Accounting Policies
Key Accounting Policies
1. Basis of Accounting
The financial statements of the Company are prepared in accordance with the Generally Accepted Accounting Principles in India. The Company prepares these financial statements to comply, in all material respects, with the Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956.
(i) The Company follows the mercantile system of accounting and recognizes income and expenditure on an accrual basis except in case of significant uncertainties.
(ii) Financial statements are based on historical cost except certain fixed assets which are stated at fair value.
2. Use of Estimates
The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income, and expenses and the disclosure of contingent liabilities on the date of the financial statements. Actual results could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Any revision to accounting estimates is recognised prospectively in current and future periods.
3. Current & Non-current Classification
All assets and liabilities are classified into current and non-current.
Assets:
An asset is classified as current when it satisfies any of the following criteria:
a) It is expected to be realised in, or is intended for sale or consumption in, the Company's normal operating cycle;
b) It is held primarily for the purpose of being traded;
c) It is expected to be realised within 12 months after the reporting date; or
d) It is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date
Current assets include the current portion of non-current financial assets. All other assets are classified as non-current.
Liabilities:
A liability is classified as current when it satisfies any of the following criteria:
a) It is expected to be settled in the Company's normal operating cycle;
b) It is held primarily for the purpose of being traded;
c) It is due to be settled within 12 months after the reporting date; or
d) The Company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
Current liabilities include current portion of non-current financial liabilities. All other liabilities are classified as non-current.
4. Operating Cycle
All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set out above which are in accordance with the revised Schedule VI to the Act. Based on the nature of services and the time between the acquisition of assets for providing of services and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current & non-current classification of assets and liabilities.
5. Revenue Recognition
(i) Revenue is recognised when the significant risk and rewards of ownership of the goods have been passed to the buyers. Sale of goods is exclusive of excise and sales tax/ VAT. Sales excludes captive consumption.
(ii) Sugar sold under levy quota for each season, is accounted at the price as notified by the Government as available till such time, pending final notification for each season. The difference in price pending final notification is accounted on an estimation by the management taking into account factors affecting the calculation of levy sugar price.
(iii) Export incentive in the nature of duty draw back or "Duty Entitlement Pass Book" under "Duty Exemption Scheme" is accounted for in the year of Export.
(iv) Dividend income is recognized when the right to receive payment is established.
(v) Interest income is recognized on a time proportion basis taking into account the amount outstanding and the interest rate applicable.
6. Fixed Assets and Depreciation
(a) Fixed Assets
(i) Fixed assets are carried at cost of acquisition or construction cost and includes amount added on fair valuation, less accumulated depreciation (except freehold land), amortisation and impairment loss, if any.
(ii) Expenditure during construction period incurred on the projects under implementation are treated as Pre- operative Expenses pending allocation to the assets, and are included under "Capital Work in Progress". These expenses are apportioned to fixed assets on commencement of commercial production. Capital Work in Progress is stated at the amount incurred up to the date of Balance Sheet.
(b) Depreciation
(i) Depreciation on fixed assets (including on revalued portion on fair value) has been provided as under: -
(a) Plant & Machinery & Aircraft: On straight-line method basis at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956.
(b) Other Tangible Assets: On written down value basis at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956.
(c) Intangible Assets represented by computer software is being amortised over a period of five years. Leasehold land is amortised over the lease period.
(ii) Depreciation on assets added, sold or discarded during the year has been provided on pro-rata basis.
(iii) Individual assets costing Rs.5,000 or less are depreciated in full in the year of acquisition.
7. Investments
Long-term investments are stated at cost of acquisition. Diminution in value of such long term investments is not provided for except where determined to be of permanent nature. Current investments are stated at lower of cost or fair market value.
8. Inventories
(i) Stock of Raw Materials is valued at cost or net realisable value whichever is lower. Cost is arrived at on FIFO Basis.
(ii) Stock of Materials-in-Process and Finished goods is valued at cost or net realisable value whichever is lower.
(iii) Stores, Spares and Packing Material are valued at cost. Cost is arrived at on Weighted Average Basis.
(iv) Obsolete stores and spares when identified and technically determined, are valued at estimated realisable value.
(v) By-products Molasses and Bagasse has been valued at estimated realisable value.
(vi) Trial-run inventories are valued at cost or estimated realisable value whichever is lower.
9. Research & Development
Revenue expenditure on Research & Development is expensed out in the Statement of Profit & Loss for the year.
Capital expenditure on Research & Development is shown as an addition to Fixed Assets.
10. Government Grants
Government grants / subsidies received towards specific fixed assets have been deducted from the gross value of the concerned fixed assets and grant / subsidies received during the year towards revenue expenses have been reduced from respective expenses. Capital Subsidies under Sugar Promotion Policy, 2004 is recognised to the extent the claims are accepted and settled.
11. Foreign Currency Transactions
Foreign Currency transactions are recorded at the rates of exchange prevailing on the date of transaction. Monetary foreign currency assets and liabilities outstanding at the close of the financial year are revalorised at the exchange rates prevailing on the balance sheet date. Exchange differences arising on account of fluctuation in the rate of exchange is recognised in the Statement of Profit and Loss. However, in respect of long-term foreign currency monetary items, the exchange difference relating to acquisition of capital assets, has been adjusted to the capital assets.
