II a) SIGNIFICANT ACCOUNTING POLICIES Disclosure of Accounting Policies Basis of Preparation of Financial Statements The financial statements have been brpared using historical cost convention and on the basis of going concern, with revenues recognised, expenses accounted on accrual basis, unless otherwise stated and in accordance with generally accepted accounting principles in India [Indian GAAP] and Accounting Standards notified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies [Accounts] Rules, 2014. Use of Estimates: The brparation of financial statements requires management to make judgments, estimates and assumptions of some of the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities on the date of the financial statements and amounts of revenues and expenses during the period reported. However any revision to accounting estimates or difference between the actual results and estimates are recognized prospectively in the period in which the results are known / materialised Valuation of Inventories a) Inventories excluding wood from captive plantation are valued at cost or net realisable value, whichever is lower. Cost rebrsents all cost of purchase, cost of conversion and other costs incurred in bringing the inventories to their brsent location and condition. Cost for the purpose of valuation is determined by using the weighted average cost, net of taxes and duties eligible for credit, except note books where stocks are valued at lower of cost and net realisable value on FIFO Basis. b) Wood from captive plantation is valued at cost (incurred till date of felling) or market price whichever is less. Standing Crops are valued at the total amount of expenditure incurred (including land development expenditure), adjusted for failed plantation costs and incidental revenue realized. c) Bagasse consumption value and stock is valued at weighted average cost, net of taxes and duties eligible for credit. d) Work-in-Process Paper in process is valued at cost which includes cost of inputs, net of taxes and duties eligible for credit and overheads upto the stage of completion. e) Non Moving Stores & Spares Stores and spares not drawn for use for more than three years as at the end of the year are charged to revenue. Such stores and spares are carried at nil value in the books and in the year of issue, charged to revenue at nil value. Cash Flow Statements Cash Flow Statement has been brpared under Indirect Method. Cash and Cash Equivalents comprise Cash in Hand, Current and Other Accounts (including Fixed Deposits) held with Banks. Events occurring after the Balance Sheet Date a) Assets and Liabilities are adjusted for events occurring after the balance sheet date that provide additional evidence to assist the estimation of amounts relating to conditions existing at the balance sheet date. b) Dividends, which are proposed / declared by the Company after the Balance Sheet date but before the approval of the Financial Statements, are adjusted. Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies Extra-ordinary Items, and Prior Period Incomes and Expenditures, are accounted in accordance with Accounting Standard 5. Debrciation Accounting a) Debrciation on tangible and intangible assets is charged over the useful life of the assets in straight line method in accordance with Schedule II to the Companies Act, 2013. b) Debrciation on additions / deductions in respect of fixed assets are charged pro-rata from / up to the date in which the asset is available for use / disposal c) Debrciation on addition to assets (which are to supplement the usage of the parent asset) is provided as detailed below: - i) In respect of additions to existing Buildings, Debrciation has been provided prospectively over the residual life of the parent asset from the beginning of the year in which such additions are made. ii) In respect of additions to existing Plant and Machinery, Debrciation has been provided prospectively over the residual useful life of the parent asset from the beginning of the year in which such addition is made. iii) In respect of rebuild / upgrade of machinery leading to substantial capacity expansion, debrciation is charged over the useful life of the assets in straight line method in accordance with Schedule II to the Companies Act, 2013. d) In respect of modernisation programme leading to replacement of existing assets, debrciation is provided over the remaining useful life of the assets getting replaced. e) In respect of Individual Assets costing less than Rs.5000/-, full debrciation has been provided in the year of addition. f) In respect of specific spares Machinery spares specific to an item of fixed asset costing Rs.3 lakh and above per individual unit are treated as addition to fixed asset and debrciation provided over the remaining useful life of the parent asset. In the year of issue, written down value of such spares are charged as debrciation. Spares acquired during the year and issued for use during the year is treated as addition to fixed asset and 100% debrciation is provided. g) Pending renewal of agreements with some of the sugar mills, debrciation on fixed assets at such Offsite is charged over the useful life of the assets in straight line method in accordance with Schedule II to the Companies Act, 2013, considering the continued arrangement for procurement of bagasse from sugar mills. Revenue Recognition a) Sales are accounted net of excise duty, sales tax and sales returns. b) Other items of revenue are recognised in accordance with the Accounting Standard (AS-9). Accordingly, where there are uncertainties in the ascertainment / realisation of income such as interest from customers (upon factors such as financial condition of the person from whom the same is to be realised) / Liquidated damages recovered from suppliers / contractors, the same is not accounted for. c) Liquidated damages and penalties recovered from suppliers/contractors, in