1.3 Significant Accounting Policies
i) Property, plant and equipment
a) Recognition and measurement
items of property, plant and equipment are measured
at cost, which includes capitalised borrowing costs,
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 item to its working condition for
its intended use and estimated costs of dismantling
and removing the item and restoring the site on
which it is located.
The cost of property, plant and equipment which
are incurred before the date they are ready for
their intended use, are disclosed as capital work-in¬
progress before such date.
The cost of a self-constructed item of 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.
Any gain or loss on disposal of an item of property,
plant and equipment is recognised in statement of
Profit & Loss.
b) Subsequent expenditure
Subsequent expenditure is capitalised only if it
is probable that the future economic benefits
associated with the expenditure will flow to
the Company.
c) Depreciation
Depreciation is calculated on cost of items of
property, plant and equipment less their estimated
residual values over their estimated useful lives using
the straight-line method and is recognised in the
statement of profit and loss.
The estimated useful lives of items of property, plant
and equipment for the current and comparative
periods are as follows:
Depreciation method, useful lives and residual values
are reviewed at each financial year end and adjusted
if appropriate. Based on internal assessment and
consequent advice, the management believes that
its estimate of useful lives as given above best
represent the period over which management
expects to use these assets.
Depreciation on additions (disposals) is provided on
a pro-rata basis i.e. from (up to) the date on which
asset is ready for use (disposed off).
d) Derecognition
Gains or losses arising from derecognition of
property, plant and equipment are measured as the
difference between the net disposal proceeds and
the carrying amount of the asset and are recognised
in the statement of profit and loss when the asset
is derecognised.
ii) Intangible assets
a) Acquired intangible assets
Intangible assets comprise purchased technical
know-how are initially measured at cost. Such
intangible assets are subsequently measured at cost
less accumulated amortisation and any accumulated
impairment losses if any.
b) Subsequent expenditure
Subsequent expenditure is capitalised only when it
increases the future economic benefits embodied
in the specific asset to which it relates. All other
expenditure, including expenditure on internally
generated goodwill and brands, is recognised in
statement of profit and loss as incurred.
c) Amortisation
Amortisation is calculated to write off the cost of
intangible assets less their estimated residual values
over their estimated useful lives using the straight¬
line method and is included in depreciation and
amortisation in Statement of Profit and Loss.
I ntangible assets are amortised over a period of 10
years for technical know-how and 3 years for others.
The Imperial Blue brand and associated brands,
including related trademarks, know-how and
domain names, are considered to have an indefinite
useful life.
The Concentrated Alcohol Beverage ("CAB") is
considered to have a finite useful life of 10 years
and is amortised over that period.
The right to use the Seagram's trademark is
considered to have a finite useful life of 4 years and
is amortised over that period.
iii) Cash and cash equivalents
For the purpose of presentation in the statement of cash
flow, cash and cash equivalents including cash on hand,
deposits held at call with financial institutions, other short
term, highly liquid investments 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. Bank overdrafts
are shown within borrowings in current liabilities in the
balance sheet and are not considered as integral part of
Company's cash management.
iv) Inventories
I nventories are measured at the lower of cost and net
realisable value after provision for obsolescence where
appropriate. The cost of inventories is based on the
weighted average cost method, and includes expenditure
incurred in acquiring the inventories, production or
conversion costs and other costs incurred in bringing
them to their present location and condition. In the
case of manufactured inventories and work-in-progress,
cost includes an appropriate share of fixed production
overheads based on normal operating capacity.
Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs of
completion and selling expenses.
The net realisable value of work-in-progress is
determined with reference to the selling prices of related
finished products.
Raw materials and other supplies held for use in the
production of finished products are not written down
below cost except in cases where material prices have
declined and it is estimated that the cost of the finished
products will exceed their net realisable values.
The comparison of cost and net realisable value is made
on an item-by-item basis.
Scrap is valued at net realisable value.
