Ambuja Cements Ltd.

(ACL) is one of the leading cement manufacturing companies in India and

commenced cement production in 1986.

Significant Accounting policy and notes to accounts:

1. Fixed Assets:

Fixed Assets are stated at their original cost of acquisition / installation net of accumulated
depreciation, amortisation and impairment losses, except freehold non mining land which is
carried at cost less impairment losses. Machinery spares connected with a particular item of
fixed asset and are used irregularly, are capitalised.
Expenditure during construction period (including financing cost relating to borrowed funds
for construction or acquisition of qualifying fixed assets) incurred on projects under
implementation are included under Capital work-in-progress. These expenses are
apportioned to fixed assets on commencement of commercial pro1duction.
Fixed Assets retired from active use and held for disposal are stated at the lower of their net
book value and net realisable value and are disclosed separately under other current
assets.

2. Depreciation and amortisation:

Tangible Assets: Includes Land, Building, Roads and water works, railway sliding and
locomotives, furniture and fixture, office equipment, ships and vehicles.

a. Leasehold land including premium is amortised over the period of lease on a straight line
basis. Cost of mineral reserve embedded in the cost of freehold mining land is depreciated in
proportion of actual quantity of minerals extracted to the estimated quantity of extractable
mineral reserves.

b. Depreciation is provided as per the useful Captive Power Plant related assets (consisting
of Buildings and Plant & Machinery) based on Written down Value Method and for other
assets based on Straight Line Method.

Intangible Assets: Includes Water drawing rights, Computer software and Goodwill.
a. Expenditure to acquire Water drawing rights is amortised on straight line method over the
period of rights to use the facilities.

b. Expenditure on Computer software is amortised on straight line method over the period
of expected benefit not exceeding five years.

c. Goodwill arising on amalgamation is amortised on straight line method over a period of

three years.

3. Impairment of Assets : The carrying amounts of assets are reviewed at each Balance Sheet date,
an impairment loss i.e. loss caused by drop in fair value of an asset below its recorded cost, is
recognised in the Statement of Profit and Loss wherever the carrying amount of an asset exceeds its
recoverable amount.

4. Investments: Investments include investments in subsidiaries and joint ventures. Other non-
current investments include investment in government securities (such as National Saving
Certificate), equity shares held in companies other than subsidiaries and public sector bonds. On the
other hand, current investments include investments in unquoted mutual funds.
 Investments that are intended to be held for more than a year, from the date of acquisition,
are classified as long-term investments and are carried at cost. Investments other than long-
term investments and readily realisable are stated as current investments and are valued at
cost or fair value whichever is lower, determined on an individual basis.
On disposal of an investment, the difference between the carrying amount and the net
disposal proceeds is recognised in the Statement of Profit and Loss.
5. Inventories: Inventories includes raw materials, work-in-progress, finished goods, stores and
spares, coal and fuel and packing material. Inventories are valued as follows:

Raw materials, stores & spare, fuel and packing material: Lower of cost less provision for
slow and non-moving inventory, if any, and net realisable value. Cost is determined on a
moving weighted average basis.
ii. Work-in-progress, finished goods, stock in trade and trial run inventories : Lower of
cost and net realisable value. Cost includes direct materials and labour and a proportion
of manufacturing overheads based on normal operating capacity. Cost of finished goods
includes excise duty. Cost of stock-in-trade includes cost of purchase and other cost
incurred in bringing the inventories to the present location and condition. Cost is
determined on a monthly moving weighted average basis.

6. Provisions and Contingent Liabilities: A provision was made for present obligation because of
past events, in case that an outflow of resources will be required to settle the obligation and a
reliable estimate should be made. Provisions are calculated on the present value. Best estimate has
been made in the balance sheet to meet the obligation and it is reviewed at each date when the
balance sheet is made and adjusted to reflect the current best.

Contingent liability is a possible obligation that arises from the past events whose occurrence and
non-occurrence is dependent on many factors which is not recognised and which may lead to
outflow of resources to settle the obligation. A contingent liability arises in very rare case because its
reliability cannot be measured.

