Note No. 2 : Material Accounting Policies
2.1 Statement of compliance with Ind AS
The Standalone Financial Statements of the Company have been prepared to comply with the Indian Accounting
Standards ('Ind AS') notified under Companies (Indian Accounting Standards) Rules, 2015(as amended from
time to time) read with Section 133 of the Companies Act, 2013 and other relevant provision and presentation
requirement of Division II of Schedule III of the Companies Act as applicable.
The company has assessed the materiality of the accounting policy information which involves exercising
judgements and considering both qualitative and quantitative factors by taking into account not only the size and
nature of the item or condition but also the characteristics of the transactions, events or conditions that could
make the information more likely to impact the decisions of the users of the financial statements.
Entity's conclusion that an accounting policy is immaterial does not affect the disclosures requirements set out in
the accounting standards.
All the Ind AS issued and notified by the Ministry of Corporate Affairs under the Companies (India Accounting
Standards) Rules 2015 (As amended) till the Standalone Financial Statements are approved for issue by the Board
of Directors has been considered in preparing these financial statements.
2.2 Basis of preparation
These Standalone Financial Statements have been prepared in accordance with Ind AS under the historical cost
basis except for the following.
i) Certain financial assets and financial liabilities- measured at fair value and
ii) Defined benefits plan- plan assets measured at fair value.
iii) Biological assets that are measured at fair value, assets held for sale which is measured at lower of cost and
fair value less cost to sell.
Accounting Policies have been consistently applied except where a newly issued IND AS is initially accepted or a
revision to an existing IND AS requiring change in the accounting policies hitherto in use.
2.3 The Company presents assets and liabilities in the balance sheet based on current/non-current classification.
An asset is treated as current when it is:
i) Expected to be realized or intended to be sold or consumed in normal operating cycle,
ii) Held primarily for the purpose of trading,
iii) Expected to be realized within twelve months after the reporting period,
iv) Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve
months after the reporting period, or
v) Carrying current portion of non-current financial assets.
All other assets are classified as non-current.
A liability is current when:
i) It is expected to be settled in normal operating cycle,
ii) It is held primarily for the purpose of trading,
iii) It is due to be settled within twelve months after the reporting period,
iv) the Company does not have a right at the end of the reporting period to defer settlement of the liability for
at least twelve months after the reporting period,
v) The Company's right to defer settlement of a liability for at least twelve months after the reporting period
must exist at the end of the reporting period. Classification of a liability is unaffected by the likelihood that
the Company will exercise its right to defer settlement,
vi) Where the right to defer settlement is subject to compliance with covenants, such right exists only if the
Company complies with those covenants on or before the end of the reporting period where testing of such
covenants is required on or before the end of the reporting period,
vii) It includes current portion of non-current financial liabilities.
All other liabilities are classified as non-current.
2.4 Revenue recognition
Revenue from sale of product is recognized at the point in time when control of the goods is transferred to the
customer, generally on delivery of the product.
At contract inception, the Company assess the goods promised in a contract with a customer and identify as
a performance obligation each promise to transfer to the customer. Revenue from contracts with customers is
recognized when control of goods or services are transferred to customers and the Company retains neither
continuing managerial involvement to the degree usually associated with ownership nor effective control over
the goods sold.
Revenue is measured at the fair value of the consideration received or receivables, net of returns and allowances,
trade discounts and volume rebates. Revenue is recognized to the extent that it is probable that the economic
benefits will flow to the Company and the revenue can be reliably measured, regardless of when the payment is
being made.
Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually
defined terms of payment and excluding taxes or duties collected on behalf of the Government. The Company
bases its estimates on historical results, taking into consideration the type of customer, the type of transaction
and the specific of each arrangement.
Revenue from sale of power is recognized when the units generated are transmitted to the pooling station, in
accordance with the terms and conditions of the power purchase agreement entered into by the Company with
the purchasing parties.
Income from sale of REC is recognized on delivery of REC to the customers 'account.
Export incentives are accounted for in the year of exports based on eligibility and when there is no significant
uncertainty in receiving the same.
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to
the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis,
by reference to the principal outstanding and at the "effective interest rate" that exactly discounts estimated
future cash receipts through the expected life of the financial asset to that asset's gross carrying amount.
Insurance claims are accounted for on the basis of claims admitted / expected to be admitted and to the extent
that there is no uncertainty in receiving the claims.
All other incomes are accounted for on accrual basis.
2.5 Expenses
All expenses are accounted for on accrual basis.
2.6 Property, plant and equipment and Capital work in progress (CWIP)
All property, plant and equipment are measured at cost less accumulated depreciation and accumulated
impairment losses, if any. Free hold land is not depreciated. The cost of an asset includes the purchase cost of
materials, including import duties and non-refundable/ creditable taxes and any directly attributable cost of
bringing an asset to the location and condition of its intended use and costs of dismantling and removing the
item and restoring the site on which it is located, interest on borrowing used to finance the construction of
qualifying assets are capitalized as part of the cost of the asset until such time that the asset is ready for its
intended use.
When significant parts of property, plant and equipment are required to be replaced at intervals, the Company
depreciates them separately based on their specific useful lives. Likewise, when a major refurbishment is
performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the
recognition criteria are satisfied. All other repairs and maintenance costs are recognized in statement of profit
and loss as incurred.