Excise duty
I n respect of stocks covered by Central Excise, excise
duty is provided on closing stocks and also considered
for valuation. In respect of IMFL stocks, applicable State
excise duty / export duty is provided on the basis of state-
wise dispatches identified. In the case of Rectified Spirit
/ ENA, it is not ascertainable as to how much would be
converted finally into IMFL or sold as such and also to
which particular state or exported outside India. Duty
payable in such cases is not determinable (as it varies
depending on the places and the form in which these are
dispatched). Hence, the excise duty on such stocks lying
in factory is accounted for on clearances of such goods.
The method of accounting followed by the company has
no impact on the financial statements of the year.
v) Foreign currency transactions
The Company's financial statements are presented in ',
which is also the Company's functional currency.
Transactions and balances
Monetary items are initially recorded by the Company at
their respective functional currency spot rates at the date
the transaction first qualifies for recognition. Monetary
assets and liabilities denominated in foreign currencies
are translated at the functional currency spot rates of
exchange at the reporting date. Exchange differences
arising on settlement or translation of monetary items are
recognised in statement of profit & loss. Non-monetary
items that are measured in terms of historical cost in a
foreign currency are translated using the exchange rates
at the dates of the initial transactions.
vi) Impairment of non-financial assets
An asset is deemed impairable when recoverable value
is less than its carrying cost and the difference between
the two represents provisioning exigency. Recoverable
value is the higher of the 'Value in Use' and fair value as
reduced by cost of disposal. Test of impairment of PPE (
Property, Plant & Equipment ) investment in subsidiaries
/ associates / joint venture and goodwill are undertaken
under Cash Generating Unit (CGU) concept. For Intangible
Assets and Investment Properties it is undertaken in
asset specific context. Test of impairment of assets are
generally undertaken based on indication of impairment,
if any, from external and internal sources of information.
Non-financial assets other than goodwill that suffered
impairment are reviewed for possible reversal of the
impairment at the end of each reporting period.
vii) Employee Benefits
a) Short-term employee benefits
Short-term employee benefit obligations are
measured on an undiscounted basis and are
expensed as the related service is provided. A liability
is recognised for the amount expected to be paid
e.g., under short-term cash bonus, 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 amount of obligation can be
estimated reliably.
b) Defined Contribution Plans
A defined contribution plan is a post-employment
benefit plan under which an entity pays fixed
contributions into a separate entity and will have
no legal or constructive obligation to pay further
amounts. The Company makes specified monthly
contributions towards Government administered
provident fund and Employee State Insurance
scheme. Obligations for contributions to defined
contribution plans are recognised as an employee
benefit expense in Statement of profit or loss in the
year during which the related services are rendered
by employees.
Prepaid contributions are recognised as an asset to
the extent that a cash refund or a reduction in future
payments is available.
c) Defined Benefit Plans
A defined benefit plan is a post-employment benefit
plan other than a defined contribution plan. The
Company's net obligation in respect of defined
benefit plans is calculated 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 obligation is
performed annually by a qualified actuary using the
projected unit credit method.
Remeasurements of the net defined benefit liability,
which comprise actuarial gains and losses are
recognised in Other Comprehensive Income (OCI).
The Company determines the net interest expense
(income) on the net defined benefit liability (asset)
for the period by applying the discount rate used
to measure the defined benefit obligation at the
beginning of the annual period to the then-net
defined benefit liability (asset), taking into account
any changes in the net defined benefit liability
(asset) during the period as a result of contributions
and benefit payments. Net interest expense and
other expenses related to defined benefit plans are
recognised in statement of profit or loss.
When the benefits of a plan are changed or when a
plan is curtailed, the resulting change in benefit that
relates to past service ('past service cost' or 'past
service gain') or the gain or loss on curtailment is
recognised immediately in statement of profit or
loss. The Company recognises gains and losses on
the settlement of a defined benefit plan when the
settlement occurs.
d) Other long-term employee benefits
The Company's net obligation in respect of
long-term employee benefits other than post¬
employment 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.
The obligation is measured on the basis of an annual
independent actuarial valuation using the projected
unit credit method. Remeasurements gains or losses
are recognised in statement of profit or loss in the
period in which they arise.
|