7. Foreign Currency Conversion: All the foreign currency transactions are recorded on the day
transaction had happened. Non-Monetary items are recognised on historical cost at the date on
which the transaction took place. Exchange difference arising on settlement of monetary items is
recognised in the same year in which it happened.

8. Revenue Recognition:
Revenue is recognised to an extent that it has economic benefits on the organisation and it can be
measured reliably

Sales are recognised on the day of bill of lading. Sales are disclosed of sales tax/value added tax,
discounts and returns. Self-consumption of cement sales is excluded

Interest income is recognised on a time proportion basis considering the amount outstanding
and the rate applicable. Dividend income is recognised when right to receive is established by
the Balance Sheet date.

9. Mines Reclamation Expenses: The Company has made a provision for mining of mineral reserves
which are extracted in the financial year.
10. Employee Stock Compensation Cost: Compensation related to employee stock option is
calculated on fair value method. Discount on equity shares as compensation expense is as per ESOS
and it is amortised as per Employee Stock Option Scheme and Employee Stock Purchase Scheme
Guidelines.

11. Retirement and Other Employee Benefits:

Defined Contribution plan: Funds are considered as defined contribution plan and the same
is charged to the Statement of Profit and Loss for the year in which the employee renders
the related services.
Defined Benefit Plan: Retirement benefits in the form of gratuity, post-retirement medical
benefit and death & disability benefit are considered as defined benefit. A Trust set up by
the Company is charged to Statement of Profit and Loss for the year in which the employee
renders the related service
Short term employee benefits: Short term employee benefits are recognised as an expense
in P&L of the year in which service was rendered. Accumulated Paid leaves are encashed in
the year end & it is treated as short term employee benefit.
Other long-term benefits: The Company presents the entire compensated absences as short-
term provisions, since employee has an unconditional right to avail the leave at any time
during the year.
Termination Disclosure: Expenses incurred towards voluntary retirement scheme are
charged to Statement of Profit and Loss as and when they accrue.

12. Borrowing Costs and Share Issue Expenses:

Borrowing cost is capitalized for the acquisition and construction of assets which takes
substantial period of time until they are ready for intended use.
Expenses on issue of Shares, Debentures and Bonds as well as Premium on Redemption of
Debentures are adjusted to Securities Premium Account in accordance with the Companies
Act, 2013.
Borrowing cost such as discount or premium and ancillary costs in connection with
arrangement of borrowings are amortised over the period of borrowings.
Other borrowing costs are charged as expense in the year in which these are incurred.

13. Taxation:
Tax expense comprises current and deferred income tax and any adjustment related to past periods
in these that may become necessary due to certain developments or reviews during the relevant
period. Current income tax is realized at the amount expected to be paid to the tax authorities as
per income tax act, 1961. Deferred tax assets are realized only when sufficient future taxable income
will be available to realize deferred tax assets.

After reviewing the deferred tax assets at each balance sheet date, company writes down the
carrying amount of deferred tax asset when there is no future taxable income will be available to
realized it or vice versa. Current tax assets and current tax liabilities are offset when there is a
legally enforceable right to set off the recognised amounts and there is an intention to settle the
asset and the liability on a net basis.
Minimum alternate tax (MAT) paid in a year is charged to Statement of Profit and Loss as current
tax. MAT credit is recognized as an asset if there is sufficient evidence that company will pay normal
tax during the specified period for which MAT credit is allowed to carry forward.

In the year in which the Company recognises MAT credit as an asset in accordance with the
Guidance note on Accounting for Credit available in respect of MAT under the Income tax Act, 1961,
the said asset is created by way of credit to the Statement of Profit and Loss and shown as MAT
Credit Entitlement under the head loans and advances. The Company reviews the MAT Credit
Entitlement asset at each reporting date and writes down the asset to the extent the Company
does not have convincing evidence that it will pay normal tax during the specified period.

