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Atul Ltd | Annual Report 2017-18
v) Borrowing costs:
Borrowing costs that are directly attributable to the acquisition, constrution or production of a qualifying asset are capitalised
during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets
are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Investment income
earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from
the borrowing costs eligible for capitalisation. Other borrowing costs are expensed in the period in which they are incurred.
w) Biological assets:
The biological assets of the Group comprises of oil palms, date palms and tissue culture.
Mature and immature tissue culture raised date palm plants, which are ready for dispatch less than 12 months from the
reporting date are classified under current assets under separate head of biological assets other than bearer plants and
others under non-current assets under separate head of biological assets other than bearer plants.
The oil palm trees are bearer plants and are therefore presented and accounted for as property, plant and equipment
{(Refer Note 4(b)}. However, the oil palm Fresh Fruit Bunches (FFB) growing on the trees are accounted for as biological
assets other than bearer plants until the point of harvest. Harvested oil palm FFBs are transferred to inventory at fair value
less costs to sell when harvested.
Changes in fair value of oil palm FFB on trees are recognised in the Statement of Profit and Loss. Farming cost like labour
costs and other are recognised in the Statement of Profit and Loss.
Biological assets are measured at fair value less cost to sell. Costs to sell include the incremental selling costs, including
auctioneers’ fees, commission paid to brokers and dealers and estimated costs of transport to the market, but excludes
finance costs and income taxes.
Measurement technique:
The fair value of growing oil palm FFB, date palm FFB and tissue culture is determined using a discounted cash flow
model based on the expected yield by plantation size, the market price for the produce | sampling and after allowing for
harvesting costs, contributory asset charges for the land and bearer plants owned by the entity and other costs yet to be
incurred in getting the fruit bunches to maturity or sampling ready for sale.
The fair value of date palms and tissue culture raised date palms (immatured plant) are being measured at cost less
accumulated impairment loss, if any as quoted market price are not available for the immature date palms plants at
different stages and for which fair value measurements are determined to be clearly unreliable.
Tissue culture raised (matured plants) are measured on initial recognition and at the end of each reporting period at its fair
value less costs to sell. The gain or loss arising on initial recognition of such biological assets at fair value less costs to sell
and from a change in fair value less costs to sell of biological assets are included in Statement of Profit and Loss for the
period in which it arises.
x) Provisions and contingent liabilities:
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is
probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.
These are reviewed at each year end and reflect the best current estimate. Provisions are not recognised for future
operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined
by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect
to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of best estimate of the expenditure required to settle the present obligation at
the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current
market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the
passage of time is recognised as interest expense.
Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which
will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the
control of the Group or a present obligation that arises from past events where it is either not probable that an outflow of
resources will be required to settle the obligation or a reliable estimate of the amount cannot be made.
Note 1 Significant Accounting Policies
(continued)
Notes
to the Consolidated Financial Statements