2.2 Summary of material accounting policies

a Property, Plant and Equipment and Capital
Work-in-progress

Recognition and initial measurement

Property, Plant and Equipment are stated at
original / acquisition cost grossed up with the
amount of tax / duty benefits availed, less
accumulated depreciation and accumulated
impairment losses, if any. All directly
attributable costs relating to the project
activities, including borrowing costs relating
to qualifying assets incurred during the project
development period, net of income earned
during the period till commercial operation
date of the project, are recorded as project
expenses and disclosed as a part of Capital
Work-in-Progress. Properties / projects in the
course of construction are carried at cost, less
any recognised impairment losses.

When significant parts of plant and equipment
are required to be replaced at intervals, the
Company depreciates them separately based
on their specific useful lives.

Freehold land are carried at historical cost less
accumulated impairment losses, if any.

Items of stores and spares that meet the
definition of property, plant and equipment
are capitalised at cost and depreciated over
their useful life.

Depreciation

In respect of Property, Plant and Equipment
covered under part A of Schedule II to the
Companies Act, 2013, depreciation is recognised
based on the cost of assets (other than freehold
land) less their residual values over their
useful lives, using the straight-line method in
the statement of profit and loss unless such
expenditure forms part of carrying value of
another asset. The useful life of property,
plant and equipment is considered based on
life prescribed in schedule II to the Companies
Act, 2013 except in case of power plant assets,
where the life has been estimated at 25 years
or 40 years based on technical assessment,
taking into account, the estimated usage of the
assets and the current operating condition of
the assets. The management believes that these
estimated useful lives are realistic and reflect
fair approximation of the period over which the
assets are likely to be used. The estimated useful
lives, residual values and depreciation method
are reviewed at the end of each reporting period,
with the effect of any changes in estimate
accounted for on a prospective basis.

Major inspection / overhauling including
turnaround and maintenance cost are
depreciated over the period of 5 years. All other
repair and maintenance costs are recognised in
the statement of profit and loss as incurred.

Assets class wise useful life of the Property,
Plant and Equipment (except for Udupi Thermal
Power Plant ("Udupi TPP") are mentioned below :

In respect of Property, Plant a nd Equipment
covered under part B of Schedule II to
the Companies Act, 2013, depreciation is
recognised based on the cost of Property,
Plant and Equipment (other than freehold
land) at the rates as well as methodology
notified by the Central Electricity Regulatory
Commission (''CERC") (Terms and Conditions of
Tariff) Regulations, 2019 in the statement of
profit and loss unless such expenditure forms
part of carrying value of another asset under
construction mainly in respect of Udupi TPP.
In case of assets with useful life lesser than
the Power Plant Project life, the useful life
of these assets has been considered for the
purpose of calculation of depreciation as per
the provisions of the Companies Act, 2013 and
subsequent amendments thereto.

In case of Udupi TPP, Property, Plant and
Equipment class wise depreciation rates are
mentioned below:

Deferred Tax Assets and liabilities are classified
as non-current assets and liabilities.

c Financial Instruments

A Financial Instrument is any contract that
gives rise to a financial asset of one entity
and a financial liability or equity instrument of
another entity.

Financial assets and financial liabilities
are initially measured at fair value with the
exception of trade receivables that do not
contain significant financing component or for
which the Company has applied the practical
expedient. The Company initially measures
a financial asset at its fair value plus, in the
case of a financial asset not at fair value
through profit or loss, the transaction cost.
Transaction costs that are directly attributable
to the acquisition or issue of financial assets and
financial liabilities (other than financial assets
and financial liabilities at fair value through
profit or loss) are added to or deducted from
the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the
acquisition of financial assets or financial
liabilities at fair value through profit or loss are
recognised immediately in the statement of
profit and loss.

d Financial assets

Initial recognition and measurement

All regular way purchases or sales of financial
assets, that require delivery of assets within
a time frame established by regulation or
convention in the market place (regular way
trades) are recognised and derecognised on a
trade date basis i.e. the date that the Company
commits to purchase or sell the assets.

Subsequent measurement

All recognised financial assets are subsequently
measured in their entirety at either amortised
cost or fair value, depending on the classification
of the financial assets.