In case of items which are covered by forward exchange contracts, the difference between the year-end rate and rate on the date of the contract is recognised as exchange difference and the premium paid on forward contract is recognised over the life of the contract. In case of other financial derivative contracts, premiums paid, gains/losses on settlement and provision for losses, are recognised in the Statement of Profit and Loss.
is recognised over the life of the contract. In case of other financial derivative contracts, premiums paid, gains/losses on settlement and provision for losses, are recognised in the Statement of Profit and Loss.
12. Employee Benefits
(a) Short Term Employee Benefits
(i) Short term employee benefits are recognised as expenditure at the undiscounted value in the Statement of Profit and Loss of the year in which the related service is rendered.
(b) Post-Employment Benefits
(i) Defined Contribution Plans:
Company's contribution to the superannuation scheme, pension under Employees' Pension Scheme, 1995 etc. are recognised during the year in which the related service is rendered.
(ii) Defined Benefit Plans:
Gratuity liability is covered under the Gratuity-cum-Insurance Policy of Life Insurance Corporation of India (LIC). The present value of the obligation is determined based on an actuarial valuation, using the Projected Unit Credit Method. Actuarial gains and losses arising on such valuation are recognized immediately in the Statement of Profit and Loss. The amount funded by the Trust administered by the Company under the aforesaid Policy, is reduced from the gross obligation under the defined benefit plan, to recognise the obligation on a net basis.
Monthly contributions are made to a Trust administered by the Company. The interest rate payable by the Trust to the beneficiaries is notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return on the investments of the Trust and the notified interest rate.
(c) Long-term compensated absences are provided on the basis of actuarial valuation.
(d) Compensation to employees under Voluntary Retirement Scheme is charged to Statement of Profit and Loss in the year of accrual.
13. Borrowing Cost
Borrowing cost attributable to acquisition and construction of assets are capitalised as part of the cost of such assets up to the date when such assets are ready for intended use and other borrowing costs are charged to Statement of Profit and Loss.
14. Operating Leases
Assets acquired under leases other than finance leases are classified as operating leases. The total lease rentals (including scheduled rental increases) in respect of an asset taken on operating lease are charged to the Statement of Profit and Loss on a straight line basis over the lease term unless another systematic basis is more representative of the time pattern of the benefit. Initial direct costs incurred specifically for an operating lease are deferred and charged to the Statement of Profit and Loss over the lease term.
Assets given by the Company under operating lease are included in fixed assets. Lease income from operating leases is recognised in the Statement of Profit and Loss on a straight line basis over the lease term unless another systematic basis is more representative of the time pattern in which benefit derived from the leased asset is diminished. Costs, including depreciation, incurred in earning the lease income are recognised as expenses. Initial direct costs incurred specifically for an operating lease are deferred and recognised in the Statement of Profit and Loss over the lease term in proportion to the recognition of lease income.
15. Earnings Per Share (EPS)
Basic EPS is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. Diluted EPS is computed using the weighted average number of equity and dilutive equity equivalent shares outstanding during the year.
16. Provision for Current and Deferred Tax
(i) Provision for current tax is made with reference to taxable income computed for the accounting period for which the financial statements are prepared by applying the tax rates relevant to the respective "Previous Year". Minimum Alternate Tax (MAT) eligible for set-off in subsequent years (as per tax laws), is recognised as an asset by way of credit to the Statement of Profit and Loss only if there is convincing evidence of its realisation. At each Balance Sheet date, the carrying amount of MAT Credit Entitlement receivable is reviewed to reassure realization.
(ii) Deferred tax resulting from "timing difference" between book and taxable profit for the year is accounted for using the current tax rates. The deferred tax asset is recognised and carried forward only to the extent that there is a reasonable certainty that the assets will be adjusted in future. However, in case of deferred tax assets (representing unabsorbed depreciation or carry forward losses) are recognised, if and only if there is a virtual certainty that there would be adequate future taxable income against which such deferred tax assets can be realised, or to the extent of deferred tax liabilities.
17. Impairment of Assets
The carrying amount of assets are reviewed at each Balance Sheet date if there is any indication of impairment based on internal/external factors. An asset is impaired when the carrying amount of the asset exceeds the recoverable amount. An impairment loss is charged to the Statement of Profit and Loss in the year in which an asset is identified as impaired. An impairment loss recognised in prior accounting periods is reversed if there has been change in the estimate of the recoverable amount.
18. Provisions, Contingent Liabilities and Contingent Assets
Provisions involving a substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent Liabilities are not recognised but are disclosed in the Financial Statements. Contingent Assets are neither recognised nor disclosed in the Financial Statements.
19. Employee Stock Options and Shares Plan (ESOP)
In accordance with SEBI guidelines, the excess of the market price of the shares, at the date of grant of options under the ESOP, over the exercise price, is treated as Employee Compensation Expense.