Items of spare parts, stand-by equipment and servicing equipment which meet the definition of property, plant
and equipment are capitalized. Other spare parts are carried as inventory and recognized in the statement of
profit and loss on consumption. When parts of an item of PPE have different useful lives, they are accounted for
as separate component.
Directly attributable expenditure (including finance cost relating to borrowed funds for construction or acquisition
of fixed assets) incurred on projects under implementation are treated as pre-operative expenses pending
allocation to the assets and are shown under CWIP, CWIP is stated at the amount expended up to balance sheet
date on assets or property, plant and equipment that are not yet ready for their intended use.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as
separate items (major components) of property, plant and equipment.
The cost and related accumulated depreciation are eliminated from the Standalone Financial Statements upon
disposal/ sale or retirement of the asset and the resultant gains or losses (difference between the sale proceeds
and the carrying amount of the assets) are recognized in the Statement of profit and Loss.
2.7 Depreciation methods, estimated useful lives and residual value
a) Depreciation on property, plant and equipment provided on Straight Line basis so as to charge the cost of
the assets or the amount substituted for costs in case of revalued assets less its residual value over the useful
life of the respective asset as prescribed under part C of Schedule II to the Companies Act, 2013. Residual
value has been considered as 5% of the cost of the respective assets.
b) Leasehold Building Developments are amortized at lower of period of lease or ten years.
c) Intangible Assets are amortized over a period of economic benefits not exceeding ten years.
d) Depreciation/amortization on assets added, sold or discarded during the year is provided on pro - rata
basis.
2.8 Intangible assets (Computer software)
Intangible assets are stated at cost of acquisition net of recoverable taxes less accumulated amortization/
depletion and impairment loss, if any. The cost comprises purchase price, borrowing costs, and any cost
directly attributable to bringing the asset to its working condition for the intended use. An intangible asset
is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains
or losses arising from de-recognition of an intangible asset are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and are recognized in the Statement of profit and loss
when the asset is derecognized.
2.9 Inventories
Inventories (other than By-products) are valued at lower of cost or net realizable value.
Inventories of Renewal Energy Certificates (REC) are valued at lower of cost or net realizable value.
Inventories on stock in trade are valued at lower of cost or net realizable value.
Cost of inventories has been determined on current cost.
Chemicals, packing material and other store & spares at purchase cost including incidental expenses on
-weighted average basis.
Cost of finished goods and Work in Progress has been worked out on absorption cost basis.
By- products and residuals are valued at net realizable value except in case of B Heavy Molasses which is valued
by considering the realizable value of C Heavy Molasses plus sugar sacrificed for producing B Heavy Molasses.
Net realizable 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.
Assessment of net realizable value is made at each subsequent reporting date. When the circumstances that
previously caused inventories to be written down below cost no longer exist or when there is clear evidence of
an increase in net realizable value because of changed economic circumstances, the amount so written-down is
adjusted in terms of policy as stated above.
2.10 Government Grants
Government grants are recognized at fair value when there is reasonable assurance that the grant would be
received and the Company would comply with all the conditions attached with them.
Government grants related to property, plant and equipment are treated as deferred revenue (included under
non-current liabilities with current portion considered under current liabilities) and are recognized and credited
in the statement of profit and loss on systematic and rational basis and included under other income.
Government grants related to revenue nature are recognized on a systematic basis in the Statement of profit and
Loss over the periods necessary to match them with the related costs which they are intended to compensate
and are adjusted with the related expenditure.
(If not related to a specific expenditure, it is taken as income and presented under: other Income)
2.11 Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of assets are capitalized
as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get
ready for its intended use. Interest income earned on the temporary investment of specific borrowings pending their
expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. All other borrowing
costs are charged to the profit and loss statement in the period in which they are incurred.
Preference Shares, which are mandatorily redeemable on a specific date are classified as liabilities. The dividend on
these preference shares is recognized as finance cost in the Statement of Profit and Loss.
2.12 Leases
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 of time in exchange for consideration.
As a lessee the Company applies a single recognition and measurement approach for all leases, except for short¬
term leases and leases of low-value assets. The Company recognizes lease liabilities to make lease payments and
right-of-use assets representing the right to use the underlying assets.
Right-of-use assets The Company recognizes 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, and adjusted for any remeasurement of lease liabilities. The cost of right-
of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments
made at or before the commencement date less any lease incentives received.
Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated
useful lives of the assets. If ownership of the leased asset transfers to the Company at the end of the lease term
or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life
of the asset. The right-of-use assets are also subject to impairment.
The right-of-use assets are disclosed in Property, Plant and Equipment (see Note 3).
Lease Liabilities At the commencement date of the lease, the Company recognizes lease liabilities measured
at the present value of lease payments to be made over the lease term. The lease payments include fixed
payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments
that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the
lease commencement date because the interest rate implicit in the lease is not readily determinable. After the
commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced
for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments
resulting from a change in an index or rate used to determine such lease payments) or a change in
the assessment of an option to purchase the underlying asset. Lease liabilities are included in Other financial
liabilities.
Short-term lease and lease of low-value assets The Company applies the short-term lease recognition exemption
to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of twelve months
or less from the commencement date and do not contain a purchase option). It also applies the lease of low-
value assets recognition exemption to leases of offices, godowns, equipment, etc. that are of low value. Lease
payments on short-term leases and leases of low-value assets are recognized as expense on a straight-line basis
over the lease term.
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