Page 251 - BCML AR 2019-20

BALRAMPUR CHINI MILLS LIMITED

Notes forming part of the Consolidated Financial Statements

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

(c) Defined benefit plans
The Company operates a defined benefit gratuity plan, which requires contributions to be made to “The Balrampur Sugar
Company Limited Employees Gratuity Fund” (“the Trust”). Trustees administer contributions made to the Trust and contributions
are invested through insurance companies.
The liability or asset recognized in the consolidated balance sheet in respect of gratuity is the present value of the defined
benefit obligation as at the balance sheet date less the fair value of plan assets. The defined benefit obligation is calculated by
external actuaries using the projected unit credit method.
Re-measurements, comprising of actuarial gains and losses, any change in the effect of the asset ceiling and the return on plan
assets (excluding amounts included in net interest on the net defined benefit liability or asset), are recognized immediately in
the consolidated balance sheet with a corresponding debit or credit to retained earnings through other comprehensive income
(“OCI”) in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.
(d) Compensated absences
The employees of the Company are entitled to compensated absences which are both accumulating and non-accumulating in
nature. The expected cost of accumulating compensated absences is determined by actuarial valuation using the projected unit
credit method for the unused entitlement that has accumulated as at the balance sheet date.
The benefits are discounted using the market yields as at the end of the balance sheet date that has terms approximating to the
terms of the related obligation. Re-measurements as a result of experience adjustments and changes in actuarial assumptions
are recognized in profit or loss.
2.15 Financial instruments
Financial assets and financial liabilities are recognized in the consolidated balance sheet when the Company becomes a party to the
contractual provisions of the instrument. The Company determines the classification of its financial assets and financial liabilities at
initial recognition based on its nature and characteristics.
Financial assets
(a) Initial recognition and measurement
The financial assets include equity and debt securities, trade and other receivables, loans and advances, cash and bank balances
and derivative financial instruments.
Financial assets are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of
financial assets (other than financial assets at fair value through profit or loss) are added to or deducted from the fair value of the
financial assets as appropriate, on initial recognition.
Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
The Company categorizes assets and liabilities measured at fair value into one of three levels depending on the ability to observe
inputs employed for such measurement:
(i) Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the
measurement date.
(ii) Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
or indirectly.
(iii) Level 3: Unobservable inputs for the asset or liability.

Annual Report 2019-20 | 249