Page 168 - BCML AR 2019-20

FINANCIAL STATEMENTS

Notes forming part of the Standalone Financial Statements

Note No. : 2 Significant accounting policies (contd.)

The estimated useful lives, residual values and amortization method are reviewed at the end of each financial year and are given
effect to, wherever appropriate.
(c) The cost and related accumulated amortization are eliminated from the financial statements upon sale or retirement of the asset
and the resultant gains or losses are recognized in the statement of profit and loss.
2.6 Inventories
(a) Inventories (other than By-products and Scraps) are valued at lower of cost and net realizable value after providing for
obsolescence if any.
Cost of inventory comprises of the purchase price, cost of conversion and other directly attributable costs that have been
incurred in bringing the inventories to their respective present location and condition. Borrowing costs are not included in the
value of inventories. The cost of inventories is computed on a weighted average basis.

Net Realizable Value (NRV) is the estimated selling price in the ordinary course of business less estimated costs of completion
and the estimated costs necessary to make the sale.
(b) By-products and Scraps are valued at net realizable value.
2.7 Biological assets
Biological assets comprise Standing crops (crops under development) of sugarcane.
The biological process starts with the preparation of land for planting seedlings and ends with the harvesting of crops. When harvested,
the cane is transferred to inventory at fair value less costs to sell or at cost whichever is applicable.
For biological assets, where little biological transformation has taken place since the initial cost was incurred (for example seedlings
planted immediately before the balance sheet date), such biological assets are measured at cost i.e. the total expenses incurred on
such plantation up to the balance sheet date.
2.8 Government grants
Government grants are recognized when there is reasonable assurance that the grant would be received and the Company would
comply with all the conditions attached to them.
Government grants related to property, plant and equipment, including non-monetary grants, are presented in the balance sheet by
deducting the grant in arriving at the carrying amount of the asset.
Government grants of revenue in nature are recognized on a systematic basis in the statement of profit and loss over the period
necessary to match them with the related costs and are adjusted with the related expenditure. If not related to a specific expenditure,
it is considered as income and included under “Other Operating Revenue” or “Other Income”.

The benefit of a government loan at a below-market rate of interest or loan with interest subvention is treated as a government grant,
measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.
2.9 Borrowing costs
Borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset are capitalized as part of the cost
of such asset till such time that is required to complete and prepare the asset to get ready for its intended use. A qualifying asset is one
that necessarily takes a substantial period of time to get ready for its intended use. Borrowing costs consist of interest and other costs
that the Company incurs in connection with the borrowing of funds. Borrowing costs also include exchange differences to the extent
regarded as an adjustment to the borrowing costs.

All other borrowing costs are charged to the statement of profit and loss in the period in which they are incurred.

166 | Balrampur Chini Mills Limited