2.2 Material Accounting Policies
i. Revenue Recognition
The Company earns revenue primarily from sale of Soda Ash
and Ammonium Chloride (Dual Product).
Revenue is recognized at point in time in accordance with INDAS
115 on satisfaction of performance obligation upon transfer of
control of promised products to customers in an amount that
reflects the consideration which the Company expects to receive
in exchange for those products.
Revenue is measured based on the transaction price, which is the
consideration, adjusted for volume discounts, price concessions
and incentives, if any, as per the contract with the customer.
Revenue also excludes taxes collected from customers.
ii. Property, plant and equipment
a. Tangible Assets
>Ý Recognition and measurement
Freehold land, Buildings except Investment Property are carried
in the balance sheet on the basis of revaluation model. The
revaluation of these assets is conducted once in every three
years by the Company.
Land, Buildings except Investment Property are measured
at fair value less accumulated depreciation on buildings and
impairment losses recognized at the date of revaluation.
Valuations are performed with sufficient frequency to ensure that
the carrying amount of a revalued asset does not differ materially
from its fair value.
A revaluation surplus is recorded in OCI and credited to the
asset revaluation reserve in equity. However, to the extent that
it reverses a revaluation deficit of the same asset previously
recognized in profit or loss, the increase is recognized in profit
and loss. A revaluation deficit is recognized in the statement of
profit and loss, except to the extent that it offsets an existing
surplus on the same asset recognized in the asset revaluation
reserve.
Cost of an item of other 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 a self-constructed item of property, plant and
equipment comprises the cost of materials direct labor and
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 recognized in the statement of profit and
loss.
Capital work-in progress comprises of the cost of property, plant
and equipment that are not yet ready for their intended use as on
the balance sheet date. Advances paid towards the acquisition of
property, plant and equipment outstanding at each balance sheet
date is classified as capital advances under other non-current
assets and the cost of assets not put to use before such date are
disclosed under ‘Capital work-in-progress'.
Depreciation
Depreciation on property, plant and equipment is charged over
the estimated useful life of the property, plant and equipment
at the rates and in the manner prescribed in Schedule II of the
Companies Act, 2013. Assets purchased/sold during the year
are depreciated on a pro-rata basis, based on the actual number
of days the assets have been put to use. Assets individually
costing upto Rs.5,000/- are depreciated fully over a period of
one year from the date of purchase.
Based on the technical experts assessment of useful life, certain
items of property plant and equipment are being depreciated
over useful lives different from the prescribed useful lives under
Schedule II to the Companies Act, 2013. Management believes
that such estimated useful lives are realistic and reflect fair
approximation of the period over which the assets are likely to
be used. The residual values are not more than 5% of the original
cost of the asset.
Depreciation on sale/deduction from property plant and
equipment is provided up to the date preceding the date of sale,
deduction as the case may be. Gains and losses on disposals
are determined by comparing proceeds with carrying amount.
These are included in Statement of Profit and Loss under ‘Other
Income'.
Depreciation methods, useful lives and residual values are
reviewed periodically at each financial year end and adjusted
prospectively, as appropriate.
iii. Financial instruments
A financial instrument is any contract that gives rise to a financial
asset of one entity and a financial liability or equity instrument of
another entity.
a. Financial Assets
>Ý Initial recognition and measurement
At initial recognition, financial asset is measured at its fair value
plus, in the case of a financial asset not at fair value through
profit or loss, transaction costs that are directly attributable
to the acquisition of the financial asset. Transaction costs of
financial assets carried at fair value through profit or loss are
expensed in profit or loss.
>Ý Subsequent measurement
For purposes of subsequent measurement, financial assets are
classified in following categories:
a) at amortized cost; or
b) at fair value through other comprehensive income; or
c) at fair value through profit or loss.
>Ý Impairment of financial assets
In accordance with Ind AS 109, Financial Instruments, the
Company applies expected credit loss (ECL) model for
measurement and recognition of impairment loss on financial
assets that are measured at amortized cost and FVOCI.
>Ý Derecognition of financial assets
A financial asset is derecognized only when
a) the rights to receive cash flows from the financial asset is
transferred or
b) retains the contractual rights to receive the cash flows of the
financial asset, but assumes a contractual obligation to pay the
cash flows to one or more recipients.
Where the financial asset is transferred then in that case financial
asset is derecognized only if substantially all risks and rewards of
ownership of the financial asset is transferred. Where the entity has
not transferred substantially all risks and rewards of ownership of the
financial asset, the financial asset is not derecognized.
b. Financial liabilities
>Ý Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial
liabilities at fair value through profit or loss and at amortized
cost, as appropriate.
All financial liabilities are recognized initially at fair value and, in
the case of borrowings and payables, net of directly attributable
transaction costs.
>Ý Subsequent measurement
The subsequent measurement of financial liabilities depends on
their classification, as described below:
• Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include
financial liabilities held for trading and financial liabilities
designated upon initial recognition as at fair value through profit
or loss. Separated embedded derivatives are also classified as
held for trading unless they are designated as effective hedging
instruments. Gains or losses on liabilities held for trading are
recognized in the Statement of Profit and Loss.
• Derecognition
A financial liability is derecognized when the obligation under the
liability is discharged or cancelled or expires. When an existing
financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability
are substantially modified, such an exchange or modification
is treated as the derecognition of the original liability and the
recognition of a new liability. The difference in the respective
carrying amounts is recognized in the Statement of Profit and
Loss as finance costs.
c. Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is
reported in the balance sheet where there is a legally enforceable
right to offset the recognized amounts and there is an intention
to settle on a net basis or realize the asset and settle the
liability 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 counterparty.
iv. Inventories
Inventories are stated at the lower of cost and net realizable
values. Cost is determined as follows:
Net realisable value is the estimated selling price in the ordinary
course of business less the estimated costs of completion and
the estimated costs necessary to make the sale.
Cost comprises all costs of purchase including duties and taxes
(other than those subsequently recoverable by the Company),
freight inwards and other expenditure directly attributable to
acquisition. Finished goods include appropriate proportion of
overheads and, where applicable, excise duty.
Provision of obsolescence on inventories is considered on the
basis of management's estimate based on demand and market
of the inventories.
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