NOTES FORMING PART OF THE FINANCIAL STATEMENTS 1. CORPORATE INFORMATION Tamilnadu Petroproducts Limited (TPL) was incorporated in 1984 as a public limited Company and is jointly promoted by Southern Petrochemicals Industries Corporation Limited (SPIC) and Tamilnadu Industrial Development Corporation Limited (TIDCO). Its shares are listed on two stock exchanges in India. viz. National Stock Exchange of India and Bombay Stock Exchange Ltd. The Company is currently engaged in the manufacturing and selling of petrochemical products namely Linear Alkyl Benzene (LAB) and Caustic Soda from the manufacturing facilities situated at Manali, near Chennai 2 . Summary of accounting policies The significant accounting policies followed by the company are as stated below I BASIS OF ACCOUNTING The financial statements of the Company has been brpared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014, and the relevant provisions of the Companies Act, 2013 ("the Act") / Companies Act, 1956 ("the 1956 Act") as applicable. The financial statements have been brpared on accrual basis under the historical cost convention except for categories of fixed assets acquired before 1 April, 1996, that are carried at revalued amounts. The accounting policies adopted in the brparation of the financial statements are consistent with those followed in the brvious year except for change in the accounting policy for debrciation as more fully described in Note 40. II USE OF ESTIMATES The brparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in brparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialise. III OPERATING CYCLE Based on the nature of products / activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current. IV FIXED ASSETS AND DEbrCIATION Fixed assets are stated at cost less debrciation. Cost comprises of purchase price (net of rebates and discounts), import duties, levies (net of CENVAT and VAT) and any directly attributable cost including borrowing cost, of bringing the assets to its working condition for its intended use. Certain assets have been revalued as on 31st March, 1996 and the resultant surplus has been added to the cost of the assets. Debrciation amount for assets is the cost of an assets, or other amount substituted for cost, less its estimated residual value. Debrciation on tangible fixed assets has been provided on the straight-line method as per the useful life brscribed in Schedule II to the Companies Act, 2013 except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on technical advice, taking into account the nature of the asset, the estimated usage of the assets, the operating conditions of the assets, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc.: General Plant and Machinery used in Epichlorohydrin plant - 10 years Certain Plant and Machinery used in Linear Alkyl Benzene plant - 4.50 years Furniture and Fixture provided to employees debrciated - 5 years CAPITAL WORK-IN-PROGRESS: Projects under which assets are not ready for their intended use are carried at cost, comprising direct cost, related incidental expenses and attributable interest. V IMPAIRMENT OF ASSETS Consideration is given at each balance sheet date to determine whether there is any indication of impairment of the carrying amount of the company's fixed assets. If any indication exists, an asset's recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is greater of the net selling price and value in use. Value in use in arrived at by discounting the future cash flows to their brsent value based on an appropriate discount factor. When there is indication that an impairment loss recognised for an asset (other than a revalued asset) in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Statement of Profit and Loss. VI FOREIGN CURRENCY TRANSACTIONS Initial Recognition Transactions in foreign currencies entered into by the Company are accounted at the exchange rates brvailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction. Measurement at balance sheet date Foreign currency monetary items of the Company, outstanding at the balance sheet date are restated at the year-end rates. Non-monetary items of the Company are carried at historical cost. Treatment of exchange differences Exchange differences arising on settlement / restatement of foreign currency monetary assets and liabilities of the Company are recognised as income or expense in the Statement of Profit and Loss. VII INVESTMENTS Long term investments are carried individually at cost, less provision for diminution, other than temporary, in the value of such investments. Current investments are carried individually, at the lower of cost and fair value. Cost of investments include acquisition charges such as brokerage, fees and duties. VIII INVENTORIES Inventories are valued at lower of cost (weighted average basis) and net realisable value after providing for obsolescence and other losses, where considered necessary. Cost includes all charges in bringing the goods to the point of sale, including octroi and other levies, transit insurance and receiving charges. Work-in-progress and finished goods include appropriate proportion of overheads and, where applicable, excise duty. IX CASH AND CASH EQUIVALENTS (FOR PURPOSE OF CASH FLOW STATEMENT) Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value. X CASH FLOW STATEMENT Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information. XI REVENUE RECOGNITION a) Sale of Goods Sales are recognised, net of returns and trade discounts, on transfer of significant risks and rewards of ownership to the buyer, which generally coincides with the delivery of goods to the customers. Sales include excise duty but exclude sales tax and value added tax. b) Income from services Revenues from contracts priced on a time and material basis are recognised when services are rendered and related costs are incurred. c) Export incentive Export benefits in the nature of focus market scheme are accrued in the year of exports based on the eligibility taking into consideration the brvailing regulations/policies and when there is no uncertainty in receiving the same. Adjustments, if any, to the amounts recognized in accordance with the accounting policy, based on final determination by the authorities, would be dealt with appropriately in the year of final determination and acceptance. XII OTHER INCOME Interest income is accounted on accrual basis. Dividend income is accounted for when the right to receive it is established. Property lease rentals are accrued as per terms of the agreement with the lessees and are recognized equally on a straight- line basis over the non-cancellable lease period. XIII EMPLOYEE BENEFITS