14. Leases:
Where the Company is the lessee:
Operating lease payments are recognised as expense in Income statement on a straight-line
basis over lease term. Initial direct costs such as legal costs, brokerage costs are recognised
immediately in the Statement of Profit and Loss for both operating and finance lease.
Where the Company is the lessor:
i. Finance lease assets are recognised as receivable amount equal to the net
investment in the lease. Lease rentals are apportioned between principal and
interest on the internal rate of return method. The principal amount received
reduces the net investment in the lease and interest is recognised as revenue.
ii. Operating lease assets are included as fixed asset and lease income is recognised in
income statement on a straight-line basis over the lease term. Costs, along with
depreciation, are recognised as an expense in the income statement.

15. Earnings per Share:

Basic earnings per share = Net profit (loss) for the period/Weighted average number of outstanding
equity share during the period
To calculate diluted earnings per share, numerator and denominator in the above formula are
adjusted for the effects of all dilutive potential equity shares.

16. Cash and Bank Balances: Cash, cash and demand deposits at bank, other short-term liquid
investments/deposits with original maturity of 3 months or less are used as Cash and cash
equivalents for cash flow statement.
17. Government Grants and Subsidies: Grants/Subsidies being the source of receiving money which
need not be returned back; if they are related to revenue, report them under Statement of Profit
and Loss. Maintain the spending records with precise and reasonable payment receipts. When credit
has been given by the government for starting the construction, in the balance sheet it is mention as
Capital reserve on long term basis, which will get deducted with the starting of the construction.

18. Other Income: This includes income from bank deposits, dividend income from subsidiary and
Joint Venture Company. Others include 21.04 Cr written back towards interest on income tax
relating to earlier years.

19. Share Capital: Given below is the authorised share capital i.e. the maximum amount of share
capital for which shares can be issued which is given in the memorandum of association and the
actual share capital issued to the shareholders.

20. Provisions: Provision account has two parts, provision for employee benefits which includes
provision for gratuity, staff benefit scheme and compensated absences. Other provisions include
provision for income tax, net of advances, mines related expenses, equity dividend, and tax on
proposed equity dividend.

21. Reserves and surplus Subsidies: It includes Capital reserve (Surplus resulting from revaluation of
asset or purchase of business when value of assets purchased is more than the consideration paid),
Capital redemption reserve (Resulting from buyback of company shares), Securities premium
account (Results from issue of securities at a premium), Employee stock options outstanding,
General Reserve and Surplus in the Statement of Profit and Loss.

22. Long-term borrowings: It includes secured (Includes interest free loan from state government)
and unsecured (Includes Sales tax deferment loan) long-term borrowings.

23. Loans and advances: Includes the below item:

Unsecured, considered good: Includes capital advances, security and other deposits, inter
corporate deposits, loans and advances to related parties, deposit given to housing
development finance corporation limited etc.
 Unsecured, considered doubtful: Includes capital advances, security and other deposits,
inter corporate deposits, loans and advances to related parties.

24. Other Long Term Liabilities: They include those liabilities which could not be paid back within
the accounting period but also are not important enough to show them separately( include liabilities
for capital expenditure).

25. Finance Costs: It includes costs related to interests on borrowings of money. In this case, interest
on income tax is the finance cost.

26. Freight and Forwarding expenses: It includes the expenses on transferring raw materials and
finished goods.

27. Cost of Raw Materials Consumed: Its the cost related to the amount of raw materials consumed
in the given accounting period. In this case, raw materials include gypsum, fly ash, etc.

28. Trade Receivables and Other Assets: Whatever payments related to trade has exceeded six
months from the due date is included here.

29. Other Current Liabilities: They include those liabilities that could be paid within the accounting
period but are not important enough to show them separately and includes security deposits,
statutory dues, unclaimed dividends, etc.

30. Other operating revenue: Includes sale of power, provisions no longer required written back,
sale of scrap (net of excise duty), insurance claim, and miscellaneous expenses.