relation to fixed assets are credited to Statement of profit and loss unless the delay has resulted in extra cost of assets, in which case the same are adjusted to wards the carrying cost of there spective asset. d) Clean Development Mechanism [CDM] benefits are recognized in the Statement of profit and loss upon issue of Certified Emission Reduction [CER] by the Executive Board of CDM and Execution of Emission Reduction Purchase Agreement with the Buyer. e) Renewable Energy Certificate (REC) benefits are recognized in the statement of Profit and Loss on sale of REC's. f) Dividend from investments is recognized when the right to receive the payment is established. Accounting for Fixed Assets Fixed Assets a) Fixed Assets are stated at cost of construction or acquisition less accumulated debrciation. Costs attributable to bring the fixed assets to a working condition are capitalised net of taxes and duties eligible for credit. b) Additional compensation for lands acquired from farmers under Land Acquisition Act, 1894 is capitalised with thecostofthelandintheyearofpaymentbasedonfinalawardofcompensationbyappropriateauthority. c) Operating software is capitalised with the related fixed assets. d) Machinery spares specific to an item of fixed asset are treated as addition to fixed asset. Capital Work-in-Progress Cost of assets (net of taxes and duties eligible for credit) not put to use before the year-end are disclosed under Capital Work-in-Progress. In respect of identified projects, expenditure incurred during construction period net of related income is included under capital work in progress and the same is allocated to the respective fixed assets that are capitalised. Assets are capitalised when they are ready for use / put to use. Accounting for Effects in Foreign Exchange Rates a) Foreign currency monetary items such as current assets and current liabilities are initially recognized at the exchange rate on the date of the transaction. These items are reported at the closing rate on the balance sheet date. b) Forward exchange contracts or other financial instruments, that are in substance, a forward exchange contracts entered into for hedging the monetary items are initially recognized at the exchange rate on the date of inception of the Forward Contract. The company does not enter into any forward contracts for trading or speculative purposes. c) The Premium or Discount arising at the inception of such a Forward Contract is amortised as expense or income over the life of the contract. d) Forward contracts are reported at the closing rate on the date of the balance sheet. e) Exchange differences other than those covered under para(g) arising on reporting the above items at rates different from which they were initially recorded during the period or reported in the brvious financial statements are recognized as income / expenditure in the Statement of Profit and Loss. f) Contingent liabilities denominated in foreign currency at the balance sheet date are disclosed using the closing rate. g) Pursuant to insertion of paragraph 46A in Accounting Standard - 11 (AS-11) by the Companies (Accounting Standard) (Second Amendment) Rules, 2011 vide Notification GSR 913(E) & Notification No.GSR 914(E) dated 29-12-2011, issued by the Ministry of Corporate Affairs, Government of India, the Company has exercised the option of capitalizing the exchange difference on Long Term Foreign Currency Loans in relation to debrciable fixed assets / Capital Work-in-Progress with effect from 01-04-2011. Accounting for Government Grants Capital Grants relating to specific fixed assets are reduced from the gross value of the respective fixed assets and other Capital Grants are treated as Capital Reserve. Government grants relating to revenue are recognised on accrual and are shown under other income. Accounting for Investments a) Long-term investments are valued at cost. Provision, if any, is made to recognise a decline other than a temporary, in the value of long-term investments. Decline in the value of long-term investments is determined initially ten years from the date of its purchase and thereafter once in a period of five years. b) Current investments are valued at lower of cost and fair market value. Employee Benefits a) Short term employee benefits are charged at the undiscounted amount to Statement of Profit and Loss in the year in which the related service is rendered. b) Defined benefit plan / long term compensated absence i) Provident Fund The Company pays fixed contribution to provident fund at br-determined rates to a separate irrevocable trust approved by the Commissioner of Income Tax, which invests the fund in permitted securities. The contribution to the fund for the period is recognised as expenses and is charged to Statement of Profit and Loss. While the obligation to the Company is limited to such fixed contribution, as per the rules of Employee's Provident Fund (EPF) any deficiency in the rate of interest on the contribution based on its return on investment as compared to the rate declared for Employees Provident Fund by the Government under para 60 of the Employees Provident Fund Act is to be met by the Company. Also as per the rules, any deficiency in the fair value of plan assets backing the Provident Fund accumulations compared to the amount of such accumulations is to be met by the company. ii) Gratuity and long term compensated absence: Liabilities in respect of defined benefit plan in the form of gratuity and Long term compensated absences are determined based on actuarial valuation made by an independent actuary using projected unit credit method as at the balance sheet date and are unfunded. c) Defined Contribution Defined contributions towards retirement benefits in the form of Pension and Superannuation Fund for the year are charged to Statement of Profit and Loss. Borrowing cost Borrowing costs, attributable to qualifying assets, are capitalised