Annual Report 2004 - Nagarjuna Fertilizers

NFCL
3. Depreciation on Fixed Assets:
a) Depreciation on fixed assets other than the assets given on lease, is provided on straight-line method at the rates
and in the manner prescribed in Schedule XIV of the Companies Act, 1956.
b) Depreciation charge for each year is net of additional depreciation on incremental values arising out of revaluation
met out of revaluation reserve.
c) In respect of Assets given on lease, depreciation is provided on straight line method at the rates and in the
manner prescribed in Schedule XIV of the Companies Act, 1956. Further, in respect of ongoing leases, the
guidance note on accounting of leases issued by the Institute of Chartered Accountants of India (ICAI) is
followed.
4. Investments :
Investments are stated at cost less any diminution in their value, which is other than temporary.
5. Foreign currency transactions:
The transactions in foreign currencies remaining outstanding at the end of the year, are translated at the exchange
rates prevailing on the date of Balance Sheet or at the rate of exchange fixed under contractual arrangements.
Exchange gain/loss on transactions relating to liabilities incurred to acquire fixed assets is treated as an adjustment
to the cost of fixed assets. Exchange gains and losses on foreign exchange transactions other than those relating
to fixed assets are adjusted in the profit and loss account.
6. Revenue recognition:
a) Credit under Group Concession Scheme (GCS) and Equated Freight is considered on despatch of finished
goods from the factory in accordance with the procedure prescribed by the Government of India – Fertiliser
Industry Co-ordination Committee.
b) Lease rental income is recognised in accordance with the guidance note on accounting for leases issued by ICAI.
7. Warranty claims in respect of Micro Irrigation business raised by parties regarding free replacements etc. covered
under warranties are accounted in the year in which the claims are finally settled.
8. Deferred Revenue/Preliminary Expenditure:
Expenditure on catalyst is treated as deferred revenue expenditure and amortised on the basis of estimated life as
technically assessed.
Preliminary expenses are written off over a period of 10 years in equal instalments.
9. Inventories:
The method of valuation of various categories of inventories is as follows:
a. Manufactured Products :
i. Finished goods - at lower of cost and net realisable value.
ii. Work in process - at cost.
Cost - includes material cost, labour, factory overheads and depreciation but excludes interest on borrowings.
Net realisable value in the case of Urea - the Group Concession Price notified by the Govt. of India in respect
of finished goods lying at the factory, and the net sale price in respect of finished goods lying in the warehouses
outside the factory.
b. Traded products - at lower of cost and net realisable value.
c. Other finished goods, work-in-process, raw materials, stores, spares, packing material and loose tools - at
weighted average cost, less provision for depletion in value, if any.
10. Retirement Benefits:
The company’s liability towards gratuity and superannuation benefits of eligible employees is covered by a policy
with LIC and the annual contributions are paid/provided in accordance therewith. Leave encashment is provided on
the basis of valuation by independent actuaries, as at date of the Balance Sheet. The Company’s contribution
towards provident fund and pension fund is administered and managed by an approved trust and are charged to
revenue.
11. Taxes on Income:
Current tax is determined as the amount of tax payable in respect of taxable income for the period. Deferred tax is
recognised subject to the consideration of prudence, on timing differences, being the difference between taxable
income and accounting income that originate in one period and is capable of reversal in one or more subsequent
periods.
12. Contingencies:
Loss contingencies arising from claims, litigation, assessments, fines, penalties, after sales warranties, right to
recompense etc., are provided for when it is probable that a liability may be incurred, and the amount can be
reasonably estimated.
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