Material Accounting policies
A. General information
Balkrishna Paper Mills Limited (“the Company”) is
engaged in the business of manufacturing and selling
of “Paper and Paper Boards” and Trading of plastic
& packaging materials. Paper and Paper Boards are
used mainly for packaging industry, catering to the
needs of Pharmaceuticals, Cosmetics, Health Care
products, readymade garments, Food Products,
Match boxes and FMCG Segments.
The company is a public limited company incorporated
and domiciled in India and has its registered office at
A/7, Trade World, Kamala City, Senapati Bapat Marg,
Lower Parel (West), Mumbai 400013, Maharashtra,
India.
B. Basis of preparation
(i) Compliance with Ind AS
The financial statements have been prepared in
accordance with the Indian Accounting Standards
(hereinafter referred to as the (IndAS') as notified
by Ministry of Corporate Affairs pursuant to
Section 133 of the Companies Act, 2013 ('Act')
read with of the Companies (Indian Accounting
Standards) Rules, 2015 as amended and other
relevant provisions of the Act.
(ii) Historical cost convention
The financial statements have been prepared on
a historical cost basis, except for the following:
1. Certain financial assets and liabilities that are
measured at fair value;
2. Assets held for sale - measured at lower of
carrying amount or fair value less cost to sell;
3. Defined benefit plans - plan assets measured
at fair value;
(iii) Current and non-current classification
All assets and liabilities have been classified as
current or non-current as per the Company's
normal operating cycle (twelve months) and other
criteria set out in the Schedule III to the Act.
(iv) Rounding of amounts
All amounts disclosed in the financial statements
and notes have been rounded off to the nearest
lakhs as per the requirement of Schedule III,
unless otherwise stated.
C. Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of the
Company are measured using the currency of
the primary economic environment in which the
entity operates (“the functional currency”). The
financial statements are presented in Indian
rupee (INR), which is the company's functional
and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated
into the functional currency using the exchange
rates prevailing 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 recognised in
statement of profit and loss.
Non-monetary items that are measured at fair
value in a foreign currency are translated using
the exchange rates at the date when the fair
value was determined. Translation differences
on assets and liabilities carried at fair value are
reported as part of the fair value gain or loss. The
gain or loss arising on translation of non-monetary
items measured at fair value is treated in line with
the recognition of the gain or loss on the change
in fair value of the item.
D. Revenue recognition
The Company has adopted Ind AS 115, Revenue from
Contract with Customers.
Revenue is measured at the transaction price of the
consideration received or receivable. Revenue from
sale of goods is recognized, when the significant risks
and rewards in respect of ownership of products are
transferred by the Company, the entity retains neither
continuing managerial involvement to the degree
usually associated with ownership nor effective control
over the goods sold and no significant uncertainty
exist regarding the amount of consideration that will
be derived from the sale of goods as well as regarding
its ultimate collection. Amounts disclosed as revenue
are net of variable consideration on account of
various Discounts, Rebates, Incentives offered by the
Company as a part of the contract.
The Company recognises revenue when the amount
of revenue can be reliably measured, it is probable
that future economic benefits will flow to the entity.
Sale of goods
Revenue from sale of goods is recognized when
control of the products being sold is transferred to
our customers and when there are no longer any
unfulfilled obligations.
The performance obligations in our contract are
fulfilled at the time of dispatch, delivery or upon formal
customer acceptance depending on customer terms.
Sales Return
The Company recognizes provision for sales return,
based on the historical results, measured on net basis
of the margin of the sale.
Revenue from services
Revenue from services is recognized in the accounting
period in which the services are rendered.
Other operating revenue - Export incentives
Export Incentives under various schemes are
accounted in the year of export.
Dividend :
Revenue is recognized when the Company's right to
receive payment is established, which is generally
when shareholders approve the dividend.
E. Government grants and subsidies:
i Grants from the Government are recognized
at their fair value where there is reasonable
assurance that the grant will be received and the
Company will comply with all attached conditions.
ii. When the grant or subsidy relates to an expense
item, it is recognized as income over the periods
necessary to match them on a systematic basis to
the costs, which it is intended to compensate.
iii. Government grants relating to the purchase of
property, plant and equipment are included in
non-current liabilities as deferred income and
are credited to Statement of Profit and Loss on
a straight-line basis over the expected lives of
related assets and presented within other income.