up to the date the asset is ready for use / put to use. All other borrowing costs are charged to revenue. Segment Reporting a) The company has identified business segments viz. Paper, Energy and Cement. Revenue and expenses have been identified to respective segments on the basis of operating activities of the enterprise. Revenue and expenses which relate to the enterprise as a whole and are not allocable to a segment on a reasonable basis have been disclosed as unallocable revenue and expenses. b) Segment assets and liabilities rebrsent assets and liabilities in respective segments. Other assets and liabilities that cannot be allocated to a segment on a reasonable basis have been disclosed as unallocable assets and liabilities. c) Inter segment revenue / expenditure is recognized at cost. d) Geographical segments have been considered for Secondary Segment Reporting by treating sales in India and foreign currency as reportable geographical segments. Related Party Transactions Remuneration to Key Managerial Personnel, other than Independent Non-executive Directors, is disclosed as 'Related Party Transactions' in the Notes to Accounts. Leases Rentals are expensed with reference to lease terms and other considerations. Earnings per Share a) Basic Earnings per share is computed with reference to the Weighted Average number of Shares, based on monthly rests. b) Diluted Earnings per share is computed based on fully paid-up value of the Shares issued, as if Calls-in-Arrears has been received. Accounting for Taxes on Income Income-tax expense is accounted in accordance with AS 22 - "Accounting for taxes on Income" which includes current taxes and deferred taxes. Current tax is net of Minimum Alternative Tax [MAT] credit entitlement, which is recognised when there is convincing evidence that the Company will pay normal income tax during the specified period credit set off is allowed under the Income-tax Act. Deferred taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available. Deferred tax assets and liabilities are measured using the tax rates and tax law that have been enacted or substantively enacted by the Balance Sheet date. Intangible Assets General: a) Intangible assets are stated at cost less accumulated amortisation. b) Computer software being intangible asset is amortised over a period of four years. Research and Development: a) Expenditure relating to capital items are treated as fixed assets and debrciated at applicable rates. b) Other expenditure on Research is recognised as an expense under respective natural heads, as and when incurred. Impairment of Assets The Company determines the Impairment of Assets based on Cash Generating Units. For this purpose, the Cash Generating Units have been based on segments of operations, viz., 'Paper & Pulp', 'Energy' and 'Cement'. The impairment loss will be provided if the carrying amount exceeds recoverable amount. Provisions, Contingent Liabilities and Contingent Assets a) A brsent obligation, which could be reliably estimated, is provided for in the accounts, if it is probable that an outflow of resources embodying economic benefits will be required for its settlement. b) Contingent Liabilities are disclosed by way of notes in the Balance Sheet. c) Contingent Assets are neither recognised nor disclosed. Accounting of Derivative Financial Instruments The Company uses foreign currency forward contracts to hedge its risks associated with foreign currency fluctuations relating to certain firm future commitments and probable forecast transactions. The Company designates these hedging instruments as cash flow hedges applying the recognition and measurement principles set out in the Accounting Standard 30 "Financial Instruments : Recognition and measurement" (AS - 30). Hedging instruments are initially measured at fair value, and are remeasured at subsequent reporting dates. Changes in the fair value of these derivatives that are designated and effective as hedges of future cash flows are recognized directly in hedge reserve account and the ineffective portion is recognized immediately in Statement of profit and loss. Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognized in Statement of profit and loss as they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognized in hedge reserve account is transferred to Statement of profit and loss. The gain / loss on the hedging instrument in respect of a probable forecast transaction / firm future commitment in respect of a non financial asset / liability is recognized in the hedge reserve account. Upon the probable forecast transaction / firm future commitment subsequently resulting in the recognition of a non financial asset / liability, the associated gain / loss recognized in the hedge reserve account is transferred to the initial cost / carrying cost of the non financial asset / liability. b) Accounting Standard Disclosures: i) Employee Benefit (AS-15) a) The fair value of the asset of the provident fund trust including the return on the assets thereof, as on the balance sheet date is greater than the obligations under the defined contribution plan, as determined by the actuary and requires no further charge to Statement profit and loss iv) IMPAIRMENT OF ASSETS (AS 28): The "recoverable amount" is higher than the "carrying amount" of the cash generating units and hence there is no impairment of losses under AS - 28. III) GENERAL a) Figures for the brvious year have been regrouped/restated/reclassified wherever necessary to conform to current year's classification. b) Amounts have been rounded off to the nearest two decimal points of lakh of rupees. C. V. SANKAR, IAS Chairman & Managing Director (DIN. 00703204) A.VELLIANGIRI Dy.Managing Director (DIN. 00153169) vide our report of even date For RAMAN ASSOCIATE Chartered Accountants Firm Reg. No.002910S V. SIVAKUMAR Company Secretary G. VASUDEVAN Partner Membership No.020739 Place : Chennai Date : 28th May, 2015 |