1. Accounting Convention:
The financial statements have been prepared to comply in all material
respects with the Accounting Standards notified by Companies
(Accounting Standards) Rules, 2006 and the relevant provisions of the
Companies Act, 1956. The financial statements have been prepared under
the historical cost convention on an accrual basis except otherwise
stated. The accounting policies have been consistently applied by the
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting
period. Although these estimates are based upon management''s best
knowledge of current events and actions, actual results could differ
from these estimates.
2. Fixed Assets:
Fixed assets are stated at cost less accumulated depreciation and
impairment losses, if any. Cost comprises the purchase price and any
attributable cost of bringing the asset to its working condition for
its intended use. Borrowing costs relating to acquisition of qualifying
fixed assets which take substantial period of time to get ready for
their intended use are also included to the extent they relate to the
period till such assets are ready to be put to use.
Depreciation is provided using the Straight Line Method as per the
useful lives of the assets estimated by the management or at the rates
prescribed under Schedule XIV of the Companies Act, 1956, whichever is
In respect of equipment of IT and PKI Projects, they are depreciated at
the rate of 9.5% per annum which is based on useful life of such assets
estimated by the management.
Furniture exceeding Rs. 5,000/- provided to employees is depreciated
fully in the year of purchase.
In respect of assets acquired for giving on lease, the depreciation is
provided at flat rates equally spread over the tenure of lease
agreement or at the rates specified in Schedule XIV of the Companies
Act, 1956, whichever is higher.
The core engine, an integral part of Captive Power Plant, needs
replacement at the end of every three years and so the replacement
amount is capitalized and is depreciated over its useful life of three
The carrying amounts of assets are reviewed at each balance sheet date
if there is any indication of impairment based on internal / external
factors. An impairment loss is recognized wherever the carrying amount
of an asset exceeds its recoverable amount. The recoverable amount is
the greater of the asset''s net selling price and value in use. In
assessing value in use, the estimated future cash flows are discounted
to their present value at the weighted average cost of capital.
After impairment, depreciation is provided on the revised carrying
amount of the asset over its remaining useful life.
A previously recognized impairment loss is increased or reversed
depending on changes in circumstances. However, the carrying value
after reversal is not increased beyond the carrying value that would
have prevailed by charging usual depreciation if there was no
5. Intangible Assets:
Goodwill is amortized over the period of 5 years commencing from the
financial year in which the amalgamation is effected and accounted for.
Software is amortized over its estimated useful life of six years.
Licence acquired and used along with and directly related to the plant
and machinery is amortized over the estimated useful life of the
related plant and machinery.
Research costs are expensed as incurred. Development expenditure
incurred on an individual project is carried forward when its future
recoverability can reasonably be regarded as assured.
Assets given under a finance lease are recognized as a receivable at an
amount equal to the net investment in the lease. Lease rentals are
apportioned between principal and interest on the IRR method. The
principal amount received reduces the net investment in the lease and
interest is recognized as revenue. Initial direct costs such as legal
costs, brokerage costs, etc. are recognized immediately in the
Statement of Profit and Loss.
Assets subject to operating leases are included in fixed assets. Lease
income is recognized in the Statement of Profit and Loss on a
straight-line basis over the lease term. Costs, including depreciation,
are recognized as an expense in the Statement of Profit and Loss.
Initial direct costs such as legal costs, brokerage costs, etc. are
recognized immediately in the Statement of Profit and Loss.
Investments that are readily realizable and intended to be held for not
more than a year are classified as current investments. All other
investments are classified as long-term investments. Current
investments are carried at lower of cost and fair value determined on
investment category basis. Long-term investments are carried at cost.
However, provision for diminution in value is made to recognize a
decline other than temporary in the value of the investments.
Inventories are valued as follows:
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
9. Foreign currency Transactions:
a. Initial Recognition:
Foreign currency transactions are recorded in the reporting currency,
by applying to the foreign currency amount the exchange rate between
the reporting currency and the foreign currency at the date of the
Foreign currency monetary items are reported using the closing rate.
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 the transaction and non-monetary items which are carried
at fair value or other similar valuation denominated in a foreign
currency are reported using the exchange rates that existed when the
values were determined.
c. Exchange Differences:
The net gain or loss on account of exchange rate differences arising on
settlement or restatement of foreign currency transactions for foreign
currency monetary items are recognized as income or expenses of the
period in which they arise except exchange differences arising on
long-term foreign currency monetary items related to acquisition of a
fixed asset which are capitalized and depreciated over the remaining
useful life of the asset. For this purpose, the Company treats a
foreign currency monetary item as long-term foreign currency
monetary item, if it has a term of 12 months or more at the date of
d. Forward Exchange Contracts not intended for trading or speculation
The premium or discount arising at the inception of forward exchange
contracts is amortized as expense or income over the life of the
contract. Exchange differences on such contracts, except the contracts
which are long-term foreign currency monetary items, are recognized in
the statement of profit and loss in the year in which the exchange
rates change. Any profit or loss arising on cancellation or renewal of
such forward exchange contract is recognized as income or as expense
for the year. Any gain / loss arising on forward contracts which are
long-term foreign currency monetary items is recognized in accordance
with c. above.