F. Property, Plant and Equipment (PPE)
Freehold land is carried at cost. All other items of
property, plant and equipment are stated at cost
less accumulated depreciation and accumulated
impairment losses, if any. Historical cost includes
expenditure that is directly attributable to the
acquisition of the items.
Capital Work in Progress is stated at Cost net of
accumulated impairment loss.
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 the Statement of Profit and Loss during the
reporting period in which they are incurred.
Gain or losses arising from disposal of property
plant and equipment are measured as the difference
between the net disposal proceeds and the carrying
amount of the assets and are recognized in the
statement of Profit and Loss where the asset is
disposed.
Depreciation
Depreciable amount for assets is the cost of an asset,
or other amount substituted for cost, less its estimated
residual value.
Depreciation on PPE (other than leasehold land) has
been provided based on useful life of the assets in
accordance with Schedule II to the Companies Act,
2013, on Straight Line Method except in respect
of Plant and Equipment where the useful life is
considered differently based on an independent
technical evaluation as 9 to 30 years.
Leasehold land are amortised over the lease period.
Depreciation methods, useful lives and residual
values are reviewed at each reporting date and
adjusted if appropriate.
Intangible assets
Intangible assets comprise application software
purchased, which are not an integral part of
the related hardware, and are amortized on a
straight line basis over a period of 3 years, which
in Management's estimate represents the period
during which the economic benefits will be derived
from their use.
Subsequent expenditure is capitalized only when it
increases the future economic benefits embodied in
the specific to which it relates.
The Company has elected to continue with the
carrying value of all its intangible assets as
recognized in the financial statements as at the
date of transition to Ind AS, measured as per the
previous GAAP and use that as the deemed cost
as at the transition date pursuant to the exemption
under Ind AS 101.
Impairment of non-financial assets
Assets that have a definite useful life are tested
for impairment whenever events or changes in
circumstances indicate that the carrying amount
may not be recoverable. Management periodically
assesses using, external and internal sources,
whether there is an indication that an asset may be
impaired.
The recoverable amount is higher of the asset's net
selling price or value in use, which means the present
value of future cash flows expected to arise from the
continuing use of the asset and its eventual disposal.
An impairment loss for an asset is reversed if, and only
if, the reversal can be related objectively to an event
occurring after the impairment loss was recognized.
The carrying amount of an asset is increased to
its revised recoverable amount, provided that this
amount does not exceed the carrying amount that
would have been determined (net of any accumulated
amortization or depreciation) had no impairment loss
been recognized for the asset in prior years.
G. Borrowing cost
Borrowing costs directly attributable to the acquisition,
construction of an asset that necessarily takes a
substantial period of time to get ready for its intended
use or sale are capitalized as part of the cost of the
asset. All other borrowing costs are expensed in the
period in which they occur. Borrowing costs consist
of interest and other costs that an entity incurs in
connection with the borrowing of funds. Borrowing
cost also includes exchange differences to the extent
regarded as an adjustment to the borrowing costs.
H. Leases
The Company assesses whether a contract contains
a lease, at inception of a contract. A contract is, or
contains, a lease if the contract conveys the right to
control the use of an identified asset for a period of time
in exchange from consideration. To assess whether
a contact conveys the right to control the use of an
identified assets, the Company assesses whether :
(i) the contract involves the use of an identified asset
(ii) the Company has substantially all of the economic
benefits from use of the asset through the period of
the lease and (iii) the Company has the right to direct
the use of the assets.
Company as a lessee
As a lessee, the Company recognizes a right-of-use-
assets and a lease liability at the lease commencement
date. The right-of-use-assets is initially measured at
cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or
before the commencement date, plus and initial direct
costs incurred and a estimate of costs to dismantle
and remove the underlying asset or to restore the
underlying asset or the site on which it is located,
less and lease incentives received. The right-of-use-
assets is subsequently depreciated using the straight
line method from the commencement date to the
earlier of the end of the useful life of the right-of-use-
assets or the end of the lease term. The estimated
useful lives of right-of-use-assets are determined on
the same basis as those of property and equipment. In
addition, the right-of-use-asset is periodically reduced
by impairment losses, if any, and adjusted for certain
remeasurement of the lease liability.
