Note 1 Significant Accounting Policies 01. Basis of brparation: The Financial Statements have been brpared in accordance with the Generally Accepted Accounting Principles in India under the historical cost convention on accrual basis except for certain buildings which are being carried at fair valued amounts. Pursuant to Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014, till the standards of accounting or any addendum thereto are brscribed by Central Government in consultation and recommendation of the National Financial Reporting Authority, the existing Accounting Standards notified under the Companies Act, 1956 will continue to apply. The Ministry of Corporate Affairs (MCA) has notified the Companies (Accounting Standards) Amendment Rules, 2016 vide its notification dated March 30, 2016. The said notification read with Rule 3(2) of the Companies (Accounting Standards) Rules, 2006 is applicable to accounting period commencing on or after the date of notification i.e. April 1, 2016. Consequently, the Financial Statements have been brpared to comply in all material aspects with the Accounting Standard notified under Section 211(3C) of the Companies Act, 1956, Companies (Accounting Standards) Rules, 2006, as amended and other relevant provisions of the Companies Act, 2013. The Accounting Policies which have been applied consistently, except where a newly issued Accounting Standard is initially adopted or a revision to an existing Accounting Standard required a change in the Accounting Policy hitherto in use, are set out below. All the assets and liabilities have been classified as current or non-current as per the normal operating cycle of the Company and other criteria set out in Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current and non-current classification of assets and liabilities. 02. Use of estimates: The brparation of the Financial Statements in conformity with Generally Accepted Accounting Principles requires the Management to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the Financial Statements and the results of operations during the reporting period. These estimates are based on the evaluation of the relevant facts and circumstances as on the date of the Financial Statements by the Management, which may differ from future revisions and actual results in subsequent periods. Differences are adjusted in subsequent periods as they occur. 03. Fixed assets: a) Tangible assets: i) Fixed assets other than ii) below are carried at cost of acquisition construction including incidental expenses directly attributable to the acquisition construction activity, as the case may be, less accumulated debrciation, amortization and impairment as necessary. ii) Assets received free of cost on brmature cancellation of a Lease Agreement are valued at fair value at the time of receipt by credit to Capital reserve less accumulated debrciation and impairment as necessary. iii) Spares specific to a machinery are carried at cost and allocated over the useful life of the asset. iv) Capital work-in-progress is carried at accumulated cost incurred upto the date of the Financial Statements. v) Expenditure incurred on cultivation of plantations upto the date, they become capable of bearing fruit are accumulated under 'Capital work-in-progress' and then capitalised as a fixed asset to be debrciated over their estimated economic life. b) Intangible assets: Computer software includes enterprise resource planning project and other cost relating to software which provides significant future economic benefits. Costs comprise license fees and cost of system integration services. 04. Debrciation and amortisation expenses: Debrciation: a) Debrciation on tangible assets is provided on the straight-line method over the useful lives of assets. b) Debrciation is calculated on a pro-rata basis from the date of acquisition installation till the date the assets are sold or disposed of. c) Machinery spares which are capitalised, are debrciated over the useful life of the related fixed asset. The written down value of such spares is charged in the Statement of Profit and Loss, on issue for consumption. d) Debrciation and amortisation methods, useful lives and residual values are reviewed periodically, including at each financial year end. e) Useful lives as brscribed under Part C of Schedule II to the Companies Act, 2013 are applied except following categories where the Management has estimated shorter useful lives for all asset categories: *For the above class of assets, based on internal assessment and independent technical evaluation carried out by external valuers the Management believes that the useful lives as given above best rebrsent the period over which the Management expects to use these assets. Hence the useful lives for these assets are different from the useful lives as brscribed under Part C of Schedule II to the Companies Act, 2013. Amortisation a) Leasehold land is amortised on a straight-line basis over the period of lease. b) Computer Software cost is amortised over a period of 3 years using straight-line method. 