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Hindalco Industries
BSE: 500440|NSE: HINDALCO|ISIN: INE038A01020|SECTOR: Aluminium
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« Mar 14
Accounting Policy Year : Mar '15
A.  Accounting Convention
 
 These financial statements are prepared in accordance with Indian
 Generally Accepted Accounting Principles (GAAP) under the historical
 cost convention on an accrual basis. GAAP comprises mandatory
 accounting standards as prescribed under Section 133 of the Companies
 Act, 2013 (''Act'') read with Rule 7 of the Companies (Accounts) Rules,
 2014, the provisions of the Act (to the extent notifi ed) and
 guidelines issued by the Securities and Exchange Board of India (SEBI).
 All the assets and liabilities are classifi ed as current or
 non-current as per the criteria set out in Schedule III to the
 Companies Act, 2013.
 
 B.  Use of Estimates
 
 The preparation of fi nancial statements require estimates and
 assumptions to be made that affect the reported amount of assets and
 liabilities on the date of the fi nancial statements and the reported
 amount of revenues and expenses during the reporting period. Difference
 between the actual results and estimates are recognized in the period
 in which the results are known/ materialized.
 
 C.  Fixed Assets
 
 (a) Tangible Assets are stated at cost less accumulated depreciation
 and impairment loss, if any. Cost comprises of purchase price and any
 directly attributable cost of bringing the assets to its working
 condition for its intended use.
 
 (b) Intangible Assets are stated at cost less accumulated amortization
 and impairment loss, if any. Cost includes any directly attributable
 expenditure on making the asset ready for its intended use.
 
 (c) Machinery spares which can be used only in connection with an item
 of Tangible Asset and whose use is not of regular nature are written
 off over the estimated useful life of the relevant asset.
 
 (d) Certain directly attributable pre-operative expenses during
 construction period are included under Capital Work-in-Progress. These
 expenses are allocated to the cost of Fixed Assets when the same are
 ready for intended use.
 
 D.  Depreciation and Amortization
 
 (a) Depreciation on Tangible Assets, except leasehold land, has been
 provided using Straight Line Method over the estimated useful life of
 the assets in a manner prescribed in Part C of Schedule II of the
 Companies Act, 2013. Leasehold lands are amortized over the period of
 lease on straight line basis.
 
 (b) Intangible Assets, except Mining Rights, are amortized over their
 estimated useful lives on straight line basis. Mining Rights are
 amortized over the period of lease on straight line basis or on the
 basis of production, proportional to mineral resources expected to be
 ultimately economically recoverable, whichever is higher.
 
 E.  Impairment
 
 An asset is treated as impaired when the carrying cost of the asset
 exceeds its recoverable value being higher of value in use and net
 selling price. Value in use is computed at net present value of cash fl
 ow expected over the balance useful life of the assets. An impairment
 loss is recognized as an expense in the Statement of Profit and Loss in
 the year in which an asset is identifi ed as impaired. The impairment
 loss recognized in prior accounting period is reversed if there has
 been an improvement in recoverable amount.
 
 F.  Leases
 
 Lease payments under an operating lease are recognized as expense in
 the Statement of Profi t and Loss as per terms of lease agreement.
 
 G.  Investments
 
 (a) Long term investments are carried at cost after deducting
 provision, if any, for diminution in value considered to be other than
 temporary in nature.
 
 (b) Current investments are stated at lower of cost and fair value.
 
 H.  Inventories
 
 (a) Inventories of stores and spare parts are valued at or below cost
 after providing for cost of obsolescence and other anticipated losses,
 wherever considered necessary. Inventory of other items are valued ''at
 Cost or Net Realizable Value, whichever is lower''. Cost is generally
 determined on weighted average cost basis and wherever required,
 appropriate overheads are taken into account. Net Realizable Value is
 the estimated selling price in the ordinary course of business less the
 estimated cost of completion and the estimated costs necessary to make
 the sale. However, materials and other supplies held for use in the
 production of inventories are not written down below cost if the fi
 nished products in which they will be used are expected to be sold at
 or above cost.
 
