposes of subsequent measurement
financial assets are classified in two broad
categories:
Financial assets at fair value
Financial assets at amortised cost.
Where assets are measured at fair value, gains
and losses are either recognised entirely in
the statement of profit and loss (i.e. fair value
through profit or loss), or recognised in other
comprehensive income (i.e. fair value through
other comprehensive income).
A financial asset that meets the following two
conditions is measured at amortised cost (net
of any write down for impairment) unless the
asset is designated at fair value through profit
or loss under the fair value option.
Business model test: The objective of the
Company's business model is to hold the
financial asset to collect the contractual cash
flows (rather than to sell the instrument prior to
its contractual maturity to realise its fair value
changes).
Cash flow characteristics test: 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.
A financial asset that meets the following two
conditions is measured at fair value through
other comprehensive income unless the asset
is designated at fair value through profit or loss
under the fair value option.
Business model test: The financial asset is
held within a business model whose objective
is achieved by both collecting contractual cash
flows and selling financial assets.
Cash flow characteristics test: 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.
Even if an instrument meets the two
requirements to be measured at amortised
cost or fair value through other comprehensive
income, a financial asset is measured at fair
value through profit or loss if doing so eliminates
or significantly reduces a measurement or
recognition inconsistency (sometimes referred
to as an 'accounting mismatch') that would
otherwise arise from measuring assets or
liabilities or recognizing the gains and losses
on them on different bases.
All other financial asset is measured at
fair value through profit or loss.All equity
investments are measured at fair value in the
balance sheet, with value changes recognized
in the statement of profit and loss, except for
those equity investments for which the entity
has elected to present value changes in other
comprehensive income.
If an equity investment is not held for trading,
an irrevocable election is made at initial
recognition to measure it at fair value through
other comprehensive income with only dividend
income recognized in the statement of profit
and loss.
> De recognition:
A financial asset (or, where applicable, a part
of a financial asset or part of a group of similar
financial assets) is primarily derecognized (i.e.
removed from the Company's statement of
financial position) 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.
> Impairment of Financial Assets:
The Company assesses impairment based on
expected credit losses model to the following:
• Financial assets measured at amortized
cost;
• Financial assets measured at fair value
through other comprehensive income
(FVTOCI);
Expected credit losses are measured through a
loss allowance at an amount equal to:
• The 12- months expected credit losses
(expected credit losses that result from
those default events on the financial
instrument that are possible within 12
months after the reporting date); or
• Full lifetime expected credit losses
(expected credit losses that result from
default events over the life of the financial
instruments).
The Company follows 'simplified approach'
for recognition of impairment loss allowance
on Trade receivables or contract revenue
receivables.
Under simplified approach, the Company
does not track changes in credit risk. Rather,
it recognizes impairment loss allowance based
on lifetime expected credit losses at each
reporting date, right from its initial recognition.
The Company uses provision matrix to
determine impairment loss allowance on the
portfolio of trade receivables. The provision
matrix is based on the historically observed
default rates over the expected life of the
trade receivables and is adjusted for forward
looking estimates. At every reporting date, the
historical observed default rates are updated
and changes in the forward looking estimates
are analysed.
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 the credit risk has
not increased significantly, 12 month expected
credit losses is used to provide for impairment
loss. However, if the credit risk has increased
significantly, lifetime expected credit losses is
used. If, in 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
recognizing impairment loss allowance based
on 12-month expected credit losses.
For assessing increase in credit risk and
impairment loss, the Company combines
financial instruments on the basis of shared
credit risk characteristics with the objective
of facilitating an analysis that is designed to
enable significant increase in credit risk to be
identified on a timely basis.
Financial liabilities:
> Initial Recognition and measurement
All financial liabilities are recognised initially at
fair value and, in the case of loans, borrowings
and payable, net of directly attributable
transaction costs. The Company's financial
liabilities include trade and other payable loans
and borrowings.
> Subsequent measurement
The measurement of financial liabilities
depends on their classification, as described
below:
a) Financial liabilities at fair value through
profit and loss:
It includes financial liabilities held for
trading and financial liabilities designated
upon initial recognition as at fair value
through profit and loss.
Financial liabilities classified as held for
trading if they are incurred for the purpose
of repurchasing in the near term. Gains
or losses on liabilities held for trading are
recognized in the statement of profit and
loss.
Financial liabilities designated upon
initial recognition at fair value through
profit and loss are designated upon initial
recognition, and only if the criteria in Ind
AS 109 are satisfied.
b) Loans and Borrowings:
Borrowings are initially recognised at fair
value, net of transaction cost incurred.
Borrowings are subsequently measured at
amortized cost. Any difference between the
proceeds (net of transaction cost) and the
redemption amount is recognised in profit
or loss over the period of the borrowings
using EIR method/ Straight line method.