05. Impairment of assets: The carrying amounts of assets are reviewed at each Balance Sheet date to assess if there is any indication of impairment based on internal external factors. An impairment loss on such assessment will be recognised wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount of the assets is net selling price or value in use, whichever is higher. While assessing value in use, the estimated future cash flows are discounted to the brsent value by using weighted average cost of capital. A brviously recognised impairment loss is further provided or reversed depending on changes in the circumstances and to the extent that the assets carrying amount does not exceeds the carrying amount that would have been determined if no impairment loss had brviously been recognised. 06. Borrowing costs: Borrowing costs in relation to acquisition and construction of qualifying assets are capitalised as part of cost of such assets up to the date when such assets are ready for intended use. Other borrowing costs are charged as expense in the year in which these are incurred. Borrowing costs include interest, other costs incurred in connection with borrowing and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to the interest cost. 07. Investments: Investments that are intended to be held for more than a year, from the date of acquisition, are classified as long-term investments and are carried at cost. However, provision for diminution in value of investments is made to recognise a decline, other than temporary, in the value of the investments. Current investments not intended to be held for a period more than one year, are stated at lower of cost and fair value. 08. Inventories: a) Raw materials, packing materials, purchased finished goods, work-in-progress, finished goods manufactured, fuel, stores and spares other than specific spares for machinery are valued at cost or net realisable value whichever is lower. Cost is arrived at on moving weighted average basis. However, materials and other supplies 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. b) Goods-in-transit and in bonded warehouse are stated at the cost to the date of Balance Sheet. c) 'Cost' comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventory to the brsent location and condition. d) Due allowances are made for slow moving and obsolete inventories based on estimates made by the Company. 09. Foreign currency transactions: a) Initial recognition: Transactions denominated in foreign currencies are recorded at the rate brvailing on the date of the transaction. b) Conversion: At the year end, monetary items denominated in foreign currencies remaining unsettled are converted into Indian rupee equivalents at the year end exchange rates. 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. c) Exchange differences: All exchange differences arising on settlement and conversion of foreign currency transactions are included in the Statement of Profit and Loss. The Company has opted to avail the option provided under paragraph 46A of Accounting Standard - 11 'The effects of changes in foreign exchange rates' inserted vide Notification dated December 29, 2011 issued by the Ministry of Corporate Affairs, Government of India. Consequently, foreign exchange difference on account of long-term foreign currency borrowings utilised to acquire a debrciable asset, is adjusted in the Cost of the debrciable asset, which will be debrciated over the balance life of the asset. d) Forward exchange contracts not intended for trading or speculation purposes: The brmium or discount arising at the inception of forward exchange contracts intended to hedge existing exposures is amortised as expenses or income over the life of the contracts. Exchange differences on such contracts are being recognised in the Statement of Profit and Loss for the year. Any profit or loss arising on cancellation or renewal of forward exchange contracts is recognised as income or expense for the year. e) Derivatives: Where the Company has entered into derivative contracts such as interest rate swaps, currency swaps and currency options, to hedge risk associated with the interest and foreign currency fluctuations relating to firm commitments where these exposures exist at the Balance Sheet date the hedging instruments are initially measured at fair value and are remeasured at subsequent reporting dates. The revalorisation gain or loss on Mark-to-Market (MTM) is generally recognised in the Statement of Profit and Loss each year. However, on account of option exercised as per (c) above MTM gains and losses on instruments intended to hedge long-term foreign currency borrowings utilised to acquire debrciable assets are recognised to offset foreign exchange fluctuation differences on such long-term foreign currency borrowings. f) Changes in fair value of derivative instruments intended to hedge future exposures resulting out of 'highly probable forecast transactions' such as exports, is determined as effective hedges of future cash flows, which are recognised directly under 'Hedging reserve' in Shareholders' funds and the ineffective portion, if any, is recognised immediately in the Statement of Profit and Loss. Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the Statement of Profit and Loss. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised or no longer qualifies for hedge accounting. At that time, for forecasted transactions, any cumulative gain or loss on the hedging instrument recognised in Shareholders' funds is retained there until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in Shareholders' funds is transferred to the Statement of Profit and Loss for the period. 