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Moneycontrol.com India | Accounting Policy > Dyes & Pigments > Accounting Policy followed by Clariant Chemicals India - BSE: 506390, NSE: CLNINDIA
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Clariant Chemicals India
BSE: 506390|NSE: CLNINDIA|ISIN: INE492A01029|SECTOR: Dyes & Pigments
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Accounting Policy Year : Dec '12
(a) Basis of preparation of financial statements

The financial statements have been prepared on historical cost convention. The company follows the accrual basis of accounting. The financial statements are prepared in accordance with the accounting standards specified in the Companies (Accounting Standards) Rules, 2006 notified by the Central Government in terms of Section 211(3C) of the Companies Act, 1956.

Assets and liabilities are classified as current if it is expected to realise or settle within 12 months after Balance Sheet date.

(b) Revenue recognition

The Company recognises sale of goods on transfer of significant risks and rewards of ownership of the goods to the buyer. Sales are net of excise duty, sales tax and trade discounts, wherever applicable.

Dividend income on investments is accounted for when the right to receive the payment is established.

(c) Excise duty

Excise duty payable on products is accounted for at the time of despatch of goods from the factories and is accrued for stocks held at the year end.

Excise Duty related to the difference between the closing stock and opening stock of finished goods has been recognised separately in Note 27 Other expenses to the Statement of Profit and Loss.

(d) Employee benefits

(i) Short term employee benefit obligations are estimated and provided for.

(ii) Post employment benefits and other long term employee benefits :

Defined contribution plans:

Company's contribution to provident fund, superannuation fund, employee state insurance and other funds are determined under the relevant schemes and/or statute and charged to the Statement of Profit and Loss.

Defined benefit plans and compensated absences :

Company's liability towards gratuity, ex-gratia gratuity and compensated absences are actuarially determined at each balance sheet date using the projected unit credit method. Actuarial gains and losses are recognised in the Statement of Profit and Loss.

(e) Voluntary retirement scheme

Expenditure incurred on voluntary retirement scheme is charged to the Statement of Profit and Loss in the year in which it is incurred.

(f) Fixed assets and Depreciation/Amortisation

(i) All fixed assets are stated at cost less depreciation, wherever applicable. Cost comprises the purchase price and any other attributable cost of bringing the asset to its working condition for its intended use. Borrowing cost relating to funds borrowed for acquisition of qualifying assets up to the date the assets are put to use is included in cost.

(ii) The cost of leasehold land is amortised over the period of the lease.

(iii) Depreciation on tangible assets is calculated on the straight line method at the rates and in the manner specified in Schedule XIV of the Companies Act, 1956 except for : certain items of office equipment, air conditioners, plant and equipment on which a depreciation rate of 20% on straight line method is applied, electronic data processing (EDP) hardware such as servers on which a depreciation rate of 20% and for other EDP equipment including personal computers and printers on which depreciation rate of 25% on straight line method is applied, Motor cars on which depreciation rate of 25% on straight line method is applied.

(iv) Fixed assets held for disposal are stated at lower of net book value and net realisable value.

(g) Impairment of assets

The carrying amounts of assets are reviewed at each Balance Sheet date to assess whether there is any indication of impairment based on internal / external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its estimated recoverable amount. The recoverable amount is greater of the asset's net selling price and value in use. In assessing the value in use, the estimated future cash flows are discounted to the present value using the weighted average cost of capital. Previously recognised impairment loss is further provided or reversed depending on changes in circumstances.

(h) Inventories

Inventories are valued at the lower of cost and estimated net realisable value after providing for obsolescence. The cost of inventories is arrived at on the following basis :

Raw materials, packing materials, trading items and stores and spares - Weighted average cost.

Finished goods and work-in-progress - Absorption costing at works cost,

(i) Trade receivables/Loans and advances

Trade receivables and loans and advances are stated after making adequate provision for doubtful debts/advances.

(j) Investments

Long term investments are stated at cost less provision for diminution in value, other than temporary. Current investments are stated at the lower of cost and fair value.

(k) Leases

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased assets are classified as operating leases. Operating lease payments are recognised as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term.

(l) Foreign currency translations

(i) Foreign currency transactions are accounted at the rate prevailing on the date of transaction. Monetary items denominated in foreign currency outstanding as at year end are translated at the exchange rate prevailing on the last day of the accounting year. In respect of items covered by forward contracts, the premium or discount arising at the inception of such a forward exchange contract is amortised as expense or income over the life of the contract. Any profit or loss arising on cancellation of such a forward exchange contract is recognised as income or expense for the period.

(ii) Non monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of transaction.

(iii) Gain or loss arising out of translation/conversion is taken credit for or charged to the Statement of Profit and Loss.

(m) Income Tax

Income tax expense comprises current tax and deferred tax charge or credit. The current tax is determined as the amount of tax payable in respect of the estimated taxable income for the year. The deferred tax charge or credit is recognised using prevailing enacted or substantively enacted tax rates at the Balance Sheet date. Where there is unabsorbed depreciation or carry forward losses, deferred tax assets are recognised only if there is virtual certainty of realization. Other deferred tax assets are recognised only to the extent there is reasonable certainty of realisation in future. The carrying amount of deferred tax assets/liabilities are reviewed at each Balance Sheet date.

(n) Contingencies/Provisions

Provision is recognised when the Company has a present obligation as a result of past event; it is probable that an outflow of resources embodying economic benefit will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate of the expenditure required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimate. A contingent liability is disclosed, unless the possibility of an outflow of resources embodying the economic benefit is remote.

(o) Use of estimates

The presentation of the financial statements requires certain estimates and assumptions. These estimates and assumptions affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates if any is recognised in the period in which the results are known/materialised.

Source : Dion Global Solutions Limited
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