NOTES to Financial Statements for the year ended March 31, 2016 Company Overview Deepak Nitrite Limited ('DNL' or 'the Company') is a prominent chemical manufacturing company. The Company manufactures Bulk Chemicals & Commodities, Fine & Speciality Chemicals and Fluorescent Whitening Agent. 1. Significant Accounting Policies Accounting Convention The accompanying financial statements have been brpared under the historical cost convention on accrual basis, in accordance with Generally Accepted Accounting Principles in India. The Company has brpared these Financial Statements to comply in all material respects with the Accounting Standards specified under the Companies (Accounting Standards) Rules, 2006, and the relevant provisions of the Companies Act, 2013. The accounting policies adopted in the brparation of the financial statements are consistent with those of brvious year. a) Use of Estimates The brparation of financial statements in conformity with Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the reported balances of assets and liabilities as of the date of financial statements and reported amounts of income and expenses during the period. Management believes that the estimates used in the brparation of financial statements are prudent and reasonable. Actual results could differ from those estimates. Difference between the actual results and estimates are recognised in the year in which the results are known /materialised. b) Presentation and Disclosure of Financial Statements Assets and Liabilities are classified as Current or Non-Current as per the provisions of the Schedule III notified under the Companies Act, 2013, and Company's normal operating cycle. Based on the nature of business and its activities, the Company has ascertained its operating cycle as twelve months for the purpose of Current & Non-Current classification of Assets & Liabilities. c) (i) Tangible Fixed Assets and Debrciation Fixed Assets are stated at their original cost of acquisition, less accumulated debrciation and impairment provision. Cost includes all incidental expenses related to acquisition and installation. Debrciation is provided, pro rata for the period of use, under the Straight Line Method (SLM) except in respect of Aromatics Amines plant where debrciation in respect of plant & machinery is provided on Written Down Value (WDV) method. Debrciation on all tangible assets is provided at the rates and in the manner brscribed by Schedule II to the Companies Act, 2013 except in case of leasehold land which is amortised over the period of lease term and certain components of plant & machinery such as Reactors, Centrifuge, Cooling towers, Air Combrssor etc. which are debrciated over its useful life as technically assessed by Independent/Internal Technical Personnel after taking into consideration past experience of the company, chemical process & chemical industry norms. The items of continuous process plant are identified by the technical officials of the Company. The excess debrciation provided on revalued fixed assets over the amount computed on the above basis is withdrawn from the Revaluation Reserve and transferred to General Reserve. Premium paid on leasehold land is amortised equally over the tenure of the lease. In respect of debrciable assets for which Impairment Loss is recognised, debrciation/amortisation is charged on the revised carrying amount over the remaining useful life of the assets computed on the basis of the life brscribed in Schedule II to the Companies Act, 2013. (ii) Intangible Assets Intangible Assets are stated at their original cost of acquisition, less accumulated amortisation and impairment losses, if any. An Intangible Asset is recognised, where it is probable that the future economic benefits attributable to the Asset will flow to the enterprise and where its cost can be reliably measured. The cost of intangible assets is amortised over the estimated useful life, in any case, not exceeding ten years, on a straight-line basis. Details of estimated useful life is given below: Software and related implementation costs 6 years Rights to use facilities 5 years Technical Know How 10 years d) Impairment of Assets The carrying amount of cash generating units/assets is reviewed at the Balance Sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount is estimated as the net selling price or value in use, whichever is higher. Impairment loss, if any, is recognised whenever carrying amount exceeds the recoverable amount. The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of recoverable amount. e) Inventories (i) Raw Materials, Packing Materials and Stores & Spares are valued at cost determined on monthly-moving weighted average basis and are net of Cenvat and VAT. (ii) Finished Goods and Stock-in-process are valued at cost of purchase of raw materials and conversion thereof, including the cost incurred in the normal course of business in bringing the inventories up to the brsent condition or at the net realisable value, whichever is lower. The inventories of joint products are valued by allocating the costs to the joint products by ^Relative Sales Value' method. By-products are valued at net realisable price. f) Revenue recognition (i) Revenue from sales is recognised when the significant risks and rewards associated with ownership of goods are transferred to the buyers and no significant uncertainty exists as to the amount of consideration derived from the sales. Sales is recorded net of trade discounts, rebates, sales taxes, VAT and excise duties (recovery of which realisation is shown separately). (ii) Revenue from rendering of services relating to conversion/processing activity is recognised when the converted/ processed goods are ready for delivery. (iii) Revenue in respect of export incentive, overdue interest, insurance claim, etc. is recognised to the extent that the Company is reasonably certain of its ultimate realisation. g) Employee Retirement Benefits (i) Defined Contribution Plans Company's contributions paid/payable during the year to Provident Fund, Superannuation Fund are recognised in the Statement of Profit and Loss. (ii) Defined Benefit Plan Company's liabilities towards gratuity and leave encashment are determined on actuarial basis using the projected unit credit method, which consider each period of service as giving rise to an additional unit of benefit and measure each unit separately to build up the final obligation. Past services are recognised on straight-line basis over the average period until the amended benefits become vested. Actuarial gain and losses are recognised immediately in the Statement of Profit and Loss Account as income or expense. Obligation is measured at the brsent value of estimated future cash flow using a discount rate that is determined by reference to market yields at the Balance Sheet date on government bonds, where the currency and