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Atul Ltd | Annual Report 2013-14
contract 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 contract 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 depreciable 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.
11 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 accounted for on dispatch from the point of sale, where property in goods are
transferred to the buyer.
ii) Export sales are accounted on the basis of dates of on Board Bill of Lading and | or Air Way Bill.
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 precedent is 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.
12 Provisions, Contingent Liabilities and Contingent Assets:
Provisions involving a substantial degree of estimation in measurement are recognised when there is a present
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 present 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.
13 Research and Development Expenditure:
Research and Development expenditure is charged to revenue under the natural 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.
Notes
to the Financial Statements
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES
(contd)