The lease liability is initially measured at the present
value of the lease payments that are not paid at the
commencement date, discounted using the interest
rate implicit in the lease or, if that rate cannot be readily
determined, the Company's incremental borrowing
rate. Generally, the Company uses its incremental
borrowing rate as the discount rate.
Lease payment included in the measurement of the
lease liability comprise the fixed payment, including in¬
substance fixed payment. Lease liability is measured
at amortised cost using the effective interest method.
The Company has used number of practical
expedients when applying IND-AS 116:- short -term
leases, leases of low-value assets and single discount
rate.
The Company has elected not to recognize right-of-
use-assets and lease liability for short term leases that
have a lease term of 12 months or less and leases of
low-value assets. The Company recognizes the lease
payment associated with these leases as an expense
on a straight line basis over the lease term. The
Company applied a single discount rate to a portfolio
of leases of similar end date.
The company's leases mainly comprise land and
building for Shops, warehouse facilities.
As a Lessor
Leases for which the Company is a lessor classified
as finance or operating lease.
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
receipt 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.
Segment Reporting:
Operating segments are reported in a manner
consistent with the internal reporting provided to the
chief operating decision maker.
I. Income Tax
Provision for current tax is made and retained in
the accounts on the basis of estimated tax liability
as per the applicable provisions of the Income Tax
Act, 1961. Deferred tax is recognised for timing
differences between the carrying amount of assets
and liabilities based on tax rates that have been
enacted or substantively enacted by the Balance
Sheet date. Deferred tax assets, subject to the
consideration of prudence, are recognised only if
there is reasonable certainty that sufficient future
taxable income will be available, against which
they can be realised. At Balance Sheet date, the
carrying amount of deferred tax assets is reviewed
to reassure its realisation.
. Inventories
Inventories are valued at lower of the cost and net
realizable value. Cost of inventories is computed on
first in first out (FIFO) basis. Cost comprises of all
costs of purchases, costs of conversion and other
costs incurred in bringing the inventories to their
present location and condition.
.. Financial instruments
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. Financial
instruments also include derivative contracts such as
foreign currency forward contracts, interest rate swaps
and currency options; and embedded derivatives in
the host contract.
i. Financial assets
Classification
The Company shall classify financial assets
as subsequently measured at amortised
cost, fair value through other comprehensive
income (FVOCI) or fair value through profit and
loss(FVTPL) on the basis of its business model for
managing the financial assets and the contractual
cash flow characteristics of the financial asset.
Initial recognition and measurement
All financial assets are recognised initially at
fair value plus, in the case of financial assets
not recorded at fair value through profit or loss,
transaction costs that are attributable to the
acquisition of the financial asset. Purchases or
sales of financial assets that require delivery
of assets within a time frame established by
regulation or convention in the market place
(regular way trades) are recognised on the trade
date i.e., the date that the Company commits
to purchase or sell the asset. However, trade
receivables that do not contain a significant
financing component are measured at transaction
price.
De-recognition
• A financial asset (or, where applicable, a part
of a financial asset or part of a Company
of similar financial assets) is primarily
derecognised (i.e. removed from the
Company's balance sheet) when:
• The rights to receive cash flows from the
asset have expired, or
• The Company has transferred its rights to
receive cash flows from the asset or has
assumed an obligation to pay the received
cash flows in full without material delay
to a third party under a 'pass-through'
arrangement; and either (a) the Company
has transferred substantially all the risks and
rewards of the asset, or (b) the Company has
neither transferred nor retained substantially
all the risks and rewards of the asset, but has
transferred control of the asset.
• When the Company has transferred its rights
to receive cash flows from an asset or has
entered into a pass-through arrangement,
it evaluates if and to what extent it has
retained the risks and rewards of ownership.
When it has neither transferred nor retained
substantially all of the risks and rewards
of the asset, nor transferred control of the
asset, the Company continues to recognise
the transferred asset to the extent of the
Company's continuing involvement. In that
case, the Company also recognises an
associated liability. The transferred asset and
the associated liability are measured on a
basis that reflects the rights and obligations
that the Company has retained.