Classification of Financial assets
Financial assets measured at amortised cost

Financial assets that meet the criteria for
subsequent measurement at amortised cost
are measured using effective interest method
("EIR") (except for debt instruments that are
designated as at fair value through profit or
loss on initial recognition):

a) the asset is held within a business model
whose objective is to hold assets in order
to collect contractual cash flows; and

b) Contractual terms of the asset give rise on
specified dates to cash flows that are solely
payments of principal and interest (SPPI)
on the principal amount outstanding.

Amortised cost is calculated by taking
into account any discount or premium on
acquisition and fees or costs that are an integral
part of the EIR.

Financial assets at fair value through other
comprehensive income (FVTOCI)

Financial assets that meet the criteria for initial
recognition at FVTOCI are remeasured at fair
value at the end of each reporting date through
other comprehensive income (OCI):

a) The objective of the business model

is achieved both by collecting

contractual cash flows and selling the
financial assets, and

b) The contractual terms of the asset that
give rise on specified dates to cash
flows that represent solely payment of
principal and interest.

Financial assets at fair value through profit or
loss (FVTPL)

Financial assets that do not meet the amortised
cost criteria or FVTOCI criteria are remeasured
at fair value at the end of each reporting date
through profit and loss.

Impairment of Financial assets

The Company applies the expected credit
loss model for recognising impairment loss on
financial assets measured at amortised cost,

trade receivables and other contractual rights
to receive cash or other financial asset.

The Company measures the loss allowance for
a Trade Receivables and Contract Assets by
following 'simplified approach' at an amount
equal to the lifetime expected credit losses
("ECL"). In case of other financial assets,
12-month ECL is used to provide for impairment
loss and where credit risk has increased
significantly, lifetime ECL is used.

Derecognition of financial assets

On derecognition of a financial asset in
its entirety, the difference between the
asset's carrying amount and the sum of the
consideration received and receivable and
the cumulative gain or loss that had been
recognised in other comprehensive income
and accumulated in equity, is recognised in the
statement of profit and loss if such gain or loss
would have otherwise been recognised in the
statement of profit and loss on disposal of that
financial asset.

e Financial liabilities and equity instruments
Classification as debt or equity

Debt and equity instruments issued by the
Company are classified as either financial
liabilities or as equity in accordance with the
substance of the contractual arrangements
and the definitions of a financial liability and
an equity instrument. Compound financial
instruments are separated into liability and
equity components based on the terms
of the contract.

Instruments entirely Equity in nature

Unsecured perpetual securities ("securities”)
are the securities with no fixed maturity or
redemption and the same are callable only
at the option of issuer. These securities
are ranked senior only to the equity share
capital of the Company and the issuer does
not have any redemption obligation hence
these securities are recognised as equity as
per Ind AS 32.

Financial liabilities

Initial recognition and measurement

All financial liabilities are recognised initially at
fair value and in the case of financial liabilities
at amortised cost, net of directly attributable
transaction costs.

Subsequent Measurement

For purposes of subsequent measurement,
financial liabilities are classified under
two categories:

• Financial liabilities at fair value through
profit or loss

• Financial liabilities at amortised cost
Classification of Financial liabilities

Financial liabilities at fair value through profit
or loss (FVTPL)

Financial liabilities at fair value through profit
or loss include financial liabilities held for
trading and financial liabilities designated upon
initial recognition at fair value through profit or
loss. Financial liabilities are classified as held
for trading if these are incurred for the purpose
of repurchasing in the near term. This category
also includes derivative financial instruments
entered into by the Company that are not
designated as hedging instruments in hedge
relationships as defined by Ind AS 109.

Gains or losses on liabilities held for trading are
recognised in the profit or loss.

Financial liabilities designated upon initial
recognition at fair value through profit or loss
are designated as such at the initial date of
recognition, and only if the criteria in Ind AS 109
are satisfied. Subsequent changes in fair value
of liabilities are recognised in the statement of
profit and loss.

Fair values are determined in the manner
described in note 'm'.

Financial liabilities measured at amortised cost

Financial liabilities that are not held-for-
trading and are not designated as at FVTPL
are measured at amortised cost at the end of
subsequent accounting periods. The carrying

amounts of financial liabilities that are
subsequently measured at amortised cost are
determined based on the effective interest
method. Interest expense that is not capitalised
as part of costs of an asset is included in the
'Finance costs' line item in the statement of
profit and loss.

