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Atul Ltd | Annual Report 2015-16
09. 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 option 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, Government of
India. Consequently, foreign exchange difference on account of long-term foreign currency borrowings
utilised to acquire a depreciable asset, 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 contracts intended to hedge
existing exposures is amortised as expenses or income over the life of the contracts. Exchange differences
on such contracts 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 contracts 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.
10. 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 recognised on dispatch from the point of sale, where property in goods are
transferred to the buyer.
Notes
to the Financial Statements
Note 1 Significant Accounting Policies
(continued)