1 ITC Limited — (31-3-2009)
Significant Accounting Policies
It is corporate policy :
Convention :
To prepare financial statements in accordance with applicable Accounting Standards in India.
A summary of important accounting policies is set out below. The financial statements have also been prepared in accordance with relevant presentational requirements of the Companies Act, 1956.
Basis of accounting :
To prepare financial statements in accordance with the historical cost convention modified by revaluation of certain Fixed Assets as and when undertaken as detailed below.
Fixed assets :
To state Fixed Assets at cost of acquisition inclusive of inward freight, duties and taxes and incidental expenses related to acquisition. In respect of major projects involving construction, related pre-operational expenses form part of the value of assets capitalised. Expenses capitalised also include applicable borrowing costs.
To capitalise software where it is expected to provide future enduring economic benefits. Capitalisation costs include licence fees and costs of implementation/system integration services.
The costs are capitalised in the year in which the relevant software is implemented for use.
To charge off as a revenue expenditure all upgradation/enhancements unless they bring similar significant additional benefits.
Depreciation :
To calculate depreciation on Fixed Assets and Intangible Assets in a manner that amortises the cost of the assets after commissioning, over their estimated useful lives or, where specified, lives based on the rates specified in Schedule XIV to the Companies Act, 1956, whichever is lower, by equal annual instalments. Leasehold properties are amortised over the period of the lease.
To amortise capitalised software costs over a period of five years.
Revaluation of assets :
As and when Fixed Assets are revalued, to adjust the provision for depreciation on such revalued Fixed Assets, where applicable, in order to make allowance for consequent additional diminution in value on considerations of age, condition and unexpired useful life of such Fixed Assets; to transfer to Revaluation Reserve the difference between the written-up value of the Fixed Assets revalued and depreciation adjustment and to charge Revaluation Reserve Account with annual depreciation on that portion of the value which is written up.
Investments :
To state Current Investments at lower of cost and fair value; and Long-Term Investments, including in Joint Ventures and Associates, at cost. Where applicable, provision is made where there is a permanent fall in valuation of Long-Term Investments.
Inventories :
To state inventories including work-in-progress at lower of cost and net realisable value. The cost is calculated on weighted average method. Cost comprises expenditure incurred in the normal course of business in bringing such inventories to its location and includes, where applicable, appropriate overheads based on normal level of activity. Obsolete, slow moving and defective inventories are identified at the time of physical verification of inventories and, where necessary, provision is made for such inventories.
Sales :
To state net sales after deducting taxes and duties from invoiced value of goods and services rendered.
Investment income :
To account for Income from Investments on an accrual basis, inclusive of related tax deducted at source.
Proposed dividend :
To provide for Dividends (including income-tax thereon) in the books of account as proposed by the Directors, pending approval at the Annual General Meeting.
Employee benefits :
To make regular monthly contributions to various Provident Funds which are in the nature of defined contribution scheme and such paid/payable amounts are charged against revenue.
To administer such Funds through duly constituted and approved independent trusts with the exception of Provident Fund and Family Pension contributions in respect of unionised staff which are statutorily deposited with the Government.
To administer through duly constituted and approved independent trusts, various Gratuity and Pension Funds which are in the nature of defined benefit/contribution schemes. To determine the liabilities towards such schemes, as applicable, and towards employee leave encashment by an independent actuarial valuation as per the requirements of Accounting Standard-15 (revised 2005) on ‘Employee Benefits’. To determine actuarial gains or losses and to recognise such gains or losses immediately in Profit and Loss Account as income or expense.
To charge against revenue, actual disbursements made, when due, under the Workers’ Voluntary Retirement Scheme.
Lease rentals?:
To charge rentals in respect of leased equipment to the Profit and Loss Account.Research and Development?:
To write off all expenditure other than capital expenditure on Research and Development in the year it is incurred. Capital expenditure on Research and Development is included under Fixed Assets.
Taxes on income?:To provide current tax as the amount of tax payable in respect of taxable income for the period.
To provide deferred tax on timing differences between taxable income and accounting income-subject to consideration of prudence. Not to recognise deferred tax assets on unabsorbed depreciation and carry forward of losses unless there is virtual certainty that there will be sufficient future taxable income available to realise such assets.Foreign currency translation?:
To account for transactions in foreign currency at the exchange rate prevailing on the date of transactions. Gains/Losses arising out of fluctuations in the exchange rates are recognised in the Profit and Loss Account in the period in which they arise. To account for differences between the forward exchange rates and the exchange rates at the date of transactions, as income or expense over the life of the contracts.
To account for profit/loss arising on cancellation or renewal of forward exchange contracts as income/ expense for the period.
To account for premium paid on currency options in the Profit and Loss Account at the inception of the option.
To account for profit/loss arising on settlement or cancellation of currency option as income/expense for the period.
To recognise the net mark-to-market loss in the Profit and Loss Account on the outstanding portfolio of options as at the Balance Sheet date, and to ignore the net gain, if any.
To account for gains/losses in the Profit and Loss Account on foreign exchange rate fluctuations relating to monetary items at the year end.Caims?:
To disclose claims against the Company not acknowledged as debts after a careful evaluation of the facts and legal aspects of the matter involved.Segment reporting?:
To identify segments based on the dominant source and nature of risks and returns and the internal organisation and management structure.
To account for inter-segment revenue on the basis of transactions which are primarily market-led.
To include under ‘Unallocated Corporate Expenses’ revenue and expenses which relate to the enterprise as a whole and are not attributable to segments.