10. Revenue recognition: Revenue from sales are recognised when all significant risks and rewards of ownership have been transferred to the buyer and no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of goods. a) Sale of goods and services: i) Domestic sales are recognised on dispatch from the point of sale, where property in goods are transferred to the buyer ii) Export sales are recognised when significant risk and rewards are transferred to the buyer as per terms of contract. iii) Service income is recognised, net of service tax, when the related services are rendered. b) Other revenue: i) Eligible export incentives are recognised in the year in which the conditions brcedent are met and there is no significant uncertainty about the collectability. ii) Lease rental income is recognised on accrual basis. iii) Dividend income is accounted for in the year in which the right to receive the same is established. iv) Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. 11. Provisions, contingent liabilities and contingent assets: Provisions involving a substantial degree of estimation in measurement are recognised when there is a brsent obligation as a result of past events and it is probable that there will be an outflow of resources. Provision is not discounted to its brsent value and is determined based on the best estimate required to settle an obligation at the year end. These are reviewed every year end and adjusted to reflect the best current estimate. Contingent liabilities are not recognised but are disclosed in the Financial Statements. Contingent assets are neither recognised nor disclosed in the Financial Statements. 12. Research and Development expenditure: Research and Development expenditure is charged to revenue under the respective heads of account in the year in which it is incurred. However, development expenditure qualifying as an intangible asset, if any, is capitalised, to be amortised over the economic life of the product patent. Research and Development expenditure on fixed assets is treated in the same way as expenditure on other fixed assets. 13. Employee benefits: a) Defined contribution plan: Contribution paid payable by the Company during the period to Provident Fund, Superannuation Fund, Employees' State Insurance Corporation, National Pension Scheme and Labour Welfare Fund are recognised in the Statement of Profit and Loss. b) Defined benefit plan: Gratuity: Gratuity liability is a defined benefit obligation and is computed on the basis of an actuarial valuation by an actuary appointed for the purpose as per projected unit credit method at the end of each financial year. The liability so provided is paid to a Trust administered by the Company, which in turn invests in eligible securities to meet the liability as and when it accrues for payment in future. Actuarial gains losses are immediately taken to the Statement of Profit and Loss. Any shortfall in the value of assets over the defined benefit obligation is recognised as a liability with a corresponding charge to the Statement of Profit and Loss. Long-term leave encashment: Long-term leave encashment is provided for on the basis of an actuarial valuation carried out at the end of the year on the projected unit credit method. Actuarial gains losses are immediately taken to the Statement of Profit and Loss. Provident Fund: Provident Fund for certain eligible employees is managed by the Company through the 'Atul Products Ltd - Ankleshwar Division Employees Provident Fund Trust' in line with Provident Fund and Miscellaneous Provisions Act, 1952. The plan guarantees interest at the rate notified by the Provident Fund authorities. The contribution by the employer and employees together with the interest accumulated thereon are payable to the employees at the time of their retirement or separation from the Company, whichever is earlier. The benefits vest immediately on rendering of the services by the employee. Any shortfall in the value of assets over the defined benefit obligation is recognised as a liability, with a corresponding charge to the Statement of Profit and Loss. c) Short-term leave encashment: Short-term leave encashment is provided at undiscounted amount during the accounting period based on service rendered by employees. d) Voluntary Retirement Scheme: Compensation payable under the Voluntary Retirement Scheme is being charged to the Statement of Profit and Loss in the year of settlement. 14. Taxation: a) Income tax expense comprises current tax and deferred tax charge or credit. Provision for current tax is made on the basis of the assessable income at the tax rate applicable to the relevant assessment year. b) MAT credit is recognised as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax within the specified period. c) Deferred tax asset and deferred tax liability are calculated by applying tax rate and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets on account of timing differences are recognised, only to the extent there is a reasonable certainty of its realisation. Deferred tax assets are reviewed at each Balance Sheet date to reassure realisation. d) Deferred tax assets, rebrsenting unabsorbed debrciation or carried forward losses are recognised, if and only if there is virtual certainty supported by convincing evidence that there will be adequate future taxable income against which such deferred tax assets can be realised. 