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-0.3 (-0.73%)
-0.35 (-0.86%) | Accounting Policy | Year : Mar '12 | ||||
Accounting Convention: The financial statements have been prepared in conformity with generally accepted accounting principles to comply in all material respects with the notified Accounting Standards(AS) under Companies (Accounting Standard) Rules 2006 and the relevant provisions of the Companies Act 1956(the Act”).The financial statements have been prepared under the historical cost convention, on an accrual basis. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year except for the change in accounting policy explained in 2 below. Presentation and disclosure of financial statements During the year ended 31 March 2012, the revised Schedule VI notified under the Act has become applicable to the company, for preparation and presentation of its financial statements. The adoption of revised Schedule VI does not impact recognition and measurement principles followed for preparation of financial statements. However, it has significant impact on presentation and disclosures made in the financial statements. All assets and liabilities have been classified as current or non-current as per criteria set out in the revised Schedule VI notified under the Act which are as under: Based on the nature of products and the time taken between the acquisition of assets or processing and their realization in cash and cash equivalents, company has ascertained its operating cycle. The Normal operating cycle as determined by the Company is 6 months. The threshold for classification as current or non-current assets is determined either by the realization of such assets within the normal operating cycle or if such asset is expected to be realized within twelve months after the reporting date. Thus classification of an asset either current or non-current has been made applying the criteria of realization of such assets within a period of 12 months after the reporting date. Where assets have been fully provided for as doubtful, the same are classified as non-current. Similarly in case of liabilities the same is classified as current where it is expected to be settled within 12 months after reporting date and where the company does not have an unconditional right to defer settlement of the liability for at least twelve months after reporting date. 2. Change in Accounting Policy Adjustment of exchange variance on translation /settlement of long term monetary items Government of India has issued an amendment to Accounting Standard -11 (Revised) giving an option to Companies which had earlier not exercised the option to adjust the exchange differences to the cost of asset in respect of long term foreign currency items for transactions commencing from 01 -4-2011. Consequently, company has exercised the option of adjusting such exchange variances to the cost of the asset. The impact of the same is given separately in Note no. 49 to the Financial Statements. 3. Use of Estimates: '' The preparation of the financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities as 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. Any revisions to accounting estimates are recognized prospectively when revised, in current and future periods. 4. Fixed Assets 4.1 Fixed assets comprise of tangible assets and intangible assets, and are stated at their original cost of acquisition (net of Cenvat and VAT) less accumulated depreciation/ amortization and impairment loss. Cost for this purpose includes all costs attributable for bringing the asset to its present location and condition. Assets held for disposal, are stated at lower of net book value and net estimated realizable value. 4.2 The Government/Institutional grants of capital nature are adjusted to the gross block of relevant Fixed Assets. 4.3 From accounting periods commencing on after 01-4-2011, the Company adjusts exchange differences on translation / settlement of long term monetary items pertaining to the acquisition of a depreciable asset to the cost of the asset and depreciates the same over the remaining life of the asset. 5. Depreciation/Amortization Depreciation on Fixed Assets other than on intangible assets (software applications) is provided for under STRAIGHT LINE METHOD (SLM) at the rates prescribed in Schedule XIV to the Companies Act, 1956. Depreciation on additions/deductions to Gross Block is calculated on pro-rata basis from the date of such additions/and up to the date of such deductions. Intangible assets (software applications) are amortized over their respective individual estimated useful lives on a STRAIGHT-LINE BASIS, pro-rata from the date the asset is available to the Company for its use. Management estimates the useful life of software applications identified as intangible assets as three years. Any expenses incurred on intangible assets upto Rs. 1 lakh in each case are being charged off in the year of incurrence. Leasehold land is amortized equally over the lease period pro-rata from the month the asset is available to the Company. Depreciation on Catalyst capitalized upon commissioning is provided on the estimated useful life as technically assessed. Depreciation on railway wagons purchased is provided on its estimated useful life. Impairment of Assets: The carrying amounts of assets are reviewed at each Balance Sheet date for identifying an impairment based on internal/external factors. Loss on impairment is provided to the extent the carrying amount of assets exceeds its recoverable amount. Recoverable amount is the higher of an asset''s net selling price and its value in use. After recognition of impairment loss, the revised carrying amount less residual value of the impaired asset would be depreciated on systematic basis over its remaining useful life. A previously recognized loss on impairment is increased or reversed depending on the change in the 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 impairment. 