Atul Ltd 2011-12

Atul Ltd | Annual Report 2011-12 3.5 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 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 present value by using weighted average cost of capital. A previously recognised impairment loss is further provided or reversed depending on changes in the circumstances. 3.6 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. 3.7 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. 3.8 Inventories: a) Raw materials, packing materials, purchased finished goods, work-in-progress, finished goods, 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. 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 present location and condition. d) Due allowances are made for obsolete inventories based on technical estimates made by the Company. 3.9 Foreign Currency Transactions: a) Initial recognition: Transactions denominated in foreign currencies are recorded at the rate prevailing 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 choice 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. Consequently, foreign exchange difference on account of a depreciable asset acquired out of long- term borrowings, is adjusted in the cost of the depreciable asset, which will be depreciated over the balance life of the asset. d) Forward exchange contracts not intended for trading or speculation purposes: The premium or discount arising at the inception of forward exchange contract is amortised as expense or income over the life of the contract. Exchange differences on such contract is being recognised in the Statement of Profit and Loss for the year. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognised as income or expense for the year. Notes to Consolidated financial statements NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (contd)