Short term employee benefits Short term employee benefits are recognised as an expense at the undiscounted amounts in the Profit and Loss account of the year in which the related services are rendered. Defined Contribution Plans i) Superannuation: This plan covers staff of the Company and is administered by the Life Insurance Corporation of India. Contributions are made monthly at a brdetermined rate to the Trust and debited to the Profit and Loss account on an accrual basis. The superannuation contribution for staff is withdrawn with effect from October 1, 2013. Defined Benefits Plans ii) Provident Fund: Contributions are made monthly at a brdetermined rate to the Provident Fund Trust managed by the company and debited to the Profit and Loss account on an accrual basis. The interest rate payable by the Trust to the beneficiaries is as notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rates and recognizes such shortfall as an expense. ii) Gratuity: The Company has an arrangement with the Life Insurance Corporation of India (LIC) to administer its Gratuity fund. Premium paid / payable is determined based on an actuarial valuation carried out by LIC using the projected unit credit method as on the Balance Sheet date and debited to the Profit & Loss account on accrual basis. Actuarial gain or loss is recognised in the statement of profit or loss as income or expense. Long term compensated absences: Liability towards long term compensated absences is accrued based on an actuarial valuation at the balance sheet date based on the projected unit credit method and is not funded. XIV BORROWING COST: Borrowing costs include interest, amortisation of ancillary costs incurred and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Costs in connection with the borrowing of funds to the extent not directly related to the acquisition of qualifying assets are charged to the Statement of Profit and Loss over the tenure of the loan. Borrowing costs, allocated to and utilised for qualifying assets, pertaining to the period from commencement of activities relating to construction / development of the qualifying asset upto the date of capitalisation of such asset is added to the cost of the assets. Capitalisation of borrowing costs is suspended and charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted. XV TAXES ON INCOME Current tax is the amount of tax payable on the taxable income for the year and determined in accordance with applicable tax rates and the provisions of the Income Tax Act, 1961 and other applicable tax laws. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted as at the reporting date. Deferred tax liabilities are recognised for all timing differences. Deferred tax assets are recognised for timing differences of items other than unabsorbed debrciation and carry forward losses only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised. However, if there are unabsorbed debrciation and carry forward of losses and items relating to capital losses, deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that there will be sufficient future taxable income available to realise the assets. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each balance sheet date for their realisability. Current and deferred tax relating to items directly recognised in reserves are recognised in reserves and not in the Statement of Profit and Loss. XVI PROVISIONS AND CONTINGENCIES A provision is recognized when the company has a brsent obligation as a result of past events and it is probable that an 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 brsent 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 estimates. Contingent liabilities are not recognized but are disclosed in the notes to the accounts. Contingent assets are neither recognised nor disclosed in the financial statement. XVII OPERATING LEASES Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognised as operating leases. Lease rentals under operating leases are recognised in the Statement of Profit and Loss on a straight-line basis over the lease term. XVIII EARNINGS PER SHARE Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. XIX RESEARCH AND DEVELOPMENT EXPENSES Revenue expenditure pertaining to research is charged to the Statement of Profit and Loss. XX INSURANCE CLAIMS Insurance claims are accounted for on the basis of claims admitted / expected to be admitted and to the extent that there is no uncertainty in receiving the claims. XXI SERVICE TAX INPUT CREDIT Service tax input credit is accounted for in the books in the period in which the underlying service received is accounted and when there is no uncertainty in availing / utilising the credits. 1. During the financial year 2013-14, the Company has entered in to an agreement for sale of one of its immovable properties and received an advance. This transaction is expected to be completed by June 2015. 2. Other payable rebrsent amount received in advance towards sale of 100000 equity shares in SEPC Power (Private) Limited during Financial year 2012-13. The same will get adjusted against Investment held, on successful implementation of the power project by SEPC Power (Private) Limited. 3. Employee Defined Benefit Plans The Company offers Gratuity benefits to its employees which are funded with Life Insurance Corporation of India. 4 Exceptional item rebrsent provision towards diminution in the value of investment in an Associate Company ( Petro Araldite Private Limited). 5. Employee benefits expense for the year includes an amount of Rs.344.27 lakhs towards compensation to the employees who had opted for early retirement from service (ERS) during the year. 6. The performance of Chlor Alkali Division (CAD) tapered considerably due to various extraneous factors since 2012. Though the demand for Caustic soda, the main product of the division has been constant , the profitability was greatly affected consequent to high cost of captive power consumption in view of severe power cuts imposed in the State. The management has been taking necessary steps to reduce the high cost of power. Based on the estimated future revenues that would be generated by the CAD and also based on valuation of the Plant by an Independent Chartered Engineers, the management has assessed and concluded that the recoverable value, as defined in the Accounting Standard 28, of the Plant is higher than the carrying value of Rs.5,550.51 lakhs (excluding land cost) as on the balance sheet date and hence no provision for impairment is considered necessary. 7. Previous year's figures have been regrouped / reclassified wherever necessary to correspond with the current year's classification / disclosure. |