6. Expenditure during Construction (EDC) All pre-operative costs (net of income) incidental to new projects undertaken are accumulated as EDC and apportioned appropriately among the various plants/facilities during the year of capitalization. 7. 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 up to the date when such assets are ready for their intended use. All other borrowing costs are charged to statement of Profit and Loss. Exchange variation on foreign currency borrowing to the extent they are considered as borrowing costs are capitalized up to the date when such assets are ready for their intended use. 8. Foreign Currency Transactions Transactions in Foreign currency are recorded in the reporting currency by applying the currency rate as at the date of transaction. Monetary assets and liabilities denominated in foreign currency are translated at the rates of exchange prevalent on the Balance Sheet date. In respect of transactions covered by forward exchange contracts the difference between the contract rate and the spot rate on the date of the contract is recognized in the Statement of Profit and Loss over the period of the contract. Exchange differences arising on long-term foreign currency monetary items related to acquisition of a fixed asset are capitalized and depreciated over the remaining useful life of the asset. For this purpose, the company treats a foreign currency monetary items as long-term foreign currency monetary item, if it has a term of 12 months or more at the date of its obligation. All other exchange differences (gains or losses) are recognized in the Statement of Profit & Loss in the period in which they arise. 9. Investments Current Investments are valued at lower of cost and fair value. Long term investments are stated at cost and provision is made for any diminution in such value, which is other than temporary in nature. 10. Inventory 10.1 Assessment of Inventory Raw Materials, Intermediary Products, By- Products and Finished Products inside factory premises are assessed by survey method on a date as close as possible to the Balance Sheet date and the shortages /excesses in the quantities as compared to book stocks are adjusted in the books. Finished goods and other inventory stored outside the factory premises are taken as per warehousing certificates and third party confirmation respectively. 10.2 Mode of Valuation Inventory is valued at lower of cost and net realizable value except in case of by-products, which are valued at, net realizable value. Gases and slurries, if any, in pipelines at different stages of process are not valued as the same is not practicable. 10.3 Basis of Cost: 10.3.1 The cost of manufactured finished goods, bought out products and intermediary products are arrived at based on weighted average cost. Bifurcation of cost of joint products is made on technical estimates. 10.3.2 Cost of raw materials, petroleum products, packing materials, stores and spares, and loose tools is determined on weighted average cost basis. 10.3.3 Used loose tools are treated as consumed and hence not valued. 10.3.4 Project surplus stores and spares of old plants not in use are brought in the books at nominal estimated value/technical estimate or carried in memorandum records. 10.3.5 Provision is made in respect of raw materials, packing materials, stores and spares and petroleum products, wherever appropriate, based on technical estimates, to reflect the impact of obsolescence, damage or other diminution in value. 10.4 Measurement of Cost / Realizable Value 10.4.1 Cost of Purchases Cost of purchase includes duties, taxes (net of those recoverable) freight and other expenses net of trade discounts, rebates and price adjustments. 10.4.2 Cost of Manufactured goods Cost of Manufactured Goods comprises of direct cost, variable production overheads and fixed production overheads on absorption costing method. Catalysts issued are charged off over their estimated useful lives as technically assessed. Variable production overheads are allocated based on actual production. Variable overheads related to movement of finished products are allocated based on actual dispatches. Fixed overheads are allocated based on higher of the actual production level or normal production level. Average freight incurred is included in valuing stocks in field warehouses and in transit. 10.4.3 Cost of Traded Fertilizers It comprises of Cost of Purchases as defined under 10.4.1 plus bagging, handling and transportation costs incurred to bring the material in its present location and condition. 10.4.4 Net Realizable Value Price of urea is administered by the Government of India by which selling price is fixed for the buyer. The net realizable value for manufactured urea is taken at retention price (selling price net of dealers'' margin plus subsidy from Government of India) net of variable selling and distribution cost. Net realizable value of off-spec urea is taken at 40% of MRP excluding subsidy. The net realizable value of phosphatic and potassic fertilizers is taken at the applicable selling prices expected to be realized, net of dealers'' margin and variable selling and distribution costs plus the concession as fixed/to be fixed by Government. Net realizable value of off-spec phosphatic and potassic fertilizers is taken at selling price net of dealers'' margin and estimated cost of re- processing including transportation cost to factory. The net realizable value of off spec bought out fertilizers is at 30% of MRP excluding subsidy. The Net realizable value of imported Urea is the selling price and other entitled compensation as contracted with the Government net of variable selling and distribution cost. The net realizable value of off-spec imported Urea is taken at 40% of MRP excluding subsidy. Average freight incurred on dispatches from silo/factory/ port to godown is reduced for arriving at the net realizable value in respect of stocks of fertilizers in silo/factory/port. The net realizable value of non-fertilizer products is taken at the year-end lowest selling prices net of variable selling and distribution cost. 11. Trade receivables, other debts, loans and advances are provided for as doubtful upon review on case to case basis. Subsidy receivable from Government overdue over 3 years are provided for as doubtful. 