Derecognition of financial liabilities

On derecognition, the difference between
the carrying amount of the financial liability
derecognised and the consideration paid /
payable is recognised in the statement of profit
and loss. In case of derecognition of financial
liabilities relating to promoters contribution,
the difference between the carrying amount
of the financial liability derecognised and the
consideration paid / payable is recognised
in other equity.

Offsetting of Financial Instruments

Financial assets and financial liabilities are
offset and the net amount is reported in the
balance sheet if there is a legally enforceable
right (not contingent on future events) to
off-set the recognised amounts and there is an
intention to settle on a net basis, or to realise the
assets and settle the liabilities simultaneously.

Financial guarantee contracts

Financial guarantee contracts issued by the
Company are those contracts that require a
payment to be made to reimburse the holder
for a loss it incurs because the specified
debtor fails to make a payment when due in
accordance with the terms of a debt instrument.
Financial guarantee contracts are recognised
initially as a liability at fair value through
profit or loss, adjusted for transaction costs
that are directly attributable to the issuance
of the guarantee. Subsequently, the liability
is measured at the higher of the amount of
loss allowance determined as per impairment
requirements of Ind AS 109 and the amount
recognised less cumulative amortisation.

f Derivative financial instruments

The Company enters into a variety of derivative
financial instruments to manage its exposure
to interest rate and foreign exchange rate risks

on borrowings / purchases, including foreign
exchange forward contracts, interest rate
swaps and cross currency swaps, Principal only
Swap, coupon only swap etc. Further details
of derivatives financial instruments are
disclosed in note 51.

Derivatives are initially recognised at fair value
at the date the derivative contracts are entered
into and are subsequently remeasured to their
fair value at the end of each reporting period.
Derivatives are carried as financial assets
when the fair value is positive and as financial
liabilities when the fair value is negative.
The resulting gain or loss is recognised in
the statement of profit and loss immediately,
except for the effective portion of cash flow
hedges, which is recognised in OCI and later
reclassified to profit and loss.

g Hedge Accounting

The Company designates certain hedging
instruments, which mainly includes derivatives
in respect of foreign currency risk, as
cash flow hedges.

At the inception of the hedge relationship, the
Company formally designates and documents
the relationship between the hedging
instrument and hedged item, along with its
risk management objectives and its strategy
for undertaking various hedge transactions.
Furthermore, at the inception of the hedge and
on an ongoing basis, the Company documents
whether the hedging instrument is highly
effective in offsetting changes in fair value or
cash flows of the hedged item attributable to
the hedged risk.

Cash flow hedges

The Company uses forward currency contracts
as hedges of its exposure to foreign currency
risk in forecast transactions and firm
commitments. The Company designates only
the spot element of a forward contract as a
hedging instrument. The forward element
is recognised in OCI. The ineffective portion
relating to foreign currency contracts is
recognised in finance costs.

h Investments in subsidiaries and associates

Investments in subsidiaries and associates are
accounted for at cost, net of impairment, if any.
(Also refer note 3(v)).

i Inventories

Inventories are stated at the lower of cost or net
realisable value after providing for obsolescence
and other losses where considered necessary.
Costs include all non-refundable duties and
all charges incurred in bringing the goods to
their present location and condition. Cost is
determined on First in First out basis (FIFO) for
coal inventory and on weighted average basis
for other than coal inventory. Net realisable
value represents estimated selling price of
inventories and in case of coal inventory it also
includes the tariff price recoverable from supply
of power generated from usage of coal less all
estimated cost necessary to make the sale.
Stores and Spares which do not meet the
definition of property, plant and equipment are
accounted as inventories.

j Cash and cash equivalents

Cash and cash equivalent in the balance sheet
comprise cash at banks and on hand and
short-term deposits with an original maturity of
three months or less, that are readily convertible
to a known amount of cash and subject to an
insignificant risk of changes in value.