terms of the government bonds are consistent with the currency and estimated terms of the defined benefit obligation. h) Investments Investments that are readily realisable and intended to be held for not more than twelve months are classified as current investments. All other investments are classified as long term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long term investments are carried at cost. However, provision for diminution is made to recognise a decline, other than temporary in nature, in the carrying amount of such long term investments. i) Foreign currency transactions (i) Transactions in foreign currencies are recorded at the exchange rates brvailing on the date of the transaction. Foreign currency monetary assets and liabilities are translated at year end exchange rates. Exchange difference arising on settlement of transactions and translation of monetary items are recognised as income or expense in the year in which they arise. However, exchange difference arising either on settlement or on translation, in case of long-term foreign currency borrowings, in so far as they relate to fixed asset are capitalised and in other cases, are accumulated in a "Foreign Currency Monetary Item Translation Difference Account". The balance in "Foreign Currency Monetary Item Translation Difference Account" is amortised over the balance period of the related long-term borrowings. Similar treatment to gain or loss on forward and hedge contracts relatable to long-term borrowings is given. Gain or loss on other forward and hedge contracts are recognised in the Statement of Profit and Loss. (ii) The difference between the forward rate and the exchange rate at the inception of the forward contract for underlying transactions is recognised as per the principles set out in i) (i) above. (iii) In respect of hedge contracts, for firm commitment or forecasted transactions, the attributable loss is accrued on periodic settlement and/or completion of contract and is recognised as per the principles set out in i) (i) above. j) Income Tax Tax expense comprises of both current and deferred tax. Provision for Current tax is measured at the amount computed under the Income Tax Act, 1961, or Book Profit computed under section 115JB, whichever is higher, and correspondingly set-off available under section 115JAA is credited to the Statement of Profit and Loss of the financial year. 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 during the specified period. In the year in which the MAT credit becomes eligible to be recognised as an asset in accordance with the recommendations contained in Guidance Note issued by the Institute of Chartered Accountants of India, the said asset is created by way of credit to the Statement of Profit and Loss and shown as MAT Credit Entitlement. The Company reviews the same at each Balance Sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent that there is no longer convincing evidence to the effect that Company will pay normal income tax during the specified period. Deferred tax assets and liabilities are recognised for future tax consequences attributable to the timing differences between taxable income and accounting income that are capable of reversal in one or more subsequent periods and are measured using tax rates enacted or substantively enacted as at the Balance Sheet date. Deferred tax assets are not recognised unless, in the management judgment, there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. The carrying amount of deferred tax is reviewed at each balance sheet date. k) Earning per Share The company reports basic and diluted Earning per Share (EPS) in accordance with the Accounting Standard 20 on 'Earning per Share'. Basic earning per Equity Share is computed by dividing net income by the weighted average number of Equity Shares outstanding for the period. Diluted earning per Equity Share are computed by dividing net income by the weighted average number of Equity Shares adjusted for the effects of all dilutive potential Equity Shares. l) Segment Reporting - Basis of Information The Company is reporting business segments as primary segments. The Company operates into 3 (three) segments viz. (i) Bulk Chemicals & Commodities, (ii) Fine & Speciality Chemicals and (iii) Fluorescent Whitening Agent. Inter segment transfer prices are normally negotiated amongst the segments with reference to the costs, market prices and business risks, within an overall optimisation objective of the Company. Revenue and Expenses have been accounted on the basis of their relationship to the operating activities of the segment. Revenue and Expenses, which relate to the enterprise as a whole and are not allocable to segments on reasonable basis, have been included under "Unallocable Expenses". Assets and Liabilities which relate to the enterprise as a whole but are not allocable to segments on a reasonable basis, have been included under "Unallocable Assets/Liabilities". Secondary segment have been identified with reference to geographical location of external customers. Composition of secondary segment is as follows: (i) India and (ii) Outside India m) Borrowing Costs Borrowing costs directly attributable to the acquisition/construction of qualifying assets as also the borrowing costs of funds borrowed generally and used for the purpose of acquisition/construction of such assets is capitalised up to the date the assets are ready for use. Other borrowing costs are recognised as an expense in the period in which they are incurred. n) Operating Lease Operating lease payments are recognised as an expense in the Statement of Profit and Loss on a straight-line basis, which is rebrsentative of the time pattern of the user's benefit. o) Cash Flow Statement The Cash Flow Statement is brpared by the indirect method set out in Accounting Standard 3 'Cash Flow Statements', whereby the Profit Before Tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The Cash flows from regular revenue generating, investing and financing activities of the Company are segregated. p) Provisions and Contingent Liabilities Provisions are recognised in the accounts in respect of brsent probable obligations, the amount for which can be reliably estimated. Contingent liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. 2. Previous year's figures are shown in bracket and have been re-classified / regrouped to conform to this year's classification / groupings. As per our report of even date For B. K. KHARE & Co. Chartered Accountants Firm Registration No.105102W HIMANSHU CHAPSEY Partner Membership No. 105731 For and on behalf of the Board C. K. MEHTA Chairman UMESH ASAIKAR Executive Director SUDHIN CHOKSEY SUDHIR MANKAD S. K. ANAND Directors Vice Chairman & Managing Director A. C. MEHTA Managing Director SANJAY UPADHYAY Chief Financial Officer ARVIND BAJPAI Company Secretary Place Mumbai date: May 09, 2016 |