a. Basis of presentation
The accompanying financial statements have been presented for the
period ended March 31, 2012 along with comparative information for the
year ended September 30, 2010. The accompanying financial statements
have been prepared on a going concern basis under the historical cost
convention on the accrual basis of accounting in conformity with
accounting principles generally accepted in India (Indian GAAP).
The accounting policies have been consistently applied by the Company
and are consistent with those used in the previous year, except as
b. Use of estimates
In preparing the Company''s financial statements in conformity with
accounting principles generally accepted in India, the Company''s
management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period, the actual results could differ from those estimates.
c. Fixed assets
Fixed assets are stated at cost less accumulated depreciation. Cost
comprises the purchase price and any cost attributable to bringing the
asset to its working condition for its intended use. Expenditure
incurred during construction period has been added to the cost of the
assets. These expenses have been allocated to the sugar, power
generation and ethanol units on a reasonable basis. Subsidy received
from the Government have been reduced from value of the respective
d. Borrowing costs
Financing cost incurred up to the date of completion of construction or
installation of qualifying assets, on funds borrowed are capitalized as
a part of the cost of the asset.
Depreciation is provided at the rates and in the manner prescribed in
Schedule XIV of the Indian Companies Act, 1956. The Companies assets
are depreciated using the straight line method. As per estimates of the
management, these rates are representative of the economic useful life
of these assets. No depreciation is provided on assets held for sale.
Operating lease payments are recognized as an expense in the profit and
loss account on a straight-line basis over the lease term. In case of
long term leases, the expenditure to the profit and loss account is
recognized on the basis of equated lease rentals arrived at by
allocating the total outflow of lease rentals on the entire contractual
period over the period of the lease.
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 or fair value/ market value,
determined on an individual investment 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. Profit/Loss on sale of investments is computed with
reference to their average cost.
Accounting for Amalgamation is as per AS-14 of the Indian Accounting
Standards as prescribed by The Institute of Chartered Accountants of
India. The Goodwill arising on Amalgamation is amortised on the basis
over its useful life but shall not exceed five years.
Inventories are valued as follows:
Raw materials, stores and spares and packing materials
Lower of cost and net realizable value. However, materials and other
items held for use in the production of inventories are not written
down below cost if the finished products in which they will be
incorporated are expected to be sold at or above cost. Cost is
determined on a First in First out (''FIFO'') basis.
Lower of cost and net realizable value. Cost includes direct materials,
labour and a proportion of manufacturing overheads based on normal
operating capacity. Cost of finished goods excludes excise duty.
Lower of cost up to estimated stage of process and net realizable
value. Cost includes direct materials, labour and a proportion of
manufacturing overheads based on normal operating capacity.
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and the
estimated costs necessary to make the sale.
By-products are valued at cost. Inter-unit transfers of by products
also include the cost of transportation, duties, etc. j. Revenue
Revenue is recognized to the extent it is probable that the economic
benefits will flow to the Company and the revenue can be reliably
measured. Revenue from sale of goods is recognized when the significant
risks and rewards of ownership of the goods are transferred to the
customer and is stated net of trade discounts, excise duty, sales
Revenue from sale of power is recognized when the units generated are
transmitted to the pooling station, in accordance with the terms and
conditions of the power purchase agreement entered into by the Company
with the purchasing parties.
k. Foreign currency transactions
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 at
the date of the Balance Sheet. 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 investments
in foreign companies are recorded at the exchange rates prevailing on
the date of making the investments.
Exchange Differences is charged to the revenue account except arising
on account of such conversion related to the purchase of fixed assets
is adjusted therewith, and other long term monetary items is adjusted
in the Foreign Currency Monetary Item Translation Difference.
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 are recognized in the
profit and loss account in the period in which the exchange rates
change. Any profit or loss arising on cancellation or renewal of
forward exchange contract is recognized as income or as expense for the
l. Employee benefits
Contributions in respect of provident fund and gratuity are made to the
appropriate authorities/trust set up by the Company for the purpose and
charged to profit and loss account. Provisions for liabilities in
respect of leave encashment benefits are made based on actuarial
valuation made by an independent actuary as at the balance sheet date.
m. Income tax
Tax expenses comprise both current and deferred taxes.
Deferred income tax reflects the impact of current period timing
differences between taxable income and accounting income for the period
and reversal of timing differences of earlier periods. 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. n. Miscellaneous expenditure
Preliminary expenses are written-off over a period of five years from
the year of commencement of commercial production.
The Deferred Revenue Expenditure comprises of debenture issue expenses
which is written off over a period of 5 years & expenses incurred on
the lease units upto the date of production which is written off in
proportion to the period of lease unexpired or 1/5th in case of long
o. Government grants
Government grants in the nature of promoter''s contribution are credited
to capital reserve and treated as a part of Shareholder''s funds. Other
Government grants/ subsidy have been reduced from value of the
p. Financial derivatives and commodity futures
Transactions in financial derivatives and commodity futures are
accounted based on the mode of final settlement. Transactions, which
are ultimately settled net, without taking delivery, are recorded net
with the gains/losses being recognized as income/expenses in the
financial statements. Transactions, which stipulate physical delivery
of the goods and where the company intends to take delivery, are
recorded at gross, as purchases and sales as a part of the company''s
sugar manufacturing activities.
q. Provisions, contingent liabilities and contingent assets
Provisions are recognized for liabilities that can be measured only by
using a substantial degree of estimation, if :
- The Company has a present obligation as a result of a past event
- A probable outflow of resources is expected to settle the
- The amount of the obligation can be easily estimated.
Contingent Liability is disclosed in the case of
- A present obligation arising from a past event, when it is not
probable that an outflow of resources will be required to settle the
- A possible obligation, unless the probability of outflow of
resources is remote.
Depending on facts of each case and after due evaluation of relevant
legal aspects, claims against the Company not acknowledged as debts are
disclosed as contingent liabilities. In respect of statutory matters,
contingent liabilities are disclosed only for those demand(s) that are
contested by the Company.
Contingent Assets are neither recognized nor disclosed.
r. 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. The
weighted average numbers of equity shares outstanding during the period
are adjusted for events of bonus issue.
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.
s. Segment reporting
The accounting policies adopted for segment reporting are in line with
the accounting policies of the Company, with the following additional
policies for segment reporting:
(i) Inter segment revenue has been accounted for based on the
transaction price agreed to between segments which is primarily market
(ii) Revenue and expenses have been identified to segments on the basis
of their relationship to the operating activities of the segment.
(iii) Gains/losses from transactions in commodity futures, which are
ultimately settled net, with/without taking delivery, are recorded as
''Other revenues'' under the Sugar segment.
(iv) Revenue and expenses, which relate to the enterprise as a whole
and are not allocable to segments on a reasonable basis, have been
included under Unallocated Corporate Expenses.
t. Impairment of assets
As at each balance sheet date, the carrying amount of assets is tested
for impairment so as to determine :
a. The provision for impairment loss, if any, required or
b. The reversal, if any, required of impairment loss recognized in
Impairment loss is recognized when the carrying amount of an asset
exceeds its recoverable amount.