For the purpose of the statement of cash flows,
cash and cash equivalents consist of cash and
short-term deposits, as defined above, net
of outstanding bank overdrafts as they are
considered an integral part of the Company's
cash management.

k Business combinations and Goodwill

Acquisitions of business are accounted
for using the acquisition method except
business combination under common control.
The consideration transferred in a business
combination is measured at fair value, which is
calculated as the sum of the acquisition date
fair values of the assets transferred by the
Company, liabilities incurred by the Company to
the former owners of the acquiree and the equity
interest issued by the Company in exchange

of control of the acquiree. Acquisition related
costs are charged to the statement of profit
and loss for the periods in which the costs are
incurred and the services are received, with the
exception of the costs of issuing debt or equity
securities that are recognised in accordance
with Ind AS 32 and Ind AS 109.

A business combination involving entities or
businesses under common control is a business
combination in which all of the combining
entities or businesses are ultimately controlled
by the same party or parties both before
and after the business combination and the
control is not transitory. The transactions
between entities under common control are
specifically covered by appendix C of Ind AS
103. Such transactions are accounted for using
the pooling-of-interest method. The assets and
liabilities of the acquired entity are recognised
at their carrying amounts of the Company's
financial statements. No adjustments are
made to reflect fair values or recognise any
new assets or liabilities. The components of
equity of the acquired companies are added
to the same components within the Company's
equity. The difference, if any, between the
amounts recorded as share capital issued plus
any additional consideration in the form of
cash or other assets and the amount of share
capital of the transferor is transferred to capital
reserve and is presented separately from other
capital reserves. The Company's shares issued
in consideration for the acquired companies
are recognised from the moment the acquired
companies are included in these financial
statements and the financial statements of
the commonly controlled entities would be
combined, retrospectively, as if the transaction
had occurred at the beginning of the earliest
reporting period presented.

If the initial accounting for a business
combination is incomplete by the end of the
reporting period in which the combination
occurs, the Company reports provisional
amounts for the items for which the
accounting is incomplete. Those provisional
amounts are adjusted through Capital Reserve
/ goodwill during the measurement period, or

additional assets or liabilities are recognised,
to reflect new information obtained about
facts and circumstances that existed at the
acquisition date that, if known, would have
affected the amounts recognised at that date.
These adjustments are called as measurement
period adjustments. The measurement
period does not exceed one year from the
acquisition date.

Purchase consideration paid in excess /
shortfall of the fair value of identifiable assets
and liabilities including contingent liabilities
and contingent assets, is recognised as
goodwill / capital reserve respectively, except in
case where different accounting treatment is
specified in the court / National Company Law
Tribunal ("NCLT") approved scheme.

However, the following assets and liabilities
acquired in a business combination are
measured at the basis indicated below:

• Deferred tax assets or liabilities, and
liabilities or assets related to employee
benefits arrangements are recognised and
measured in accordance with Ind AS 12
"Income Taxes” and Ind AS 19 "Employee
Benefits” respectively.

• Potential tax effects of temporary
differences and carry forwards of an
acquiree that exist at the acquisition date
or arise as a result of the acquisition are
accounted in accordance with Ind AS 12.

Goodwill arising on an acquisition of a business
is carried at cost as established at the date of
acquisition of the business less accumulated
impairment losses, if any.

For the purposes of impairment testing,
goodwill is allocated to each of the
Company's cash-generating units (or group
of cash-generating units) that is expected to
benefit from the synergies of the combination.

A cash-generating unit to which goodwill
has been allocated is tested for impairment
annually, or more frequently when there is an
indication that the unit may be impaired. If the
recoverable amount of the cash-generating
unit is less than its carrying amount, the

impairment loss is allocated first to reduce the
carrying amount of any goodwill allocated to
the unit and then to the other assets of the
unit pro rata based on the carrying amount of
each asset in the unit. Any impairment loss for
goodwill is recognised directly in statement of
profit and loss. An impairment loss recognised
for goodwill is not reversed in subsequent
periods.

On disposal of the relevant cash-generating
unit, the attributable amount of goodwill is
included in the determination of the profit or
loss on disposal.

l Foreign currency translations and transactions

In preparing the financial statements of the
Company, transactions in currencies other than
the entity's functional currency are recognised
at the rate of exchange prevailing at the date of
the transactions. At the end of each reporting
period, monetary items denominated in foreign
currencies are retranslated at the rates
prevailing at that date. Non-monetary items
that are measured in terms of historical cost in
a foreign currency are not retranslated.

