Page 249 - BCML AR 2019-20

BALRAMPUR CHINI MILLS LIMITED

Notes forming part of the Consolidated Financial Statements

Note No. : 2 Significant accounting policies (contd.)
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 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 consolidated
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 consolidated statement of profit and loss over
the periods 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 consolidated statement of profit and loss in the period in which they are incurred.
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

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