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NOTE 1 : MATERIAL ACCOUNTING POLICIES UNDER INDAS
A General Information
The Company was established in 1989 and is engaged in manufacturing of speciality chemicals. The manufacturing facilities are located at Mahad and Lote Parashuram, Maharashtra. The Company is listed on Bombay Stock Exchange and National Stock Exchange. The registered office is located at B-12 & B-13/1, MIDC Indl. Area, Mahad - 402 309, Dist. Raigad, Maharashtra.
B Basis of preparation of Financial Statements
The principal accounting policies applied in the preparation of these financial statements are set out in Para C below. These policies have been consistently applied to all the years presented
i Statement of Compliance
These Separate Financial Statements (also known as Standalone Financial Statements) have been prepared in accordance with IND AS as prescribed under Section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and subsequent amendments thereto
ii Basis of preparation and presentation
The financial statements have been prepared on historical cost basis considering the applicable provisions of Companies Act 2013, except for the following material item that has been measured at fair value as required by relevant Ind AS. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
a) Certain financial assets/liabilities measured at fair value and
b) Any other item as specifically stated in accounting policy.
The Financial Statement are presented in Indian Rupee (T) and all values are rounded to the Rupee in lakhs, unless otherwise stated.
The Company reclassifies comparative amounts, unless impracticable and whenever the Company changes the presentation or classification of items in its Financial Statements materially. No such material reclassification has been made during the year.
The financial statements of the Company for the Year Ended 31 March, 2024 were authorised for issue in accordance with a resolution of the board of directors on 17 May, 2024
iii Major Sources of Estimation Uncertainty
In the application of accounting policy which are described in note (C) below, the management is required to make judgment, estimates and assumptions about the carrying amount of assets and liabilities, income and expenses, contingent liabilities and the accompanying disclosures
(
that are not readily apparent from other sources.
The estimates and associated assumptions
(
are based on historical experience and other factors that are considered to be relevant and are prudent and reasonable.Actual results may differ from those estimates. The estimates and
t
underlying assumptions are reviewed on ongoing
i
basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods.
The few critical estimations and judgments made in applying accounting policies are:
Property, Plant and Equipment/Intangible Assets
Useful life of Property Plant and Equipment are as specified in Schedule II to the Companies Act,
2013 and on certain intangible assets based on technical advice which considered the nature of the asset, the usage of the asset and anticipated technological changes. The Company reviews the useful life of Property, Plant and Equipment/ intangible at the end of each reporting period.This reassessment may result in change in depreciation charge in future periods.
Impairment of Non-financial Assets:
For calculating the recoverable amount of nonfinancial assets, the Company is required to estimate the value-in-use of the asset or the Cash Generating Unit and the fair value less costs to disposal. For calculating value in use the Company is required to estimate the cash flows to be generated from using the asset. The fair value of an assets is estimated using a valuation technique where observable prices are not available. Further, the discount rate used for value in use calculations includes an estimate of risk assessment specific to the asset.
Impairment of Financial Assets:
The Company impairs financial assets other than those measured at fair value through profit or loss or designated at fair value through other comprehensive income on expected credit losses.
The estimation of expected credit loss includes the estimation of probability of default (PD), loss given default (LGD) and the exposure at default (EAD). Estimation of probability of default apart from involving trend analysis of past delinquency rates include an estimation on forward-looking information relating to not only the counterparty but also relating to the industry and the economy as a whole. The probability of default is estimated for the entire life of the contract by estimating the cash flows that are likely to be received in default scenario. The lifetime PD is reduced to 12 month PD based on an assessment of past history of default cases in 12 months. Further, the loss given default is calculated based on an estimate of the value of the security recoverable as on the reporting date. The exposure at default is the amount outstanding at the balance sheet date.
Defined Benefit Plans:
The cost of the defined benefit plan and other post-employment benefits and the present value of such obligations are determined using actuarial valuations.An actuarial valuation involves making various assumptions that may differ from actual developments in the future.These include the determination of the discount rate, future salary increases, mortality rates and attrition rate.Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
Fair Value Measurement of Financial Instruments:
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the Discounted Cash Flow (DCF) model.The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk and volatility.Changes in assumptions about these factors could affect the reported fair value of financial instruments.
Income taxes
Significant judgments are involved in determining the provision for income taxes, including amount
expected to be paid/recovered for uncertain tax positions.
In assessing the realisability of deferred income tax assets, management considers whether some portion or all of the deferred income tax assets will not be realised. The ultimate realisation of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversals of deferred income tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred income tax assets are deductible, management believes that the Company will realise the benefits of those deductible differences. The amount of the deferred income tax assets considered realisable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced.
C Summary of Material Accounting Policies
Ind AS 1 was amended vide notification no G.S.R.242(E) dated 31 March, 2023 to require disclosure of Material Accounting Policy information from accounting periods beginning on or after 01 April, 2023 instead of significant accounting policy disclosure by amending paragraph 117, inserting paragraphs 117A to 117E and deleting paragraphs 118 to 121. Paragraph 117 of Ind AS 1 states when an information on accounting policy is considered as ‘Material Accounting Policy information’ as follows: Accounting policy information is material if, when considered together with other information included in an entity’s financial statements, it can reasonably be expected to influence decisions that the primary users of general-purpose financial statements make on the basis of those financial statements.
Each of the policy disclosed herein below has been tested to determine whether the information disclosed is Material Accounting Policy information
1 Property , Plant and Equipment
The Company has elected to continue with the carrying value of Property, Plant and Equipment (‘PPE’) recognised as of transition date measured as per the Previous GAAP and use that carrying value as its deemed cost.
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated
impairment losses except freehold land which is not depreciated.
Any gain or loss arising on the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds and the carrying amount of the asset and is recognised in Profit or Loss agregated with other income or other expense line item on net basis respectively.
The depreciable amount of an asset is determined after deducting its residual value. Depreciation on the property, plant and equipment, is provided over the useful life of assets based on management estimates which is in line with the useful life indicated in Schedule II to the Companies Act, 2013. Depreciation on all assets is provided on straight line basis. Given below are the estimated useful lives for each class of property, plant and equipment:
3 Inventories
Raw materials, components, stores and spares are measured at lower of cost and net realisable value. However materials and other items held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. The cost is computed on FIFO basis. Work-in-progress and finished goods are valued at lower of cost and net realisable value. Cost includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity.
Inventory obsolescence is based on assessment of the future uses. Obsolete and slow-moving items are subjected to continuous technical monitoring.
2 Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost. After initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.
Technical Know-how acquired separately is treated as intangible assets and amortised over a period of 10 years on straight-line method over the estimated useful economic life.
Software (not being an integral part of the related hardware) acquired for internal use are treated as intangible assets and is amortised over a period of 6 years on straight-line method over the estimated useful economic life.
Any gain or loss arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in Profit or Loss agregated with other income or other expense line item on net basis respectively.
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