Exchange differences on monetary items are
recognised in profit and loss in the period
in which they arise except for exchange
differences on foreign currency borrowings
relating to assets under construction for future
productive use, which are included in the cost
of those assets when they are regarded as an
adjustment to interest costs on those foreign
currency borrowings.

The Company has elected to continue the
policy adopted for accounting for exchange
differences arising from translation of
long-term foreign currency monetary items
outstanding and recognised in the financial
statements for the period ending immediately
before the beginning of the first Ind AS
financial reporting period i.e. March 31, 2016 as
per the previous GAAP.

m Fair value measurement

The Company measures financial instruments
such as derivatives and mutual funds at fair
value at each balance sheet date.

The Company's management determines the
policies and procedures for both recurring
fair value measurement, such as derivative
instruments and unquoted financial assets
measured at fair value.

The Company uses valuation techniques that
are appropriate in the circumstances and for
which sufficient data are available to measure
fair value, maximising the use of relevant
observable inputs and minimising the use of
unobservable inputs.

All assets and liabilities for which fair value
is measured or disclosed in the financial
statements are categorised within the fair
value hierarchy, described as follows, based on
the lowest level input that is significant to the
fair value measurement as a whole:

- External valuers are involved for valuation
of significant assets such as unquoted
financial assets and financial liabilities
and derivatives.

- For assets and liabilities that are
recognised in the financial statements on
a recurring basis, the Company determines
whether transfers have occurred between
levels in the hierarchy by re-assessing
categorisation (based on the lowest level
input that is significant to the fair value
measurement as a whole) at the end of
each reporting period.

For the purpose of fair value disclosures, the
Company has determined classes of assets
and liabilities on the basis of the nature,
characteristics and risks of the asset or liability
and the level of the fair value hierarchy as
explained above.

n Government grants

The Company recognises government
grants only when there is reasonable
assurance that grant will be received, and

all the attached conditions will be complied
with. Where Government grants relates to
non-monetary assets, the cost of assets is
presented at gross value and grant significantly
complied thereon is recognised as income in
the statement of profit and loss over the useful
life of the related assets in proportion in which
depreciation is charged.

Grants related to income are recognised in the
statement of profit and loss in the same period
as the related cost which they are intended to
compensate are accounted for.

o Contract Balances
Contract assets

A contract asset is the right to consideration
in exchange for goods or services transferred
to the customer. If the Company performs by
transferring goods or services to a customer
before the customer pays consideration or
before payment is due, a contract asset is
recognised for the earned consideration that
is conditional. Contract assets are subject to
impairment assessment.

Trade receivables

A receivable represents the Company's
right to an amount of consideration that is
unconditional i.e. only the passage of time is
required before payment of consideration is
due and the amount is billable.

Contract liabilities

A contract liability is the obligation to transfer
goods or services to a customer for which the
Company has received consideration from the
customer. Contract liabilities are recognised
as revenue when the Company performs
obligations under the contract.

p Revenue recognition

Revenue from contracts with customers is
recognised when control of the goods or
services are transferred to the customer at
an amount that reflects the consideration to
which the Company expects to be entitled in
exchange for those goods or services.

Revenue is measured based on the transaction
price, which is the consideration, adjusted
for discounts and other incentives, if any, as
specified in the contract with the customer.
Revenue also excludes taxes or other amounts
collected from customers.

The disclosure of significant accounting
judgements, estimates and assumptions
relating to revenue from contracts with
customers are provided in Note 3 (vii).

The specific recognition criteria described
below must also be met before revenue
is recognised.

i) Revenue from Power Supply

The Company's contracts with customers
for the sale of electricity generally include
one performance obligation. The Company
has concluded that revenue from sale of
electricity should be recognised at the
point in time when electricity is transferred
to the customer.

The Company has generally concluded that
it is principal in its revenue arrangements.
However, where the company is acting as
an agent, the company recognises revenue
at the net amount that is retained for
these arrangements.

Revenue from operations on account of
Force Majeure events / change in law
events in terms of PPAs / SPPAs with
customers (Power Distribution Utilities)
is accounted for by the Company based
on the orders / reports of Regulatory
Authorities, best management estimates
wherever needed and reasonable certainty
to expect ultimate collection.

