Statement of Material Accounting Policies followed by the Company
COMPANY BACKGROUND
Bannari Amman Sugars Limited (the 'Company') is a Public Limited Company domiciled and incorporated in India under the Companies Act, 1956. The registered office of the Company is located at 1212 Trichy Road, Coimbatore 641 018. The Company has five sugar factories with aggregate capacity of 23700 MT of sugarcane crushing per day and 129.80 MW of Cogen Power. It has two Distillery units with the aggregate production capacity of 217.50 KLPD besides having Agri Natural Fertilizers, Granite Processing units. The company has seven Wind Mills with a total capacity of 8.75 MW. The company's Shares are listed in BSE and NSE.
Pursuant to the Companies (Indian Accounting Standards) Amendment Rules, 2023 effective from 01.04.2023, the company is required to disclose "material accounting policy information" instead of the previously required "significant accounting policies".
The Company has conducted a materiality assessment of its accounting policy information. This process involves the application of professional judgement, considering both quantitative and qualitative factors. The assessment takes into account the size, nature and condition of the item or event. Additionally, it evaluates the characteristics of transactions, events, or conditions that could significantly impact the decisions of financial statement users.
a) Basis of Preparation
i) Compliance with IND AS
The financial statements of the Company have been prepared in accordance with the Indian Accounting Standards (hereinafter referred to as the 'Ind AS') notified under Section 133 of the Companies Act 2013 (the Act) read with the Companies (Indian Accounting Standards) Rules, 2015 as amended and other relevant provisions of the Act.
The accounting policies are applied consistently to all the periods presented in the financial statements
ii) Historical Cost Convention
The financial statements have been prepared on a historical cost basis, except for certain financial assets and liabilities that are measured at fair value at the end of the each reporting period.
Historical cost is generally based on the value of consideration given in exchange of goods and services. Fair Value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. The fair value of an asset or liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest.
Fair value for measurement and/or disclosure purposes in these financial statement is determined on such a basis except for leasing transactions that are within the scope of Ind AS 116 and measurements that have similarities to fair value but are not fair value, such as net realizable value in Ind AS 2 (Inventories) or value in use in Ind AS 36 (Impairment of Assets).
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 and other criteria set out in the Schedule III to the Companies Act 2013.
Deferred Tax assets and liabilities are classified as Non-current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their
realisation in cash and cash equivalents. The company has identified Twelve months as its operating cycle.
iv) Rounding of amounts
All amounts disclosed in the financial statements and notes have been rounded to the nearest lakhs and two decimal thereof as per the requirement of Schedule III, unless otherwise stated.
b) Use of Estimates and Judgements
The estimates and judgements used in the preparation of the financial statements are continuously evaluated by the Company and are based on historical experience and various other assumptions and factors (including expectations of future events) that the company believes to be reasonable under the existing circumstances. Differences between actual results and estimates are recognised in the period in which the results are known/materialised.
The said estimates are based on the facts and events, that existed as at the reporting date, or that occured after the date but provide additional evidence about conditions existing as at the reporting date.
c) Property, Plant and Equipment
Property, Plant and Equipment that qualifies for recognition as an asset is measured at cost net of tax / duty credit availed less accumulated depreciation and accumulated impairment losses, if any. The Cost includes deemed cost as on the date of transition. Freehold land is not depreciated.
Cost includes related taxes, duties, freight, insurance etc., attributable to acquisition and installation of assets and borrowing cost incurred up to the date of commencing operations, but excludes duties and taxes that are recoverable from taxing authorities.
Subsequent cost are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future
economic benefit 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 derecognised when replaced. Cost in the nature of repairs and maintenance are recognised in the Statement of Profit and Loss during the reporting period in which they are incurred.
Assets which are not ready for their intended use and other capital work in progress are carried at cost, comprising direct cost, related incidental expenses and attributable interest. Advances given towards acquisition of Property, Plant and Equipment outstanding at each balance sheet date are disclosed as Capital Advances under Other Non-Current Assets.
