3.10 Provisions and Contingent Liabilities
a) Provision
Provisions are recognized when the Company has a present obligation as a result of past
events, for which it is probable that an outflow of resources will be required to settle the
obligation and a reliable estimate of the amount can be made. Provisions required to settle
are reviewed regularly and are adjusted where necessary to reflect the current best estimates
of the obligation. Provisions are discounted to their present values, where the time value of
money is material.
b) Contingent Liabilities:
A contingent liability is a possible obligation that arises from past events whose existence
will be confirmed by the occurrence or non-occurrence of one or more uncertain future
events beyond the control of the Company or a present obligation that is not recognized
because it is not probable that an outflow of resources will be required to settle the
obligation. A contingent liability also arises in extremely rare cases where there is a liability
that cannot be recognized because it cannot be measured reliably. The Company does not
recognize a contingent liability but discloses its existence in the financial statements.
c) Contingent Assets:
A contingent asset is a possible asset that arises from past events and whose existence will
be confirmed only by- the occurrence or non-occurrence of one or more uncertain future
events not wholly within the control of the entity. The Company does not recognize the
contingent asset in its financial statements since this may result in the recognition of income
that may never be realized. Where an inflow of economic benefits is probable, the Company
disclose a brief description of the nature of contingent assets at the end of the reporting
period. However, when the realization of income is virtually certain, then the related asset is
not a contingent asset and the Company recognize such assets. Provisions, contingent
liabilities and contingent assets are reviewed at each Balance Sheet date.
3.11 Cash and cash equivalents
Cash and cash equivalents for the purposes of cash flow statement comprise cash at bank
and in hand.
3.12 Foreign currency transactions
Transactions in foreign currencies are translated into the functional currency of the
Company at the exchange rates at the dates of the transactions or an average rate if the
average rate approximates the actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated into the
functional currency at the exchange rate at the reporting date. Non-monetary assets and
liabilities that are measured at fair value in a foreign currency are translated into the
functional currency at the exchange rate when the fair value was determined. Non-monetary
assets and liabilities that are measured based on historical cost in a foreign currency are
translated at the exchange rate at the date of the transaction. Exchange differences arising on
settlement of transactions and translation of monetary items are recognized in statement of
profit and loss.
3.13 Inventories
Inventories are measured at the lower of cost and net realizable value. The cost includes
expenditure incurred in acquiring the inventories, production or conversion costs and other
costs incurred in bringing them to their present location and condition. Costs incurred in
bringing each product to its present location and condition are accounted for as follows:
Raw materials, Paints, stores and spares and consumables (valued at cost): cost includes
cost of purchase and other costs incurred in bringing the inventories to their present location
and condition. Cost is determined on first in, first out basis.
Finished goods: cost includes cost of direct materials and labor and a proportion of
manufacturing overheads absorbed based on the normal operating capacity, but excludes
borrowing costs. Cost is determined on first in, first out (FIFO) basis.
Scrap is valued at Net realizable value.
Net realizable value is the estimated selling price in the ordinary course of business, less the
estimated costs of completion and selling expenses. The net realizable value of Scrap is
determined with reference to the selling prices of related Scrap.
3.14 Segment Reporting
An operating segment is a component of the Company that engages in business activities
from which it may earn revenues and incur expenses, including revenues and expenses that
relate to transactions with any of the Company’s other components, and for which discrete
financial information is available. Operating segments are reported in a manner consistent
with the internal reporting provided to the chief operating decision maker. The Managing
Director of the Company is responsible for allocating resources and assessing performance
of the operating segments and accordingly is identified as the Chief Operating Decision
Maker (CODM). All operating segments’ operating results are reviewed regularly by the
CODM to make decisions about resources to be allocated and assess their performance.
3.15 Borrowing cost
Borrowing costs are interest and other costs incurred in connection with the borrowing of
funds. Borrowing costs directly attributable to acquisition or construction of an asset which
necessarily take a substantial period of time to get ready for their intended use are
capitalized as part of the cost of that asset. Other borrowing costs are recognized as an
expense in the period in which they are incurred.
3.16 Events after reporting date
Where events occurring after the balance sheet date provide evidence of conditions that
existed at the end of the reporting period, the impact of such events is adjusted within the
financial information. Otherwise, events after the balance sheet date of material size or
nature are only disclosed.
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