In case of PPA under section 62 of
Electricity Act, 2003, revenue from sale
of power is recognised based on the most
recent tariff order approved by the CERC,
as modified by the orders of Appellate
Tribunal for Electricity ("APTEL"), to
the extent applicable, having regard to
mechanism provided in applicable tariff
regulations and the bilateral arrangements
with the customers. Where the tariff rates

r Employee benefits

i) Defined benefit plans:

The Company has obligation towards
gratuity, a defined benefit retirement plan
covering eligible employees (in some cases
funded through Group Gratuity Scheme
of Life Insurance Corporation of India).
The Company accounts for the liability
for the gratuity benefits payable in future
and its classifications between current
and non-current liabilities are based on an
independent actuarial valuation carried
out using Projected Unit Credit Method.

Defined benefit costs in the nature
of current and past service cost and
net interest expense or income are
recognised in the statement of profit and
loss in the period in which they occur.
Remeasurement, comprising of actuarial
gains and losses, the effect of changes
to the asset ceiling (excluding amounts
included in net interest or the net defined
benefit liability) and the return on plan
assets (excluding amounts included in net
interest on the net defined benefit liability)
are recognised immediately in the balance
sheet with corresponding debit or credit to
retained earnings through OCI in the period
in which it occurs. Remeasurement are not
classified to statement of profit and loss
in subsequent periods. Past service cost is
recognised in the statement of profit and
loss in the period of a plan amendment.

ii) Defined contribution plan:

Retirement Benefits in the form of
Provident Fund and Family Pension Fund
which are defined contribution schemes
are charged to the statement of profit
and loss for the period in which the
contributions to the respective funds
accrue as per relevant statues.

iii) Compensated Absences:

Provision for Compensated Absences
and its classifications between current
and non-current liabilities are based
on independent actuarial valuation.

The actuarial valuation is done as per the
projected unit credit method as at the
reporting date.

iv) Short term employee benefits:

These are recognised at an undiscounted
amount in the Statement of profit and
loss for the year in which the related
services are rendered.

s Leases

The Company assesses at contract inception
whether a contract is, or contains, a lease.
That is, 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 as lessee

The Company recognises right-of-use assets
and lease liabilities for all leases except for
short-term leases and leases of low-value assets.

The Company applies the available practical
expedients wherein it:

• Uses a single discount rate to a portfolio
of leases with reasonably similar
characteristics

• Relies on its assessment of whether leases
are onerous immediately before the date
of initial application

• Applies the short-term leases exemptions
to leases with lease term that ends within
12 months at the date of initial application

• Excludes the initial direct costs from the
measurement of the right-of-use asset at
the date of initial application

• Uses hindsight in determining the lease
term where the contract contains options
to extend or terminate the lease

Right-of-use assets

The company recognises right-of-use assets at
the commencement date of the lease (i.e., the
date the underlying asset is available for use).

The cost of right-of-use assets includes the
amount of lease liabilities recognised, initial
direct costs incurred, and lease payments made

at or before the commencement date less any
lease incentives received. Refer note 'a' for
useful life of right-of-use assets.

The right-of-use assets are also subject to
impairment. Refer note 'w' for impairment of
non-financial assets.

Lease Liabilities

The Company records the lease liabilities at the
present value of the lease payments discounted
at the incremental borrowing rate at the date
of initial application and right-of-use asset
at an amount equal to the lease liabilities
adjusted for any prepayments recognised in
the balance sheet. The lease payments include
fixed payments (including in substance fixed
payments) less any lease incentives receivable,
variable lease payments that depend on an
index or a rate and amounts expected to be
paid under residual value guarantees. The lease
payments also include the exercise price of
a purchase option reasonably certain to be
exercised by the Company and payments of
penalties for terminating the lease, if the lease
term reflects the Company exercising the option
to terminate. Variable lease payments that do
not depend on an index or a rate are recognised
as expenses in the period in which the event or
condition that triggers the payment occurs.