Fees paid on the establishment of loan
facilities are recognised as transaction
costs of the loan to the extent that it is
probable that some or all of the facilities
will be drawn down. In this case, the fees
is deferred until the drawn down occurs.
To the extent there is no evidence that it
is probable that some or all of the facilities
will be drawn down, the fee is capitalized
as a prepayment of liquidity services and
amortised over the period of the facilities
to which it relates.
> Derecognition of Financial Liabilities:
Borrowings are removed from the balance
sheet when the obligation specified in the
contract is discharged, cancelled or expired.
The difference between the carrying amount of
a financial liability that has been extinguished
or transferred to another party and the
consideration paid, including any non-cash
asset transferred or liabilities assumed, is
recognised in profit or loss as other gain/
(losses).
> Offsetting of 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 realize the assets and settle the liabilities
simultaneously. The legally enforceable right
must not be contingent on future events and
must be enforceable in the normal course of
business and in the event of default, insolvency
or bankruptcy of the company, or the counter
party.
f) Fair value measurement:
Fair value is the price that would be received to
sell an asset or settle a liability in an ordinary
transaction between market participants at the
measurement date. The fair value of an asset or
a liability is measured using the assumption that
market participants would use when pricing an asset
or liability acting in their best economic interest. The
Company used valuation techniques, which were
appropriate in circumstances and for which sufficient
data were available considering the expected loss/
profit in case of financial assets or liabilities.
g) Revenue Recognition:
• Sale of Goods
Revenue is recognized only when there is no
significant uncertainty as to its measurability or
collect ability of the amount. Turnover includes
sale of goods, and are net of discounts, claims
and GST.
• Interest income
Interest income is accounted on accrual
basis. Interest income is recognised on a time
proportion basis taking into account the amount
outstanding and the rate applicable.
Interest income is included in other income in
the statement of profit and loss.
• Dividend income:
Dividend income is accounted for when the
right to receive the same is established, which
is generally when shareholders approve the
dividend.
h) Inventories:
In general, all inventories of finished goods, work
in progress etc, are stated at lower of cost or net
realizable value. Finished goods stored in tanks
pending final packing are included in the finished
goods stocks and valued accordingly. Cost of
inventories comprises of all cost of purchase, cost
of conversion and other cost incurred in bringing
the inventory of their present location and condition.
Raw materials, packing material & stores and spares
are stated at cost on FIFO basis.
i) Export incentives
Export benefits are accounted when there is certainty
to receive the incentive from the government or on
actual basis whichever is earlier.
j) Retirement and other Employee Benefits:
i. Short term employee benefits:
All employee benefits payable wholly within
twelve months of rendering the service are
classified as short term employee benefits.
Short - term employee benefits are expense
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 obligation can be estimated reliably.
ii. Gratuity:
The Company's net obligation in respect of
defined benefit plans is calculated separately
for each plan by estimating the amount of
future benefit that employees have earned in
the current and prior periods, discounting that
amount and deducting the fair value of any plan
assets.
The calculation of defined benefit obligations
is performed half-yearly by a qualified actuary
using the projected unit credit method. When
the calculation results in a potential asset for
the Company, the recognised asset is limited
to the present value of economic benefits
available in the form of any future refunds from
the plan or reductions in future contributions
to the plan. To calculate the present value of
economic benefits, consideration is given to
any applicable minimum funding requirements.
Remeasurements, comprising of actuarial
gains and losses, the effect of the asset ceiling,
excluding amounts included in net interest on
the net defined benefit liability and the return
on plan assets (excluding amounts included in
net interest on the net defined benefit liability),
are recognised immediately in the balance
sheet with a corresponding debit or credit to
retained earnings through OCI in the period
in which they occur. Remeasurements are
not reclassified to profit or loss in subsequent
periods. Net interest is calculated by applying
the discount rate to the net defined benefit
liability or asset.
iii. Leave Encashment:
Entitlements to leave encashment are
recognized when they accrue to employees.
Privilege leave can be availed or encashed
subject to a restriction on the maximum number
of accumulations of leave. The Company
determines the liability for such accumulated
leaves using the projected unit credit method
with actuarial valuations being carried out at
each reporting date.
iv. Provident Fund:
Retirement benefit in the form of provident
fund is a defined contribution scheme. The
Company has no obligation, other than the
contribution payable to the provident fund.