• Continuing involvement that takes the form
of a guarantee over the transferred asset is
measured at the lower of the original carrying
amount of the asset and the maximum
amount of consideration that the Company
could be required to repay.
Impairment of financial assets
In accordance with Ind-AS 109, the Company
applies Expected Credit Loss (ECL) model for
measurement and recognition of impairment loss
on the following financial assets and credit risk
exposure:
a) Financial assets that are debt instruments,
and are measured at amortised cost e.g.,
loans, debt securities, deposits, and bank
balance
b) Trade receivables - The application of
simplified approach does not require the
Company to track changes in credit risk.
Rather, it recognises impairment loss
allowance based on lifetime ECL's at each
reporting date, right from its initial recognition.
ii. Financial liabilities
Classification
The Company classifies all financial liabilities as
subsequently measured at amortised cost, except
for financial liabilities at fair value through profit
and loss. Such liabilities, including derivatives that
are liabilities, shall be subsequently measured at
fair value.
Initial recognition and measurement
Financial liabilities are classified, at initial
recognition, as financial liabilities at fair value
through profit or loss, loans and borrowings,
payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair
value and, in the case of loans and borrowings and
payables, net of directly attributable transaction
costs.
The Company's financial liabilities include trade
and other payables, loans and borrowings
including bank overdrafts, and derivative financial
instruments.
Financial liabilities at fair value through Profit
and Loss
Financial liabilities at fair value through profit and
loss include financial liabilities held for trading
and financial liabilities designated upon initial
recognition as at fair value through profit and
loss. Financial liabilities are classified as held
for trading if they are incurred for the purpose of
repurchasing in the near term. This category also
includes derivative financial instruments entered
into by the Company that are not designated as
hedging instruments in hedge relationships as
defined by Ind-AS 109.
Gains or losses on liabilities held for trading are
recognised in the profit and loss.
Loans and borrowings
After initial recognition, interest-bearing loans
and borrowings are subsequently measured at
amortised cost. Gains and losses are recognised
in profit and loss when the liabilities are
derecognized.
This category generally applies to interest-bearing
loans and borrowings.
Derecognition
A financial liability is derecognised 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 recognised in the
statement of profit and loss.
Offsetting of 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 recognised amounts and there is an intention
to settle on a net basis or realise 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
counter party.
Derivative financial instruments
The Company uses derivative financial
instruments, such as foreign exchange forward
contracts to manage its exposure to foreign
exchange risks. For contracts where hedge
accounting is not followed, such derivative
financial instruments are initially recognised at fair
value on the date on which a derivative contract
is entered into and are subsequently re-measured
at fair value through profit and loss. Derivatives
are carried as financial assets when the fair value
is positive and as financial liabilities when the fair
value is negative.
M. Employee benefits
i. Short term employee benefits
Short term employee benefits consisting of wages,
salaries, social security contributions, ex-gratia
and accrued leave, are benefits payable and
recognised in 12 months. Short-term employee
benefits expected to be paid in exchange for the
services rendered by employees are recognised
undiscounted during the year as the related
service are rendered by the employee.
ii. Defined contribution plans
Company's contribution for the year paid/payable
to defined contribution retirement benefit schemes
are charged to Statement of Profit and Loss.
The Company's contribution towards provident
fund, superannuation fund and employee state
insurance scheme for certain eligible employees
are considered to be defined contribution plan
for which the Company made contribution on
monthly basis.
iii. Defined benefit plans
Company's liabilities towards defined benefit
plans and other long term benefits viz. gratuity
and compensated absences expected to occur
after twelve months, are determined using
the Projected Unit Credit Method. Actuarial
valuations under the Projected Unit Credit
Method are carried out at the balance sheet date.
Actuarial gains and losses are recognised in the
Statement of other comprehensive income in the
period of occurrence of such gains and losses.
The retirement benefit obligation recognised in
the balance sheet represents the present value
of the defined benefit obligation as adjusted for
unrecognised past service cost, and as reduced
by the fair value of scheme assets, if any.
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