 (b) Fair value hedges are mainly used to hedge the exposure to change
 in fair value of commodity price risks.  The fair value adjustment
 remains part of the carrying value of inventory and enters into the
 determination of earnings when the inventory is sold.
 
 I.  Foreign Currency Transactions
 
 Transactions in foreign currency are recorded at the rate of exchange
 prevailing on the date of transaction.  Year end balance of foreign
 currency monetary item is translated at the year end rates. Exchange
 differences arising on settlement of monetary items or on reporting of
 monetary items at rates different from those at which they were
 initially recorded during the period or reported in previous fi nancial
 statements are recognized as income or expense in the period in which
 they arise. Foreign currency monetary items those are used as hedge
 instruments or hedged items are accounted as per accounting policy on
 derivative fi nancial instruments.
 
 J.  Employee benefi ts
 
 Employee benefi ts of short term nature are recognized as expense as
 and when these accrue. Long term employee benefi ts and post employment
 benefi ts, whether funded or otherwise, are recognized as expense based
 on actuarial valuation at year end using the projected unit credit
 method. For discounting purpose, market yield of Government Bonds, at
 the balance sheet date, is used. Actuarial gains or losses are
 recognized immediately in the Statement of Profi t and Loss.
 
 K.  Employee Share Based Payments
 
 Equity settled stock options granted to employees pursuant to the
 Company''s stock option schemes are accounted for as per the intrinsic
 value method prescribed by Employee Stock Option Scheme and permitted
 by the SEBI guidelines, 1999 and the Guidance Note on Share Based
 Payment issued by the Institute of Chartered Accountants of India
 (ICAI). The intrinsic value of the option being excess of market value
 of the underlying share at the date of grant of option, over its
 exercise price is recognised as deferred employee compensation with a
 credit to Employees Stock Options Outstanding Account. The deferred
 employee compensation is amortized to Statement of Profi t and Loss on
 straight line basis over the vesting period of the option. In case of
 forfeiture of option which is not vested, amortised portion is reversed
 by credit to employee compensation expense. In a situation where the
 stock option expires unexercised, the related balance standing to the
 credit of the employees Stock Options Outstanding Account are
 transferred to the General Reserve.
 
 L.  Revenue Recognition
 
 Sales revenue is recognized on transfer of signifi cant risk and
 rewards of the ownership of the goods to the buyer and stated at net of
 trade discount and rebates. Dividend income on investments is accounted
 for when the right to receive the payment is established. Export
 incentive, certain insurance, railway and other claims where quantum of
 accruals cannot be ascertained with reasonable certainty, are accounted
 on acceptance basis.
 
 M.  Borrowing Costs
 
 Borrowing costs directly attributable to the acquisition or
 construction of qualifying assets are capitalized.  Other borrowing
 costs are recognized as expenses in the period in which they are
 incurred. In determining the amount of borrowing costs eligible for
 capitalization during a period, any income earned on the temporary
 investment of those borrowings is deducted from the borrowing costs
 incurred.
 
 N.  Taxation
 
 (a) Provision for current income tax is made in accordance with the
 Income tax Act, 1961. Deferred tax assets and deferred tax liabilities
 are recognized at substantively enacted tax rates, subject to the
 consideration of prudence, on timing difference, being the difference
 between taxable income and accounting income that originate in one
 period and are capable of reversal in one or more subsequent periods.
 
 (b) Minimum Alternative Tax (MAT) is recognized as an asset only when
 and to the extent there is convincing evidence that the Company will
 pay normal Income Tax during the specifi ed period. In the year in
 which the MAT credit becomes eligible to be recognized as an asset in
 accordance with the recommendations contained in guidance note issued
 by the ICAI, the said asset is created by way of credit to Statement of
 Profi t and Loss and shown as MAT credit entitlement. The Company
 reviews the same at each Balance Sheet date and writes down the
 carrying amount of MAT entitlement to the extent there is no longer
 convincing evidence to the effect that Company will pay normal Income
 Tax during the specifi ed period.
 
