Note 2 Summary of Material Accounting Policies
[2.1] Basis of preparation
[2.1.1] Compliance with Indian Accounting Standards (Ind AS)
The Financial Statements are prepared on accrual basis of accounting and comply in all material aspects with
Indian Accounting Standards (Ind AS) notified under Section 133 ofthe Companies Act, 2013 (TheAct) [Companies
(Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules,
2016] and other relevant provisions of the Act.
All Assets and Liabilities have been classified as Current or Non-current as per the Company’s normal operating
cycle and other criteria set out in the Schedule III to the Companies Act, 2013. Based on the nature of products and
the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the
Company has ascertained its operating cycle as 12 months for the purpose of current/non-current classification of
assets and liabilities.
Deferred Tax Assets and Liabilities are classified as Non-current Assets and Liabilities.
[2.1.2] BasisofMeasurement
The Financial Statements have been prepared on accrual basis of accounting and historical cost conventions,
except for the Financial Assets which are measured at fair value:
[i] Quoted Financial Assets are measured at fair value;
[ii] defined benefit plans - plan assets measured at fairvalue.
The methods used to measure fair values are discussed in Note 2.28.
[2.1.3] Functional and Presentation Currency
These Financial Statements are presented in Indian Rupees (INR), which is the Company's functional currency.
All financial information presented in INR has been rounded off to the nearest lakh (upto two decimals) for the
Company.
[2.1.4] Use of Estimates and Management Judgements
[a] Useful life of Property, Plant and Equipment
The estimated useful life of property, plant and equipment is based on a number of factors including the effects
of obsolescence, demand, completion and other economic factors in accordance of Schedule II of Companies
Act 2013.The company follows straight line method of depreciation.However, in case of Plant & Machinery,
useful life has been considered from 15years up to 25 years as per the Technical Evaluation, considering
conditions of Plant & Machinery at respective Garden for additions upto Financial Year 2013-24.Similarly for
Bearer Plants of Assam &Dooars Garden the useful life for depreciation has been considered as 63 Years
and for Mim Tea Estate the same is considered as 91 Years.
[b] Recoverable amount of Property, Plant and Equipment and Capital Work-in-Progress
The recoverable amount of property, plant and equipment and capital work in progress is based on estimates
and assumptions. Any changes in these assumptions may have a material impact on the measurement of the
recoverable amount resulting in impairment.
[c] Post-retirement Benefit Plans
Employee benefit obligations except medical benefits are measured on the basis of actuarial assumptions
which include mortality and withdrawal rates as well as assumptions concerning future developments in
rates, the rate of salary increase, the inflation rate and expected rate of return on plan assets. The Company
considers that the assumptions used to measure its obligation are appropriate and documented. However,
any changes in the assumptions may have impact on the resulting calculations. Medical Benefits measured
on actual basis.
[d] Provisions and Contingencies
The assessments undertaken in recognizing provisions and contingencies have been made in accordance
with Ind AS 37, “Provisions, Contingent Liabilities and Contingent Assets”. The evaluation of the likelihood
of the contingent events has been made on the basis of best judgment by management regarding probable
outflow of economic resources. Such estimation can change due to unforeseeable developments.
[e] Investment in Subsidiaries and Associates
Investment is carried at cost and provision is made for any impairment ofsuch investment.
[2.2] Segment Reporting
Operating Segments are reported in a mannerconsistentwith the definition provided by IND AS 108.
[2.3] Foreign Currency Transactions
Foreign currency transactions are translated into Indian Rupee (INR) which is the functional currency by applying
the exchange rates between the INR and foreign currency at the dates of the transactions. Foreign Exchange
gains and losses resulting from the settlement of such transactions and from the translation of monetary assets
and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in the
statement of Profit and Loss.
[a] Foreign currency loans to finance fixed assets including technical know-how fees are converted either at the
exchange parity rate ruling at the close of the accounting year or at the fixed rate when the exchange is booked in
advance, as the case may be. Necessary adjustments with regard to such exchange rate difference are made to
secured loans, fixed assets and depreciation.
[b] In respect of any import of materials both under CIF, FOB and C&F Contracts, purchases are booked at the
exchange rates prevailing on the date of Bill of Entry. The exchange difference, if any, arising from the difference
between the above rate and the rate at which the actual payment is made or at the rate prevailing on 31st March,
whichever is earlier, is accounted for in the Statement of Profit and Loss.
[c] Exports/Overseas Sales are booked at the rates prevailing on the date of bill of lading. Exchange difference,
if any, relating to such bills arising either on realisation of the proceeds or on conversion thereof at the exchange
rate ruling at the close ofthe year, whichever is earlier, is accounted for in the Statement of Profit and Loss.