12. Leases Assets acquired on leases wherein a significant portion of the risks and rewards of ownership are retained by the lessors are classified as operating leases. Lease rentals paid for such leases are recognized as an expense as per the lease terms which is more representative of the time pattern of the benefit. Rental income on leases is accounted for an accrual basis in accordance with the terms of the contract. This is more representative of the time pattern in which benefit derived from the use of the leased asset is diminished. 13. Taxation Provision for Current Income Tax is made in accordance with the Income Tax Act 1961. Deferred Tax resulting from timing difference” between book profit and taxable profit for the year is accounted for using the tax rates and laws that have been enacted or substantially enacted as on the balance sheet date. The deferred tax asset is recognized and carried forward only to the extent that there is a reasonable certainty that the assets will be adjusted in future and for unabsorbed depreciation or carry forward of losses where there is a virtual certainty of their adjustment in future. 14. Cash and Cash Equivalents Cash and cash equivalents in the cash flow statement comprises of cash in hand , cash at bank and short term investments with an original maturity of three months or less. 15. Employee Benefits 15.1 Contribution to Provident Fund is accounted for on accrual basis. The Provident Fund contributions are made to a Trust administered by the Company. The interest rate payable to the members of the Trust shall not be lower than statutory rate of interest declared by the Central Government under the Employees Provident Funds and Miscellaneous'' Provisions Act, 1952 and shortfall, if any, shall be made good by the Company. Such shortfall on account of interest, if any, is recognized in the Statement of Profit and Loss. 15.2 Company''s defined Contribution made to its Superannuation scheme is charged off to Statement of Profit and Loss on accrual basis. 15.3 Employee benefits under Defined Benefit plans comprising of gratuity, leave encashment on retirement, Post retirement medical benefits and long term service award are recognized based on the present value of Defined Benefit Obligation based on actuarial valuation carried out as on the date of the Balance Sheet. The actuarial valuation is done as per Projected Unit Method. 15.4 Actuarial gains and losses are recognized in full in the Statement of Profit and Loss for the period in which they occur. Past service cost is recognized immediately to the extent that the benefits are already vested. The retirement benefit obligation recognized in the Balance Sheet represents the present value of the defined benefit obligation as adjusted for unrecognized past service cost, and as reduced by the fair value scheme of assets, wherever applicable. 16. Earnings per Share (EPS) Basic earnings per share is calculated by dividing net profit or loss after tax for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. For the purpose of calculating diluted EPS, net profit or loss after tax for the year attributable to equity shareholders are divided by the weighted average number of equity shares outstanding during the year and are adjusted for the effects of all dilutive potential equity shares. 17. Research and Development Expenditure Revenue Expenditure on Research and Development activity is recognized separately and charged to Statement of Profit and Loss. 18. Revenue Recognition 18.1 Sales are recognized on an accrual basis when all significant risks and rewards of ownership are transferred to the buyer and the Company retains no effective control of the goods transferred. 18.2 Gross Sales (net of returns) include excise duty, wherever applicable. 18.3 Subsidy income is accounted on the quantity sold during the year. 18.4 Recognition of Subsidy is generally made on the basis of in principle recognition/approval/ settlement of claims from Government of India /Fertilizer Industry Co-ordination Committee. 18.5 Other Income is recognized on an accrual basis. 18.6 Dividend income is recognized when right to receive dividend is established. 18.7 Interest Income is recognized when no significant uncertainty as to its realization exists and is accounted on time proportion basis at contracted rates. 18.8 Scrap, salvaged/waste materials and sweepings are accounted for on realization. 18.9 Insurance and other miscellaneous claims are recognized on receipt/acceptance of claim. Contractual pass through incentives, benefits, etc. are recognized on receipt basis. 18.10 Debits/Credits Relating to Prior period Income and expenditure pertaining to earlier period and up to Rs. 1,00,000/- in each case, are not being classified as relating to prior period”. 18.11 Prepaid Expenses Individual expense up to Rs.25,000 is not considered in classifying prepaid expenses. 19. Contingent Liabilities and Provisions Claims against the Company not acknowledged as debts relating to normal business transactions and show cause notices and demands disputed by the Company are treated as Contingent Liabilities after careful evaluation of facts. Provision in respect of contingent liabilities if any, is made when it is probable that a liability may be incurred and the amount can be reasonably estimated. A provision is recognized when the Company has a present obligation as a result of past event; it is probable that 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 estimate. |
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| Source : Dion Global Solutions Limited | |||||
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