 O.  Derivative Financial Instruments
 
 (a) The Company uses derivative fi nancial instruments such as
 Forwards, Swaps, Options, futures etc. to hedge its risks associated
 with foreign exchange fl uctuations. Risks associated with fl
 uctuations in the price of the products (e.g. Copper, Alumina,
 Aluminium, Coal and precious metals) are minimized by undertaking
 hedging using appropriate derivative instruments. Derivatives embedded
 in other fi nancial instruments or other host contracts are treated as
 separate derivatives when their risks and characteristics are not
 closely related to their host contracts. In some cases, the embedded
 derivatives may be designated in a hedge relationship. The fair values
 of all such derivative fi nancial instruments are recognized as assets
 or liabilities at the balance sheet date. All such derivative fi
 nancial instruments are used as risk management tools only and not for
 speculative purposes.
 
 (b) For derivative fi nancial instruments and foreign currency monetary
 items designated as Cash Flow hedges, the effective portion of the fair
 value of the hedge instruments are recognized in Hedging Reserve and
 reclassifi ed to ''Revenue from Operations'', ''Cost of Materials
 Consumed'' or ''Other Expenses'' in the period in which the Statement of
 Profi t and Loss is impacted by the hedged items or in the period when
 the hedge relationship no longer qualifi es as cash fl ow hedge. In
 cases where the exposure gives rise to a non-fi nancial asset, the
 effective portion is reclassifi ed from Hedging Reserve to the initial
 carrying amount of the non-fi nancial asset as a ''basis adjustment'' and
 recycled to the Statement of Profi t and Loss when and the manner in
 which the respective non- fi nancial asset affects the Statement of
 Profi t and Loss in future periods. The ineffective portion of the
 change in fair value of such instruments is recognized in the Statement
 of Profi t and Loss in the period in which they arise. If the hedging
 relationship ceases to be effective or it becomes probable that the
 expected forecast transaction will no longer occur, hedge accounting is
 discontinued and the fair value changes arising from the derivative fi
 nancial instruments are recognized in ''Other Expenses'' in the Statement
 of Profi t and Loss.
 
 (c) For derivative fi nancial instruments designated as Fair Value
 hedges, the fair value of both the derivative fi nancial instrument and
 the hedged item are recognized in ''Revenue from Operations'', ''Cost of
 Materials Consumed'' or ''Other Expenses'' in the Statement of Profi t and
 Loss till the period the relationship is found to be effective. If the
 hedging relationship ceases to be effective or it becomes probable that
 the expected transaction will no longer occur, future gains or losses
 on the derivative fi nancial instruments are recognized in ''Other
 Expenses'' in the Statement of Profi t and Loss.
 
 (d) If no hedging relationship is designated, the fair value of the
 derivative fi nancial instruments is marked to market through Statement
 of Profi t and Loss and included in ''Other Expenses''.
 
 P.  Research and Development
 
 Expenditure incurred during research and development phase is charged
 to revenue when no intangible asset arises from such research. Assets
 procured for research and development activities are generally
 capitalized.
 
 Q.  Government Grants
 
 Government Grants are recognized when there is a reasonable assurance
 that the same will be received.  Revenue grants are recognized in the
 Statement of Profi t and Loss. Capital grants relating to specifi c fi
 xed assets are reduced from the gross value of the respective fi xed
 assets. Other capital grants are credited to Capital Reserve.
 
 R.  Provisions, Contingent Liabilities and Contingent Assets
 
 Provision is recognized when there is a present obligation as a result
 of a past event that probably requires an outfl ow of resources and a
 reliable estimate can be made of the amount of the obligation.
 Disclosure for contingent liability is made when there is a possible
 obligation or a present obligation that may, but probably will not,
 require an outfl ow of resources. No provision is recognized or
 disclosure for contingent liability is made when there is a possible
 obligation or a present obligation and the likelihood of outfl ow of
 resources is remote. Contingent Asset is neither recognized nor
 disclosed in the fi nancial statements.
Source : Dion Global Solutions Limited
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