[d] Receivables and Payables in foreign currency are reported in the Balance Sheet at the parity rate ruling at the
close ofthe financial year. The exchange difference arising on the settlement ofsuch receivables/payable or on
reporting such receivables/payables at rates different from those at which those are initially recorded during
the period or reported in previous Balance Sheet is accounted for in the Statement of Profit and Loss.
[2.4] Revenue Recognition and Other Income
Revenue has been recognizedas per IND AS 115 effective from 01.04.2018.
[2.4.1] SaleofGoods
Revenue from the sale of goods is recognized when the significant risks and rewards of ownership of the goods
have passed to the buyer. Revenue from the sale of goods is measured at the fair value of the consideration
received or receivable, net of returns and allowances, trade discounts and volume rebates.
Revenue from sales is based on price specified in the Sales Contracts, net of discounts and schemes which are
assessed based on published circulars and expected achievement threshold. No element of financing is deemed
present as the sales are made generally with a credit term, which is consistent with market practice.
Despatches against FOR destination contracts not reaching the customers within the close of the year, are shown
as Finished goods-in-transit.
Tea sales against contracts are accounted for on the basis of delivery orders and on completion of sale in auction
centres in accordance with the norms of tea trade
[2.4.2] Rental Income
Rental Income arising from letting out of the property to Associate Company & other Parties is accounted for
on periodical basis as per terms of the agreement and is included in other income in the statement of profit and
loss.
[2.4.3] Interest Income
Interest Income is recognized using the effective interest rate method. The effective interest rate is the rate that
exactly discounts estimated future cash receipts through the expected life of the Financial Asset to the gross
carrying amount of a Financial Asset. When calculating the effective interest rate the Company estimates the
expected Cash Flows by considering all the real contractual terms of the financial instrument but does not consider
the expected credit losses. However, for Bank interest accrued at year end are considered as communicated by
Banks.
[2.4.4] Dividend Income
Dividends are recognized in profit and loss under the head ‘Other Income’ only when the right to receive payment
is established, it is probable that the economic benefits associated with the dividend will flow to the Company, and
the amount of the dividend can be measured reliably.
[2.4.5] Other Income
The following incomes are treated as Other Income:
a) Insurance and other claims are accounted for on the basis of amounts admitted.
b) Sales Tax, Excise Duty and Customs Duty refunds are accounted for on the basis of assessment/refund orders
received;
c) Interest receivable from customers as per stipulation of the Sales Contract on account of late receipt of full/
proportionate payments are accounted for to the extent such interest is ascertainable with respect to the payment
so far received.
d) Export/DeemedExportbenefits areaccounted foroncompletion ofdespatches intermsofthecontract.
e) Liquidated Damages recovered by the Company for delayed supply of raw materials, equipment/spares
are treated as Other Income.
[2.5] Income Taxes
The Income Tax expense or credit for the period is the tax payable on the current period's taxable income based
on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences and to unused tax losses.
The current income tax is calculated on the basis of the tax laws enacted or substantively enacted at the end of
the reporting period. Management periodically evaluates position taken in tax returns with respect to situations in
which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis
of amounts expected to be paid to the tax authorities. Additional income taxes that arise from the distribution of
dividends are recognized at the same time the liability to pay the related dividend is recognized and rectification
has not been considered.
In respect of proceedings pending before various Income Tax/ Agricultural Income Tax/ Sales Tax, Vat ,GST
Authorities including NCLT, High Court and Supreme Court on account of Rectification / Appeal filed by the
company adjustments are made on final settlement of such proceedings
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is
not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting profit/ Loss nor taxable profit (tax loss).
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by
the end of the reporting period and are expected to apply when the related deferred income tax asset is realized
or the deferred income tax liability is settled.
Deferred tax assets are recognized for all deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilize those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax
liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net
basis, or to realize the asset and settle the liability simultaneously.
Current and deferred tax is recognized in profit and loss, except to the extent that it relates to items recognized in
other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive
income or directly in equity, respectively.
[2.6] Leases
The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement
at the inception of the leases as per the terms and conditions specified in IND AS 116. The arrangement is, or
contains, a lease if fulfillment of the arrangement is dependent on the use of a specific asset or assets and
the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an
arrangement.
