3. Material Accounting Policies
3.1 Property, Plant and Equipment
[a] Tangible Assets
[i] Recognition and Measurement
Items of property, plant and equipment are measured at cost, which include capitalised borrowing costs,
less accumulated depreciation, and accumulated impairment losses, if any, except freehold land which is
carried at historical cost.
Cost of an item of property, plant and equipment comprises its purchase price (after deducting trade
discounts and rebates), including import duties and non-refundable purchase taxes, any directly attributable
cost of bringing the item to its working condition for its intended use.
The cost of a self-constructed item of property, plant and equipment comprises the cost of materials
and direct labour, any other costs directly attributable to bringing the item to working condition for its
intended use.
If significant parts of an item of property plant and equipment have different useful lives, then they are
accounted for as separate items (major components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss
following the principles of Ind AS 115 “Revenue from Contracts with Customers”.
[ii] Subsequent Expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with
the expenditure will flow to the Company.
[iii] Derecognition
An item of Property, Plant and Equipment is derecognised upon disposal or when no future economic
benefits are expected to arise from the continued use of assets.
[iv] Depreciation/ Amortization
Depreciation is calculated on cost of items of property, plant and equipment (other than freehold land and
properties under construction) less their estimated residual values over their estimated useful lives using
the straight-line method in respect of plant and machinery and electric plant and installation and using the
written down value method in respect of other assets. Depreciation is generally recognised in the Statement
of Profit and Loss.
Useful lives have been determined in accordance with Schedule II to the Companies Act, 2013 except on
following assets, where useful life has been taken based on external/internal technical evaluation as under:
The residual values are not more than 5% of the original cost of the asset.
Depreciation method, useful lives and residual values are reviewed at each financial year-end and adjusted,
if appropriate. Based on technical evaluation and consequent advice, the management believes that its
estimates of useful lives best represent the period over which management expects to use these assets. The
useful lives of the Company’s Plant and Equipments are considered on the basis of continuous process plant.
Depreciation on additions (disposals) is provided on a pro rata basis that is from (up to) the date on which
asset is ready for use (disposed of).
[b] Capital work-in-progress
Projects under commissioning and other Capital work-in-progress are carried at cost comprising of direct and
indirect costs, related incidental expenses and attributable interest. Depreciation on Capital work-in-progress
commences when assets are ready for their intended use and transferred from Capital work-in-progress Group
to Tangible Plant & Equipment Group.
[c] Intangible Assets
[i] Initial Recognition and Classification
Intangible assets including those acquired by the Company are initially measured at cost. Such intangible assets
are subsequently measured at cost less accumulated amortization and any accumulated impairment losses.
[ii] Subsequent Expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditures are recognised in profit or loss as incurred.
[iii] Amortization
Amortization is calculated to write off the cost of intangible assets less their estimated residual values
over the estimated useful lives using the written down value method and is included in Depreciation and
Amortization expense in the Statement of Profit and Loss. The estimated useful lives of computer software
are considered not exceeding three years. Amortization method, useful lives and residual values are reviewed
at the end of each financial year and adjusted, if appropriate.
[iv] Derecognition
An item of intangible asset is derecognised upon disposal or when no future economic benefits are expected
to arise from the continued use of asset.
[v] Intangible Assets under Development
Intangible assets not ready for the intended use on the date of the Balance Sheet are disclosed as “Intangible
Assets under Development”.
[vi] Investment Property
Investment properties are land and buildings that are held for long term lease rental yields and/ or for
capital appreciation. Investment properties are initially recognised at cost including transaction costs.
Subsequently investment properties comprising buildings are carried at cost less accumulated depreciation
and accumulated impairment losses, if any.
Depreciation on buildings is provided over the estimated useful lives as specified in note 3.1(a)[iv] above. The
residual values, estimated useful lives and depreciation method of investment properties are reviewed, and
adjusted on prospective basis as appropriate, at each reporting date. The effects of any revision are included
in the Standalone Statement of Profit and Loss when the changes arise.
An investment property is de-recognised when either the investment property has been disposed of or do
not meet the criteria of investment property i.e. when the investment property is permanently withdrawn
from use and no future economic benefit is expected from its disposal. The difference between the net
disposal proceeds and the carrying amount of the asset is recognised in the Standalone Statement of Profit
and Loss in the period of de-recognition.
[d] Impairment of Non-Financial Assets
The Company’s non-financial assets are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
An impairment loss is recognised if the carrying amount of an asset exceeds its estimated recoverable amount.
Impairment losses are recognised in the Statement of Profit and Loss.
In respect of assets for which impairment loss has been recognised in prior periods, the Company reviews at each
reporting date whether there is any indication that the loss has decreased or no longer exists. An impairment loss
is reversed if there has been a change in the estimates used to determine the recoverable amount. Such a reversal
is made only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have
been determined, net of depreciation or amortization, if no impairment loss had been recognised.
3.2 Borrowing Costs
Borrowing costs are interest and other costs incurred in connection with the borrowing of funds. Borrowing costs
directly attributable to the acquisition or construction of qualifying asset that necessarily takes a substantial period of
time to get ready for its intended use are capitalised as part of the cost of the respective asset until such time the assets
are substantially ready for their intended use. All other borrowing costs are recognised as an expense in the period
in which they are incurred and reported in finance costs. Borrowing costs are reported on an accrual basis using the
effective interest method.
3.3 Operating Cycle
Based on the nature of products/activities of the Company and the normal time between purchase of raw materials and
their realisation in cash or cash equivalents, the Company has determined its operation cycle within 12 months for the
purpose of classification of its assets and liabilities as current and non-current.
3.4 Current versus Non-Current Classification
The Company presents assets and liabilities in the Balance Sheet based on current/ non-current classification.
An asset/ liability is treated as current when it is:¬
* Expected to be realised or intended to be sold or consumed or settled in normal operating cycle
* Held primarily for the purpose of trading.
* Expected to be realised/ settled within twelve months after the reporting period, or
* Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve
months after the reporting period.
* There is no unconditional right to defer the settlement of the liability for at least twelve months after the
reporting period.
All other assets and liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities respectively.
3.5 Inventories
Items of inventories are measured at lower of cost and net realisable value after providing for obsolescence, wherever
considered necessary. The cost of inventories comprises of all costs of purchase, costs of conversion and other costs
including manufacturing overheads incurred in bringing the inventories to their present location and condition. Cost
of raw materials, stores and spares, packing materials, trading and other products are determined on weighted average
cost basis.
Net realisable value is the estimated selling price in the ordinary course of business, less any applicable selling expenses.
The net realisable value ofwork-in-progress is determined with reference to the selling prices of related finished products.
Normal Excess/ shortages, if any, arising on physical verification are absorbed in the respective consumption accounts.
3.6 Cash and Cash Equivalents
Cash and cash equivalents include cash and cheques in hand, bank balances, demand deposits with banks and other
short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value where original maturity is three months or less.
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