1. General: The Company follows accrual system of accounting and
recognises income and expenditure on accrual basis unless otherwise
stated. The Accounts are prepared on historical cost convention, in
accordance with Generally Accepted Accounting Principles in India and
provisions of the Companies Act, 1956. The Financial statements include
operations of branch at Kenya.
2. Use of Estimates:
The preparation of financial statements requires the management of the
Company to make estimates and assumptions that 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
are recognised in the period in which the results are known /
materialised. Though the management believes that the estimates used
are prudent and reasonable, actual results could differ from these
3. Fixed Assets:
a. Fixed assets are stated at cost, unless stated otherwise. Cost
comprises the purchase price and other attributable expenses.
b. Revaluation: The net increase in the value of the assets is
credited to the Revaluation Reserve.
c. Impairment of Assets: Impairment of an asset is reviewed and
recognised in the event changes and circumstances indicate that the
carrying amount of an asset is not recoverable. Difference between the
carrying amount of an asset and the recoverable value is recognised as
impairment loss in the statement of profit and loss in the year of
4. Depreciation on Fixed Assets:
a) Depreciation on fixed assets other than the assets given on lease is
provided on straight-line method at the rates and in the manner
prescribed in Schedule XIV of the Companies Act, 1956.
b) Depreciation on Computers, Mobile Phones, Vehicles, Electronic
Equipments, Air-conditioners and Lab Equipment are provided at rate
higher than the rate prescribed in Schedule XIV of the Companies Act,
1956, based on technical evaluation of the useful life (three years) of
c) Depreciation charge for each year is net of additional depreciation
on incremental values arising out of revaluation met out of revaluation
Investments are classified as long term and current investments. Long
term investments are carried at cost less provision for other than
temporary diminution, if any, in value of such investments. Current
investments are carried at lower of cost and fair value.
6. Foreign currency transactions:
Foreign currency transactions are accounted at the exchange rates
prevailing on the date of transactions. Gains and losses resulting from
settlement of such transactions are recognised in the profit and loss
Monetary assets and liabilities related to foreign currency
transactions remaining unsettled at the end of the year are translated
at year end rates. The difference in translation of monetary assets and
liabilities and realized gains and loss on foreign exchange
transactions are recognised in the profit and loss account.
Foreign branches are classified as integral foreign operations. Assets
and liabilities (both monetary and non monetary) are translated at the
closing rate at the year end. Income and expenses are translated at the
monthly average rate at the end of the respective month.
Premium or discount arising on forward exchange contracts entered into
for the purpose of mitigating currency risk, are recognized in the
Profit and Loss account.
7. Borrowing Costs
Borrowing costs that are attributable to the acquisition or
construction of qualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing costs are charged to revenue.
8. Revenue recognition:
Group Concession Price under Group Concession Scheme (GCS) and Equated
Freight are considered in accordance with the norms prescribed by the
Government of India - Fertiliser Industry Co-ordination Committee.
9. Grants in Aid:
Grants in Aid received in respect of revenue expenditure are treated as
other income in the profit and loss account relevant to the financial
year. Grants received in respect of capital assets are deducted from
the gross value of the specified assets in arriving at their book
The method of valuation of inventories:
a. Manufactured Products:
i. Finished goods - at lower of cost and net realisable value.
ii. Work in process - at cost.
Cost - includes material cost, labour, factory overheads and
depreciation but excludes interest on borrowings.
Net realisable value in the case of Urea - the Group Concession Price
notified by the Govt, of India in respect of finished goods lying at
the factory, and the net sale price in respect of finished goods lying
in the warehouses outside the factory.
b. Traded products - at lower of-cost and net realisable value.
c. Other finished goods, work-in-process, raw materials, stores,
spares, packing material and loose tools - at weighted average cost,
less provision for depletion in value, if any.
11. Retirement Benefits:
The Companys liability towards gratuity and superannuation benefits of
eligible employees is covered by a policy with LIC and the annual
contributions are paid/provided in accordance with this scheme. Leave
encashment is provided on the basis of valuation by independent
actuaries, as at the date of the Balance Sheet. The Companys
contribution towards provident fund is administered and managed by an
approved trust and is charged to revenue.
12. Research and Development:
Expenditure relating to capital items is debited to fixed assets and
depreciated at applicable rates. Revenue expenditure is charged to
Profit and loss account of the year in which they are incurred.
I. Current tax: Provision for current tax is made based on the taxable
income for the year computed under the Income Tax Act, 1961.
II. Deferred Taxes: Deferred tax is accounted for by computing the tax
effect of timing differences which arise during the year and reverse in
subsequent periods. Deferred tax assets are recognised and carried
forward only to the extend that there is a certainty that sufficient
future taxable income will be available against which such Deferred Tax
Assets can be realized.
Obligations arising from claims, litigation, assessments, fines,
penalties, after sales warranties etc., are recognised for when it is
probable that a liability may be incurred, and the amount can be