Depreciation
Straight line method has been adopted for providing depreciation on fixed assets other than CoGeneration Division and Wind Mill Division. For the assets of Co-Generation Division and Wind Mill Division, depreciation has been provided under written down value method. The assets are depreciated over the useful life as prescribed in Schedule II of the Companies Act, 2013. Depreciation on additions / deletions on Property, Plant and Equipment is computed on pro-rata basis from the date of purchase of such addition or upto the date of such deletion as the case may be. The residual values are not more than 5% of the original cost of the asset. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of changes in estimate accounted for on a prospective basis.
Derecognition
The carrying amount of an item of Property, Plant and Equipment shall be derecognised on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the derecognition of an item of property, plant and
equipment shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item. The same is recognised in the statement of profit and loss.
d) Biological Assets
Livestock are measured at fair value less cost to sell. Costs to sell include the transportation charges for transporting the cattle to the market but excludes finance costs and income taxes. Changes in fair value of livestock are recognised in the statement of profit and loss. Costs such as vaccination, fodder and other expenses are expensed as incurred.
Biological assets other than live stock are measured at fair value less cost to sell or at cost whichever is applicable. Changes in fair value of biological assets is recognised in the statement of profit and loss.
e) Impairment of Non financial Assets
Non financial assets are tested for impairment at the end of each reporting period as to whether events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the assets' carrying amount exceeds its recoverable amount. The recoverable amount is higher of an assets' fair value less costs of disposal and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash generating units). Non financial assets that suffered an impairment in prior periods are reviewed for possible reversal of the impairment at the end of the each reporting period.
f) Derivative financial Instruments
Derivative financial instruments such as forward contracts, to hedge its foreign currency risks are initially recognised at fair value on the date, a derivative contract is entered into. The same is subsequently remeasured at their fair value with changes in fair value recognised in the statement of
profit and loss in the period when they arise.
g) Financial Instruments
A Financial Instrument is any contract that give rise to a financial asset of one entity and Finacial Liability or equity instrument of another entity. Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisons of the instruments.
Financial Assets
Financial assets, except trade receivables, are initially measured at fair value. Trade receivables are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition of financial assets (other than financial assets at fair value through profit or loss) are added to or deducted from the fair value of the financial assets, on initial recognition.
Investment in Equity instruments at Fair Value Through Other Comprehensive Income (FVTOCI)
Initial Recognition
The Company measures investments in equity instruments at FVTOCI. These equity instruments are neither held for trading nor are contingent consideration recognised under a business combination. These elected investments are initially measured at fair value plus transaction costs.
Subsequent measurement
Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income.
Dividend
Dividend on investments in equity instruments are recognised in profit or loss unless the dividend does not represent a recovery of part of cost of the investment. Dividend is recognised only when the company's right to receive the dividend is established, it is probable that the economic benefits
associated with the dividend will flow to the entity and the amount of dividend can be measured reliably. The Company has recognised dividend in Statement of profit and loss under 'Other Income' .
Derecognition
A financial asset is derecognised when the contractual rights to the cash flows from the financial asset expires or the Company transfers the financial asset and substantially all the risks and rewards of ownership of the asset.
If the Company neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, but retains control of the financial asset, the Company continues to recognise the transferred asset to the extent of its continuing involvement. The extent of the Company's continuing involvement in the financial asset is the extent to which it is exposed to changes in the value of the transferred asset. In such cases, the Company also recognises an associated liability. The financial asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
On derecognition of such financial assets, the cumulative gain / loss previously recognised in Other Comprehensive Income is not reclassified from the equity to the Statement of Profit and Loss.
However, the company may transfer such cumulative gain / loss into the retained earnings within equity.
Impairment of Financial Asset
The Company applies expected credit loss model for recognising impairment loss on financial assets measured at fair value through other comprehensive income (FVTOCI), trade receivables and other financial assets measured at amortised cost.
The Company follows a simplified approach wherein an amount equal to lifetime expected credit losses is measured and recognised as loss allowance in the case of trade receivables and lease receivables.