As a Lessee
Vide notification of Ministry of Corporate Affairs dated 30th Match, 2019, Indian Accounting Standard (Ind -AS
-116) Leases has become effective for the Company from 1.4.2019.replacing Ind AS 17 (Leases). The accounting
policy on Leases has been changed as per IndAs 116. The principal change of Ind As 116 , Leases is change
in the accounting treatment by Lessees of Leases currently classified as operating leases. Lease agreements
has given rise to the recognition of right of use assets and a lease liability for future lease payments. In case of
Company standards have been applied to only such cases wherever executed lease agreements/or Notifications
issued by the concerned Lessor Government are in hands of the Company and for the balance period of such
lease as on 01.04.2019, except for cases mentioned below:
In case of lease of lands from Government of Assam for the Tea Gardens in Assam, the Company, in conjunction
with Indian Tea Association, has noted that, section 9 of the Assam Land and Revenue Regulation, 1886 provides
a land lease, right to use, occupancy and other relevant rights subject to payment of revenue, taxes, cases
and rates from time to time as may be due in respect of the said land and thus, there is no fixed or defined
period of lease. As such, IndAs 116 should not accordingly be applicable in case of Assam. However, there is no
financial impact on transition to IND AS 116 as the Company has not applied this standard retrospectively with
the cumulative effect of initially applying the standard recognized at the date of initial application.^ case of Lease
arrangements which are disputed , Actual Lease expenses are booked in the profit & Loss Account
As a Lessor
Lease income from operating leases where the Company is a lessor is recognized in income on a straight line
basis over the lease term unless the receipts are structured to increase in line with expected general inflation to
compensate for the expected inflationary cost increases. The respective leased assets are included in the balance
sheet based on their nature.
[2.7] Impairment of Non-financial Assets other than Inventories
[a] The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired
or when annual impairment testing for an asset is required, the Company estimates the asset's recoverable
amount. An asset's recoverable amount is the higher of an asset's Cash Generating Unit's (CGU) fair value less
costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the
asset does not generate cash inflows that are largely independent of those from other assets of the Company.
When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount. The resulting impairment loss is recognized in the
Statement of Profit and Loss.
[b] In assessing value in use, the estimated future cash flows are discounted to their present value using a pre
tax discount rate that reflects current market assessments of the time value of money and the risks specific to
the asset. In determining fair value less costs of disposal, recent market transactions are taken into account.
If no such transactions can be identified, an appropriate valuation model is used. These calculations are
corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair
value indicators.
[2.8] Statement of Cash Flows
[a] Cash and Cash Equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash in
hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original
maturities of three months or less from the date of purchase that are readily convertible to known amounts of
cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts
are shown under borrowings in current liabilities in the Balance Sheet.
[b] Statement of Cash Flows is prepared in accordance with the indirect method prescribed in Ind AS-7 ’’Statement
of Cash Flow”
[2.9] Trade Receivables
Trade receivables are recognized initially at transaction price and subsequently measured at cost less provision
on the basis of internal analysis of credit risk by the company.
[2.10] Inventories
[a] Raw Material (including Packing Materials), Work-in-Progress, traded and Finished Goods are stated at lower
of cost and net realizable value. Cost of raw material & traded goods comprises of cost of purchases. Cost of
work-in-progress &Finished Goods comprise direct material, direct labour and appropriate portion of variable
and fixed overhead expenditure, the latter being allocated on the basis of actual labor hours utilized in such
jobs as being consistently followed. Cost of inventories also include all other costs incurred in bringing the
inventories to their present location and condition. Cost are assigned to individual items of inventory on the
basis of weighted average method. Cost of purchased inventories are determined after deducting rebates
& discounts. Net realizable 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.
[b] Provisions for slow and non-moving stock lying for more than three years but less than five years are made
at 15% of Book Value, for such stock remaining more than 5 years, provision @ 36.25% of Book Value are
made. Provision for obsolete stores are made at 100% of Book value. All losses on Work-in-progress incurred
upto the end of the year and losses estimated for further Works Cost to be incurred on such jobs are taken
into account and duly provided for.
[c] While valuing the contract jobs in progress at the close of the year, future estimated losses are considered
only in respect of jobs valued at Rs. 25.00 lakhs or more and/or physical progress whereof as per technical
estimate, is minimum 50%.
[d] Inter-Unit transfers of own manufactured stores, spares, raw materials etc., if lying in stock at the close of the
year, are valued at estimated Works/Factory cost of the Transferor Unit.
[e] Stock of scrap, is valued on the basis of estimated/actual realised value as the case may be. However
tea waste is not valued.
[f] Export benefits against Advance Licences are considered at the time of actual consumption of the imported
materials. Advance Licences in hand at the close of the year are not accounted for.
[g] Cost of Inventory which are sold during the year are recognised by way accretion/decretion of inventory.
