2007-08 - Aditya Birla Nuvo, Ltd

SCHEDULESSCHEDULE 19 (Contd.)SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTSFertiliser price support under Group Concession and other Scheme of the Government of India is recognisedbased on management’s estimate taking into account known policy parameters and input price escalation/de-escalation.Income from Certified Emission Reductions (CERs) is recognised at estimated realisable value on confirmationof CERs by the concerned authorities.Dividend income on investments is accounted for when the right to receive the payment is established.(xii) RETIREMENT AND OTHER EMPLOYEE BENEFITS(i)(ii)Defined Contribution PlanThe Company makes defined contribution to Provident Fund and Superannuation Schemes, which arerecognised in the Profit and Loss Account on accrual basis.Defined Benefit PlanThe Company’s liabilities under Payment of Gratuity Act (funded), long term compensated absences andpension are determined on the basis of actuarial valuation made at the end of each financial year usingthe projected unit credit method except for short term compensated absences, which are provided forbased on estimates. Actuarial gain and losses are recognised immediately in the statement of theProfit and Loss Account as income or expense. Obligation is measured at the present value of estimatedfuture cash flows using a discounted rate that is determined by reference to market yields at the BalanceSheet date on Government bonds where the currency and terms of the Government bonds are consistentwith the currency and estimated terms of the defined benefit obligation.(xiii) EMPLOYEE STOCK OPTIONSThe stock options granted are accounted for as per the accounting treatment prescribed by Employee StockOption Scheme and Employee Stock Purchase Guidelines, 1999, issued by Securities and Exchange Board ofIndia, whereby the intrinsic value of the option is recognised as deferred employee compensation. The deferredemployee compensation is charged to the Profit and Loss Account on straight line basis over the vestingperiod of the option. The employee stock option outstanding account, net of any unamortised deferredemployee compensation, is shown separately as part of Reserves.(xiv) TAXATIONTax expense comprises of current, deferred and fringe benefit tax.Provision for current tax is made on the basis of estimated taxable income for the current accounting year inaccordance with the Income Tax Act, 1961.The deferred tax for timing differences between the book and tax profits for the year is accounted for, usingthe tax rates and laws that have been substantively enacted as of the Balance Sheet Date. Deferred tax assetsarising from timing differences are recognised to the extent there is reasonable certainty that these would berealised in future.Deferred tax assets, in case of unabsorbed losses and unabsorbed depreciation, are recognised only if there isvirtual certainty that such deferred tax asset can be realised against future taxable profits.Fringe Benefit Tax is provided in accordance with the provisions of the Income Tax Act, 1961.(xv) OPERATING LEASESLeases, where significant portion of risk and reward of ownership are retained by the Lessor, are classified asOperating Leases and lease rentals thereon are charged to the Profit and Loss Account.(91)