In case of other financial assets measured at fair value through other comprehensive income or at amortised cost, the Company determines if there has been a significant increase in credit risk of the financial asset since initial recognition. If the credit risk has not increased significantly, an amount equal to 12-month expected credit losses is measured as loss allowance and when the credit risk has increased significantly, an amount equal to lifetime expected credit losses is measured and recognised as loss allowance.
Financial Liabilities Initial Recognition
Financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the issue of financial liabilities (other than financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial liabilities, on initial recognition.
Subsequent measurement
Financial Liabilities are subsequently carried at amortised cost using the effective interest method, which is subsequently measured at fair value through profit or loss. For trade and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate fair value to the short maturity of these instruments.
Derecognition
A financial liability is derecognised when the obligation specified in the contract 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 financial liabilty is substantially modified, such an exchange or modification is treated as the extinguishment of the original liability and the recognition of a new financial liability. The difference between the carrying amount of a financial liability extinguished and the consideration paid is recognised in the Statement of Profit and Loss.
i) Fair value measurement
The Company measures financial instruments, such as, investments at fair value at each balance sheet date. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy that categorises into three levels, described as follows, the inputs to valuation techniques used to measure value.
Level 1:quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly or indirectly
Level 3: inputs that are unobservable for the asset or liability.
For Assets and liabilities that are recognised in the financial statement on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by
reassessing the categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
j) Revenue Recognition
Revenue from contracts with customers is recognised on transfer of control of promised goods or service to a customer at an amount that reflects the consideration to which the company is expected to be entitled to in exchange for those goods or services. The company recognises the revenue at the amount of transaction price allocated to the performance obligation. The transaction price of goods sold and services rendered is net of variable consideration on account of various discounts and schemes offered by the Company as part of the contract.
Revenue is recogninsed only to the extent that is highly probable that the amount will not be subject to significant reversal when uncertainty relating to its recognition is resolved.
Sale of Goods :
Revenue is recognised when the performance obligations are satisfied and the control of the product is transferred, being when the goods are delivered as per the relevant terms of the contract at
which point in time the Company has a right to payment for the asset, customer has legal title of the asset, customer bears significant risk and rewards of ownership and the customer has accepted the asset or the Company has objective evidence that all criteria for acceptance have been satisfied. Payment for the sale is made as per the credit terms in the agreements with the customers. The credit period is generally short term, thus there is no significant financing component.
Revenue is measured based on the transaction price, which is the consideration, net of customer incentives, discounts, variable considerations, payments made to customers, other similar charges, as specified in the contract with the customer. Additionally, revenue excludes taxes collected from customers, which are subsequently remitted to Government authorities.
Export incentives under various schemes are accounted in the year of export at the estimated realisable value.
Sale of Services
The Company recognises its revenue from sale of services based on the recognition criteria that the outcome of a transaction involving the rendering of services can be estimated reliably.
Stage of completion of transactions is measured by determining the services performed till balance sheet date as a percentage of total services to be performed as per the contract. The credit period is generally short term, thus there is no significant financing component.
Dividend and Interest Income
Dividend income from investments is recognised when the shareholder's right to receive payment has been established (provided that it is probable that the economic benefits will flow to the company and the amount of income can be measured reliably.
Interest income from financial asset is recognised when it is probable that the economic benefits will flow to the entity 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 applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial assets' net carrying amount on initial recognition.
Rental Income
Rental Income arising from operating leases are accounted over the lease terms and is recognised in the statement of profit and loss.
k) Foreign Currency Transactions
The financial statements are presented in Indian Rupee which is company's functional and presentation currency. Foreign currency transactions are recorded at the exchange rate prevailing on the date of the transaction. Exchange differences arising on foreign exchange transaction settled during the year are recognised in the statement of profit and loss. Foreign currency monetary items as at the balance sheet date are translated using the closing rate. The gain or loss arisng out of these translations are recognized in the statement of profit and loss.
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