C. Material accounting policies
A summary of the material accounting policies applied in the
preparation of the standalone financial statements are as
given below. These accounting policies have been applied
consistently to all periods presented in the standalone
financial statements.
(1) Property, plant and equipment
1.1 Initial recognition and measurement
Items of property, plant and equipment are
measured at cost less accumulated depreciation
and accumulated impairment losses, if any.
Cost of an item of property, plant and equipment
comprises its purchase price, including import
duties and non-refundable purchase taxes, after
deducting trade discounts and rebates, any
directly attributable cost of bringing the items
to its working condition for its intended use and
estimated cost of dismantling and removing the
item and restoring the site on which it is located.
The cost of a self-constructed property, plant and
equipment comprises the cost of materials and direct
labour, any other costs directly attributable to bringing
the item to working condition for its intended use, and
estimated costs of dismantling and removing the item
and restoring the site on which it is located.
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.
1.2 Subsequent costs
Subsequent expenditure is recognised as an
increase in the carrying amount of the asset
when it is probable that future economic benefits
accruing from the cost incurred will flow to
the enterprise and the cost of the item can be
measured reliably.
The cost of replacing part of an item of property,
plant and equipment is recognised in the carrying
amount of the item if it is probable that the
future economic benefits embodied within the
part will flow to the Company and its cost can
be measured reliably. The carrying amount of
the replaced part is derecognised. The costs
of the day-to-day repairs of property, plant and
equipment are recognised as in the standalone
statement of profit and loss as incurred.
1.3 Derecognition
Property, plant and equipment is derecognised
when no future economic benefits are expected
from their use or upon their disposal. Gains and
losses on disposal of an item of property, plant
and equipment are determined by comparing
the proceeds from disposal with the carrying
amount of property, plant and equipment, and
are recognised in the standalone statement of
profit and loss.
(2) Depreciation
Depreciation is recognised in standalone statement
of profit and loss on a straight-line basis over the
estimated useful lives of each part of an item of
property, plant and equipment specified in schedule II
to the Act as given below:
Land is not depreciated. Leasehold improvements are
amortised over the primary period of the lease.
Depreciation on additions to/deductions from property,
plant and equipment during the year is charged on pro¬
rata basis from/up to the date in which the asset is
available for use/disposed.
Depreciation method, useful lives and residual values
are reviewed at each financial year-end and adjusted
prospectively, if appropriate. Based on technical
evaluation, the management believes that its estimates
of useful lives as given above best represent the period
over which management expects to use these assets.
(3) Impairment of non-financial assets
Assessment is done at each balance sheet date
as to whether there is any indication that an asset
may be impaired. For the purpose of assessing
impairment, the smallest identifiable group of assets
that generates cash inflows from continuing use
that are largely independent of the cash inflows from
other assets and group of assets, is considered as a
cash generating unit. If any such indication exists, an
estimate of the recoverable amount of the asset/cash
generating unit is made. Assets whose carrying value
exceeds their recoverable amount are written down
to the recoverable amount. Recoverable amount is
higher of an asset's or cash generating unit's selling
price and its value in use. Value in use is the present
value of estimated future cash flows expected to raise
from continuing use of an asset and from its disposal
at the end of its useful life. Assessment is also done
at each balance sheet date as to whether there is any
indication that an impairment loss recognised for an
asset in prior accounting periods may no longer exist
or may have decreased.
(4) Inventories
Inventories are valued at the lower of cost and net
realisable value after providing for obsolescence and
other losses wherever considered necessary. Cost of
inventories comprises of cost of purchase, cost of
conversion and other costs incurred in bringing the
inventories to their present location and condition.
The cost of purchase consists of the purchase
price including duties and taxes other than those
subsequently recoverable by the enterprise from
the taxing authorities, freight inwards and other
expenditure directly attributable for its acquisition.
Net realisable value is the estimated selling price in
the ordinary course of business, less estimated costs
of completion and the estimated costs necessary
to make the sale.
Finished goods and stores, spares and consumables
are valued at lower of cost and net realisable value and
the comparison is made on an item-by-item basis.
The methods of determining cost of various categories
of inventories are as under:
Stock in transit is valued at lower of cost and net
realisable value. Scrap is valued at estimated net
realisable value.
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