The Company recognizes contribution payable
to the provident fund scheme as an expense,
when an employee renders the related service.
v. Other long-term employee benefits
The Company's net obligation in respect of
long - term employee benefits is the amount
of future benefit that employees have earned
in return for their service in the current and
prior periods. That benefit is discounted to
determine its present value. Re- measurement
is recognised in Statement of Profit and Loss in
the period in which they arise.
k) Borrowing Cost
Borrowing costs specifically relating to the
acquisition or construction of qualifying assets that
necessarily takes a substantial period to get ready
for its intended use are capitalized (net of income
on temporarily deployment of funds) as part of the
cost of such assets. Borrowing costs consist of
interest and other costs that the Company incurs
in connection with the borrowing of funds. All other
borrowing costs are expense in the period in which
they occur.
l) Leases:
The Company has adopted Ind AS 116 “Leases”
using, under which the Company recorded the lease
liability at the present value of the remaining lease
payments discounted at the incremental borrowing
rate and has measured right of use asset an amount
equal to lease liability adjusted for any related
prepaid and accrued lease payments previously
recognized.
Company as a lessee
The Company assesses at contract inception
whether a contract is, or contains, a lease. That
is, if the contract conveys the right to control the
use of an identified asset for a period in exchange
for consideration. To assess whether a contract
conveys the right to control the use of an identified
asset, the Company assesses whether: (i) the
contract involves the use of an identified asset (ii)
the Company has substantially all of the economic
benefits from use of the asset through the period
of the lease and (iii) the Company has the right to
direct the use of the asset. The Company applies
a single recognition and measurement approach for
all leases, except for short-term leases and leases
of low-value assets. For these short-term leases,
the Company recognizes the lease payments as an
operating expense on a straight-line basis over the
term of the lease. The Company recognises lease
liabilities to make lease payments and right-of-use
assets representing the right to use the underlying
assets as below.
Right-of-use assets
The Company recognises right-of-use assets at the
commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use
assets are measured at cost, less any accumulated
depreciation and impairment losses. Right-of-use
assets are depreciated on a written down value
basis over the shorter of the lease term and the
estimated useful lives of the assets.
Lease Liabilities
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 rate.
After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of
interest and reduced for the lease payments made.
Lease liabilities and ROU assets have been
separately presented in the Balance Sheet and
lease payments have been classified as financing
cash flows.
m) Segment Reporting:
In accordance with Ind AS-108 "Operating Segments"
the company has only one reportable primary
business segment i.e. "Chemical Manufacturing".
However, the company has secondary geographical
segment which is disclosed in financial statements
as per Ind AS-108.
n) Taxation:
Current Tax
i. Tax on income for the current period is
determined on the basis on estimated
taxable income and tax credits computed in
accordance with the provisions of the relevant
tax laws and based on the expected outcome
of assessments / appeals.
ii. Current income tax relating to items recognised
directly in equity is recognised in equity and not
in the statement of profit and loss. Management
periodically evaluates positions taken in the
tax returns with respect to situations in which
applicable tax regulations are subject to
interpretation and establishes provisions where
appropriate.
Deferred Tax
i. Deferred tax is provided using the balance
sheet approach on temporary differences at
the reporting date between the tax bases of
assets and liabilities and their carrying amounts
for financial reporting purposes at the reporting
date.
ii. 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 utilized. Unrecognised deferred tax assets
are reassessed 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.
iii. Deferred tax assets and liabilities are measured
at the tax rates that are expected to apply in the
year when the asset is realized or the liability is
settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted at
the reporting date.
iv. Deferred tax relating to items recognised
outside the statement of profit and loss is
recognised outside the statement of profit and
loss. Deferred tax items are recognised in
correlation to the underlying transaction either
in other comprehensive income or directly in
equity.
v. Deferred tax assets and deferred tax liabilities
are offset if a legally enforceable right exists
to set off current tax assets against current
income tax liabilities and the deferred taxes
relate to the same taxable entity and the same
taxation authority.
vi. The break-up of the major components of the
deferred tax assets and liabilities as at balance
sheet date has been arrived at after setting off
deferred tax assets and liabilities where the
Company have a legally enforceable right to
set-off assets against liabilities and where such
assets and liabilities relate to taxes on income
levied by the same governing taxation laws.
vii. Deferred Tax assets are the amounts of income
taxes recoverable in future periods in respect
of:
(a) Deductible temporary differences;
(b) The carry forward of unused tax losses;
and
(c) The carry forward of unused tax credits.
The Company reviews the same at each
reporting date and written down the
carrying amount of MAT credit entitlement
to the extent there is no longer convincing
evidence to the effect that the company
will pay normal income tax during the
specified period.
o) Earnings per share:
Basic earnings per share are calculated by dividing
the net profit or loss for the period attributable
to equity shareholders by the weighted average
number of equity shares outstanding during the
period.
For the purpose of calculating diluted earnings per
share, the net profit or loss for the period attributable
to equity shareholders and the weighted average
number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity
shares.
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