[2.11] Financial Assets other than Investments in Subsidiaries,Associates and Joint Venture
[2.11.1] Classification
The Company classifies its financial assets in the following measurement categories:
*those to be measured subsequently at fair value (either through other comprehensive income or through profit
and loss), and
* those measured at amortized cost.
The classification depends on the Company’s business model for managing the financial assets and the contractual
terms of cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit and loss or other comprehensive
income. For investments in debt instruments, this will depend on the business model in which the investment is
held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable
detection at the time of initial recognition to account for the equity investment at fair value through other
comprehensive income.
The Company reclassifies debt instruments when and only when its business model for managing those assets
changes.
[2.11.2] Measurement
Equity instruments
The Company measures all equity investments except in subsidiary & Associates at fair value. Investment in
subsidiary & Associates are measured at historical cost.
[2.11.3] Impairment of Financial Assets
The Company assesses on a forward looking basis the expected credit losses associated with its assets carried
at amortized cost and FVOCI debt instruments. The impairment methodology applied depends on whether there
has been a significant increase in credit risk. Note 2.28 details how the Company determines whether there has
been a significant increase in credit risk.
For trade receivables only, the Company applies the simplified approach of recognizing the expected losses from
initial recognition of the receivables on case to case basis as provision for impairment.
[2.11.4] Derecognition ofFinancial Assets
A financial asset is derecognized onlywhen
*The Company has transferred the rights to receive cash flows from the financial asset or
‘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 entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks
and rewards of ownership of the financial asset. In such cases, the financial asset is derecognized. Where the
entity has not transferred substantially all risks and rewards of ownership of the financial asset, the financial asset
is not derecognized.
Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of ownership
of the financial asset, the financial asset is derecognized if the Company has not retained control of the financial
asset. Where the Company retains control of the financial asset, the asset is continued to be recognized to the
extent of continuing involvement in the financial asset.
[2.12] Purchases
[a] Insurance charges incurred in relation to the incoming goods where materials are directly relatable are
accounted for in respect of individual items; otherwise, such insurance premium is charged off to the Statement
of Profit and Loss.
[b] In case of goods purchased from overseas, the shipment is treated as goods-in-transit :
[i] in case of both CIF and C&F Contracts, from the date of intimation received from bank;
[ii] in case of FOB Contracts, from the date of actual shipment as per Bill of Lading.
[2.13] OtherRevenueExpenses
[a] Issue of materials/components as free replacements during the guarantee period, which cannot be provided
being unknown, is accounted for on actual despatches. Known free replacements upto the close of the
accounting year are provided for.
[b] The Company provides liability on account of repairs and rectifications for goods already sold to customers on
the basis of past three years average expenses on the above head.
[c] Liabilities in respect of Liquidated Damages are provided if and to the extent, not disputed by the Company.
Liquidated Damages disputed by the Company are treated as contingent liability. The amount of liability/
contingent liability is estimated on the basis of contracted terms and the facts of each case to the extent of
revenue recognised.
[d] Liability in respect of commission is provided in proportion to sales.
[e] Interest on delayed payments of Income Tax/Agricultural Income-Tax is accounted for on the basis of
assessment orders of the Tax Authorities, if not disputed by the Company or actual payment effected, as the
case may be.
[f] Payment of Technical Know how Fees is accounted for in compliance with the relevant Accounting Standard.
[g] Provision for unrealised profit is made in respect of partially completed composite/turnkey contracts on
the basis of proportionate direct cost on the revenue recognised.
[h] Medicine purchase for Tea Estates are all charged out as per consistent practice.
[i] Guarantee commission is taken in the year of guarantees issued/renewed.
[2.14] Booking /Writing Back of Liabilities
a) For providing liabilities, cut-off date is 30th April but all known liabilities, if material, are booked as far as
practicable (previous year cut-off date 30th April).
b) Liabilities which are more than 5 years old and not likely to materialize, are written back except Govt. debts.
In case of extraordinary items only, separate disclosure is given in the Financial statements.
[2.15] 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.
[2.16] Property, Plant and Equipment
[a] The Physical verification of fixed assets is carried out in a phased manner so as to cover each item of the fixed
assets over a period of 3 years.
[b] Grant/Subsidy in respect of capital expenditure is accounted for as per applicable Accounting Standard
and recognised in Statement of Profit and Loss overthe period ofthe useful life ofthe assets. Capital Grant
/ Subsidy on receipt basis and in case or Revenue subsidy the same is accounted for when there exists
sufficient written assurance of receiving the same.
[c] Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical
cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the
items.
[d] Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Company and
the cost of the item can be measured reliably. The carrying amount of any component accounted for as a
separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit and
loss during the reporting period in which they are incurred.