10. Revenue Recognition:
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Company and the revenue can be
a. Sale of goods:
Revenue is recognized when the significant risks and rewards of
ownership of the goods have passed to the buyer.
Sales, net of sales tax / VAT and discounts, comprise of sale of goods
and services, excise duty and claims preferred on the Government of
India for retention price reimbursement on fertilizers and admissible
claims for change in retention price on account of variation in the
costs. The excise duty collected on sales is shown by way of further
deduction from sales. Urea and ANP Product Subsidy:
Urea Subsidy under the New Pricing Scheme-III (extension) and ANP
Subsidy under Nutrient Based Subsidy (NBS) Scheme w.e.f. 01-04-2010 is
allowed by the Government of India (GoI) for the quantity received at
the destination, as per the rate prescribed by GoI, at the time of
dispatch in case of Urea and at the time of receipt in case of ANP.
Urea Subsidy is further adjusted for input price escalation /
de-escalation as estimated by the management based on the prescribed
norms. The Company accounts for the same on sales quantity basis. Urea
and ANP Freight Subsidy:
Freight Subsidy is recognized for the quantity received at the
destination based on the rates approved by the Government of India in
case of Urea and on the normative rates approved by the Government of
India or the actual freight, whichever is lower, in case of ANP.
b. Other Income:
Revenue is recognized on a time proportion basis taking into account
the amount outstanding and the rate applicable. Dividends:
Revenue is recognized when the right to receive the dividend is
The amounts receivable from various agencies are accounted on accrual
basis to the extent it is possible to ascertain the income with
Revenue is recognized on actual receipt basis.
11. Government Grants:
Government Grant is recognized when there is reasonable assurance that
the conditions attached to them will be complied with. Government Grant
received against the cost of fixed asset is credited to the gross value
of the respective fixed asset in arriving at its book value. The grant
is thus recognized in the profit and loss statement over the useful
life of the respective depreciable fixed asset by way of a reduced
12. Borrowing Costs:
Interest and other costs in connection with the borrowing of the funds
to the extent related / attributed to the acquisition / construction of
qualifying assets are accumulated and capitalized upto the date when
such assets are ready for their intended use. Other borrowing costs are
charged to Statement of Profit and Loss.
13. Export Benefits:
Export benefits under Duty Exemption Advance Licence Scheme, Duty
Exemption Pass Book Scheme and Duty Drawback Scheme are accounted for
in the year of export of goods.
14. Retirement Benefits:
a. Retirement benefits in the form of Provident Fund and Pension Fund
are defined contribution schemes and the contributions are charged to
the Statement of Profit and Loss of the year when the contributions to
the respective funds are due. There are no other obligations other than
the contributions payable to the respective trusts.
b. Gratuity liability and Post employment Medical Benefit liability
are defined benefit obligations and are provided for on the basis of
actuarial valuation made at the end of each financial year on project
unit credit method.
c. Short term compensated absences are provided for on the basis of
estimates. Long term compensated absences are provided for based on
actuarial valuation on project unit credit method.
d. Actuarial gains / losses are immediately taken to Statement of
Profit and Loss and are not deferred.
Tax expense comprises of current tax and deferred tax. Current income
tax is measured at the amount expected to be paid to the tax
authorities in accordance with the Indian Income Tax Act. Deferred
income tax reflects the impact of current year timing differences
between taxable income and accounting income for the year and reversal
of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws
enacted or substantively enacted at the Balance Sheet date. Deferred
tax assets are recognized only to the extent that there is reasonable
certainty that sufficient future taxable income will be available
against which such deferred tax assets can be realized. In situations
where the Company has carried forward tax losses, all deferred tax
assets are recognized only if there is virtual certainty supported by
convincing evidence that they can be realized against future taxable
profits. The carrying amount of deferred tax assets are reviewed at
each balance sheet date. The Company writes down the carrying amount of
a deferred tax asset to the extent that it is no longer reasonably
certain or virtually certain as the case may be, that sufficient future
taxable income will be available against which such deferred tax assets
can be realized.
A provision is recognized when an enterprise has a present obligation
as a result of past event; it is probable that an outflow of resources
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 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
17. Earnings Per Share:
Basic earnings per share are calculated by dividing the net profit or
loss for the period attributable to equity shareholders by the weighted
average number of equity shares outstanding during the period. Partly
paid equity shares are treated as a fraction of an equity share to the
extent that they were entitled to participate in dividends relative to
a fully paid equity share during the reporting period.
For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the period are
adjusted for the effects of all dilutive potential equity shares.
18. Cash and Cash Equivalents:
Cash and cash equivalents in balance sheet comprise cash at bank and in
hand and fixed deposits with banks.
19. Segment Reporting Policies:
Identification of segments:
The Company''s operating businesses are organized and managed
separately according to the nature of products and services provided,
with each segment representing a strategic business unit that offers
different products. Majority of the Company''s products are sold
within India and hence geographical segment is not identified. There
are no intersegment transfers.
Allocation of Common Costs:
To the extent the costs can be directly identified, they are allocated
to the related segment. Common allocable costs are allocated to each
segment according to the relative production tonnage, sales tonnage /
value and other related basis.
Other segment includes Information Technology activity and general
corporate income and expense items which are not allocated to any