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Atul Ltd | Annual Report 2016-17
Any ineffective portion of changes in the fair value of the derivative is recognised immediately in the net profit in
the Statement of Profit and Loss. If the hedging instrument no longer meets the criteria for hedge accounting, then
hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold, terminated or exercised,
the cumulative gain | (loss) on the hedging instrument recognised in cash flows hedging reserve till the period the
hedge was effective remains in cash flows hedging reserve until the forecasted transaction occurs. The cumulative
gain | (loss) previously recognised in the cash flows hedging reserve is transferred to the Statement of Profit and Loss
upon the occurrence of the related forecasted transaction.
If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flows hedging
reserve is reclassified to net profit in the Statement of Profit and Loss.
u) Borrowings:
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised
in the Statement of Profit and Loss over the period of the borrowings using the effective interest method. Fees paid on the
establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or
all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs.
Borrowings are removed from the Balance Sheet when the obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to
another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in
the Statement of Profit and Loss as other income | (expense).
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability
for at least 12 months after the reporting period.
v) Borrowing costs:
General and specific borrowing costs that are directly attributable to the acquisition, construction 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 comprise date palms and oil palms.
Mature and immature tissue culture raised date palms, 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 palms 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 is 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 costs 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
auction charges, 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 date palm FFB and oil palm FFB are 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 (immature plant) are being measured at cost less
accumulated impairment loss, if any as quoted market price is not available for the immature date palm plants at different
stages and for which fair value measurements are determined to be clearly unreliable.
Tissue culture raised date palms (mature plant) are measured on initial recognition and at the end of each reporting period
at its fair value less costs to sell. The gain | (loss) arising on initial recognition of such biological assets at fair value less costs
Note 1 Significant Accounting Policies
(continued)
Notes
to the Consolidated Financial Statements