[e] Machinery manufactured by one Unit/Division for use in another Unit/Division are accounted for at Works/
Factory cost of the Transferor Unit.
[f] The carrying amount of assets are reviewed at each Balance Sheet date if there is any indication of impairment
based on internal/external factors. An asset is treated as impaired when the carrying cost of assets exceeds
its recoverable value. An impairment loss is recognized in the Statement of Profit and Loss where the carrying
amount of an asset exceeds its recoverable amount. The impairment loss recognized in prior accounting
periods is reversed if there has been a change in the estimate of recoverable amount.
[g] Bearer Plants are transferred from Capital WIP to Fixed Assets Block of Bearer Plant after 3 years from its
year ofreplantation.The average total life of bearer plant has been considered as 70 (seventy) years for Assam
and Dooars Gardens and 100 (one hundred) years for Mim Tea Estate situated at Darjeeling. Cost of bearer
plants include cost of uprooting , land development , rehabilitation, planting of Guatemala , planting of shade
trees , cost of nursery , drainage , manual cultivation , fertilisers , agro-chemicals , pruning and in filling etc.
Depreciation on bearer plants is recognised so as to write off its cost over useful lives , using the straight line
method. Estimated useful life ofthe bearer plants for assam & Dooars garden has been determined to be 63
years and for Mim Tea Estate at Darjeeling the same is considered to be 91 years considering geographical
location . Young tea bushes & shade trees , including the cost incurred for procurement of new seeds and
maintainence of nurseries are carried out at cost less any recognised impairment losses under capital work in
progress for the first three years. Cost includes the cost of land preparation , new planting and maintainence
of newly planted bushes until maturity. On maturity after completion of three years , these costs are classified
under bearter plants. Depreciation of bearer plants commence on maturity. Residual life ofthe bearer plants has
been considered as 4 years in respect of Assam & Dooars Garden and 6 years for Mim Tea Estate at Darjeeling
considering geographical location.
[f] The assets are considered to be unusable after getting approval of the designated technical assessment
committee.
[2.17] Applicability of IND AS-41 (Biological Assets)
AYCL Tea Division plucks tea leaves for manufacturing in 7 days round. On 31st March each year it plucks the
matured tea and manufactures the same. In all sections of each garden tea leaves on the bushes stands immature.
Para 10 of Ind AS 41 states to recognize a Biological Asset when and only when, the fair value or the cost of the
asset can be measured reliably. It is well known fact that no market exists for Green tea leaves which remains
on the tea bushes and not ready for harvesting (not yet harvested). As long as the green tea leaves exist on the
Tea bushes and has not reached the harvesting stage, it has no utility and can not be used in any manner for
processing of tea.
As emphasized in para 8 of Ind AS 41, it would be impossible to ascertain the Fair Value of green tea leaves
standing on the tea bushes. Similarly it would be impractical to ascertain the cost of such green tea leaves as
any cost model for computation of cost thereof would be based on estimation and assumption, which can not be
reliably measured.
In view of the above AYCL does not recognize the Biological Assets (Green tea leaves not harvested and in a
growing stage, not matured) as on the reporting date in Financial Statements.
[2.18] CapitalWork-in-Progress
Expenditure incurred on assets under construction is carried at cost under Capital Work-in-Progress. Such costs
comprise purchase price of assets, including duties and non-refundable taxes and other costs that are directly
attributable to bringing the asset to the location and conditions necessary for it to be capable of operation in the
manner intended by management.
[2.19] Intangible Assets
Costs associated with maintaining software programs are recognized as an expense as incurred. Cost of purchased
software are recorded as intangible assets and amortized from the point at which the asset is available for use.
Intangible assets are amortized over their best estimated useful life considering their license period wherever
available and in other cases upto three years on straight line method.
[2.20] Trade and Other Payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of financial
year which are unpaid. The amounts are unsecured and are usually paid as per payment terms. Trade and other
payables are presented as current liabilities unless payment is not due within 12 months after the reporting period.
They are recognized initially at their fair value/transaction value.
[2.21] Borrowings Costs
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of
a qualifying asset are capitalized during the period of time that is required to complete and prepare the asset for
its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready
for their intended use or sale. Any difference between the proceeds(net of transactions cost) and the redemption
amount is recognized in the statement of Profit & Loss.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalization.
Borrowing costs are removed from the Balance sheet when the obligation specified in the contract is discharged,
cancelled or expired. The difference between the carrying amount of the Financial liability that has been
extinguished or transferred to another party and the consideration paid, including any non-cash asset transferred
on liability assumed is recognized in the statement of Profit& Loss Account as other gains/(losses).
Other borrowing costs are expensed in the period in which they are incurred.
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