Subsequent measurement of lease liabilities

The lease liabilities is remeasured when
there is change in future lease payments
arising from a change in an index or a rate or
a change in the estimate of the guaranteed
residual value or a change in the assessment
of purchase, extension or termination option.
When the lease liabilities is measured, the
corresponding adjustment is reflected in the
right-of-use assets.

t Taxes on Income

Tax expenses comprises current tax and
deferred tax. These are recognised in the
statement of profit and loss except to the
extent that it relates to a business combination,
or items recognised directly in equity or in other
comprehensive income.

Current tax

Tax on income for the current period is
determined on the basis of estimated
taxable income and tax credits computed in
accordance with the provisions of the relevant
tax laws and based on the expected outcome
of assessments / appeals. Current income
tax assets and liabilities are measured
at the amount expected to be recovered
from or paid to the taxation authorities.
Management periodically evaluates positions
taken in the tax returns with respect to
situations in which applicable tax regulations
are subject to interpretation and establishes
provisions where appropriate.

Current income tax relating to items recognised
outside profit or loss is recognised outside
profit or loss (either in other comprehensive
income or in equity). Current tax items are
recognised in correlation to the underlying
transaction either in OCI or directly in equity.
Management periodically evaluates positions
taken in the tax returns with respect to
situations in which applicable tax regulations
are subject to interpretation and establishes
provisions where appropriate.

Deferred tax

Deferred tax is recognised for the future
tax consequences of deductible temporary
differences between the carrying values of
assets and liabilities and their respective
tax bases at the reporting date. Deferred
tax liabilities are generally recognised for all
taxable temporary differences except when
the deferred tax liability arises at the time of
transaction that affects neither the accounting
profit or loss nor taxable profit or loss.
Deferred tax assets are generally recognised
for all deductible temporary differences, carry
forward of unused tax credits and any unused
tax losses, to the extent that it is probable
that future taxable income will be available
against which the deductible temporary
differences and carry forward of unused tax
credit and unused tax losses can be utilised
except when the deferred tax asset relating
to temporary differences arising at the time
of transaction affects neither the accounting

profit or loss nor the taxable profit or loss.
The carrying amount of deferred tax assets is
reviewed at each reporting date and reduced
to the extent that it is no longer probable that
sufficient taxable profit will be available to
allow all or part of the deferred tax asset to
be utilised. Unrecognised deferred tax assets
are re-assessed at each reporting date and are
recognised to the extent that it has become
probable that future taxable profits will allow
the deferred tax assets to be utilised.

Deferred tax relating to items recognised
outside profit and loss is recognised outside
profit and loss (either in other comprehensive
income or in equity). Deferred tax items are
recognised in correlation to the underlying
transaction either in OCI or directly in equity.

The Company offsets deferred tax assets and
deferred tax liabilities if and only if it has a legally
enforceable right to set off current tax assets
and current tax liabilities and the deferred
tax assets and deferred tax liabilities relate
to income taxes levied by the same taxation
authority on the same taxable entity which
intend either to settle current tax liabilities and
assets on a net basis or to realise the assets
and settle the liabilities simultaneously in each
future period in which significant amounts of
deferred tax liabilities or assets are expected to
be settled or recovered.

When there is uncertainty regarding income tax
treatments, the Company assesses whether a
tax authority is likely to accept an uncertain tax
treatment. If it concludes that the tax authority
is unlikely to accept an uncertain tax treatment,
the effect of the uncertainty on taxable
income, tax bases and unused tax losses and
unused tax credits is recognised. The effect of
the uncertainty is recognised using the method
that, in each case, best reflects the outcome of
the uncertainty: the most likely outcome or the
expected value. For each case, the Company
evaluates whether to consider each uncertain
tax treatment separately or in conjunction
with another or several other uncertain tax
treatments based on the approach that best
prefixes the resolution of uncertainty.

u Earnings per share

Basic earnings per share is computed by dividing
the profit after tax (net off distribution on
Perpetual Securities whether declared or not)
attributable to the owners of the company by
the weighted average number of equity shares
outstanding during the year. Diluted earnings
per share is computed by dividing the profit
after tax (net off distribution on Perpetual
Securities whether declared or not) attributable
to the owners of the company as adjusted
for the effects of dividend, interest and other
charges relating to the dilutive potential equity
shares by weighted average number of shares
plus dilutive potential equity shares.