Page 169 - BCML AR 2019-20

BALRAMPUR CHINI MILLS LIMITED

Notes forming part of the Standalone Financial Statements

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

2.10 Leases
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange
for consideration.
The Company’s lease asset class primarily consist of leases for land. At the inception of the contract, Company assess whether a contract
is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a
period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset,
the Company assesses whether: (i) the contract involves the use of an identified asset (ii) Company has substantially all of the economic
benefits from the use of the asset through the period of the lease and (iii) Company has the right to direct the use of the asset.
At the date of commencement of the lease, Company recognizes a right-of-use asset (“ROU”) and a corresponding lease liability for all
lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low-value leases.
For these short-term or low-value leases, the Company recognizes the lease payments as an operating expense on a straight-line basis
over the term of the lease.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date of the lease plus any initial direct cost less any lease incentives. They are
subsequently measured at cost less accumulated depreciation and impairment losses.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are
discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates.
2.11 Provisions, contingent liabilities and contingent assets

(a) A provision is recognized if, as a result of a past event, Company has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are
not recognized for future operating losses.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation as at the
balance sheet date, taking into account the risks and uncertainties surrounding the obligation.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the
receivable is recognized as an asset. The expense relating to the provision is presented in the statement of profit and loss, net of
any reimbursement.
(b) Contingent Liabilities are disclosed in respect of possible obligations that arise from past events but their existence will be
confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of
Company or where any present obligation cannot be measured in terms of future outflow of resources or where a reliable
estimate of the obligation cannot be made.

(c) A contingent asset is not recognized in the financial statements, however, it is disclosed, where an inflow of economic benefits
is probable.
(d) Provisions, contingent liabilities and contingent assets are reviewed at each balance sheet date.

2.12 Dividend payable
The final dividend on equity shares is recorded as a liability on the date of approval by the shareholders and interim dividends are
recorded as a liability on the date of declaration by the Company’s Board of Directors. A corresponding amount is recognized directly
in Equity.

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