15. Government grants: a) Grants are recognised when there is reasonable assurance that the same will be received. b) Revenue grants for expenses incurred are reduced from the respective expenses. c) Capital grants relating to specific fixed assets are reduced from the cost of the respective fixed assets. d) Grants in the nature of promoters' contribution are credited to Capital reserve and treated as a part of Shareholders' funds. 16. Cash and cash equivalents: In the Cash Flow Statement, cash and cash equivalents include cash in hand, demand deposits with banks, other short-term highly liquid investments with original maturities of 3 months or less. 17. Earning per share: Earnings per share (EPS) is 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. Earnings considered in ascertaining the EPS is the net profit for the period and any attributable tax thereto for the period. 18. Leases: As lessor: The Company has leased certain tangible assets and such leases where the Company has substantially retained all the risks and rewards of ownership are classified as operating leases. Lease income on such operating leases are recognised in the Statement of Profit and Loss on a straight-line basis over the lease term which is rebrsentative of the time pattern in which benefit derived from the use of the leased asset is diminished. Initial direct costs are recognised as an expense in the Statement of Profit and Loss in the period in which they are incurred. As lessee: Assets taken on lease under which all risks and rewards of ownership are effectively retained by the lessor are classified as operating lease. Lease rentals under operating leases are recognised in the Statement of Profit and Loss on a straight-line basis over the lease term in accordance with the respective Lease Agreement terms. Note 28.6 Segment information In accordance with Accounting Standard-17 'Segment Reporting', segment information has been given in the Consolidated Financial Statements of Atul Ltd, and therefore, no separate disclosure on segment information is given in the Financial Statements. Note 28.8 Lease a) The Company has taken various residential and office brmises under operating lease or leave and license Agreements. These are generally cancellable, having a term between 11 months and 3 years and have no specific obligation for renewal. Payments are recognised in the Statement of Profit and Loss under 'Rent' in Note 2. Note 2.1 Employee benefits Funded schemes a) Defined benefit plans: Gratuity: The Company operates a gratuity plan through the 'Atul Employees Gratuity Trust'. Every employee is entitled to a benefit equivalent to fifteen days salary last drawn for each completed year of service in line with the Payment of Gratuity Act, 1972 or Company scheme whichever is beneficial. The same is payable at the time of separation from the Company or retirement, whichever is earlier. The benefits vest after five years of continuous service. Defined contribution plan: Amount of Rs. 9.00 cr (Previous year: Rs. 8.48 cr) is recognised as expense and included in the Note 25 'Contribution to Provident and Other funds'. Provident Fund liability: In case of certain employees, the Provident Fund contribution is made to a trust administered by the Company. In terms of the guidance note issued by The Institute of Actuaries of India, the actuary has provided a valuation of Provident Fund liability based on the assumptions listed below and determined that there is no shortfall as at March 31, 2016. Note 2.2 Interest in joint venture company The Company acquired 50% interest in Rudolf Atul Chemicals Limited (RACL), a joint venture company in India between IB Industriechemie Beteiligungs GmbH, Germany and Atul Ltd on August 18, 2011. RACL is engaged in the business of manufacturing and marketing textile chemicals. As per the contractual arrangement between the Shareholders of RACL, both the companies have significant participating rights such that they jointly control the operations of the joint venture company. The aggregate amount of assets, liabilities, income and expenses related to the share of the Company in RACL as at and for the year ended March 31, 2016 as per audited Financial Statements is given below: Note 2.3 Amalgamation of Amal Ltd The Board of Directors (Board) approved the Scheme of Amalgamation of Amal Ltd. with the Company (Scheme) on December 05, 2014. The Board has approved a share swap ratio of 1 Equity share of the face value of Rs. 10 each fully paid up of Atul Ltd. for every 50 Equity shares of the face value of Rs. 10 each fully paid up of Amal Ltd. In terms of the Scheme, the appointed date is April 01, 2014. The Scheme of Amalgamation has been awaiting approval from Board for Industrial and Financial Reconstruction. Pending all other statutory approvals, no effect to the above Scheme has been given in the Financial Statements. The impact of the Scheme on the Financial Statement is not expected to be material. Note 2.5 Regrouped Recast Reclassified Figures of the earlier year have been regrouped recast reclassified wherever necessary. As per our attached report of even date For Dalal & Shah Chartered Accountants LLP Firm Registration Number: 102020W W-100040 S Venkatesh Partner Membership Number: 037942 For and on behalf of the Board of Directors T R Gopi Kannan : Whole-time Director and CFO L P Patni : Company Secretary B S Mehta Chairman and Managing Director B N Mohanan Whole-time Director and President - U&S S A Lalbhai Managing Director S S Lalbhai Chairman and Managing Director R A Shah S S Baijal H S Shah S M Datta V S Rangan M M Chitale S A Panse B R Arora Place : Mumbai Date : April 29, 2016 |