MATERIAL ACCOUNTING POLICIES2.1 Statement of compliance and basis of preparation
The standalone financial statements of the Company
have been prepared in accordance with Indian Accounting
Standards (Ind AS) notified under the Companies (Indian
Accounting Standards) Rules, 2015 (as amended from
time to time) and presentation requirements of Division
II of Schedule III to the Companies Act, 2013,(as amended
from time to time) (Ind AS compliant Schedule III), as
applicable to the standalone financial statements.
The standalone financial statements have been prepared
on a historical cost basis, except for the following assets
and liabilities which have been measured at fair value:
• Derivative financial instruments, and
• Certain financial assets and liabilities measured at
fair value (refer accounting policy regarding financial
instruments).
• Equity settled ESOP at grant date fair value at each
reporting date.
The accounting policies and related notes further described
the specific measurements applied for each of the assets
and liabilities.
The standalone financial statements are presented in
' and all values are rounded to the nearest lacs (' 00,000),
except when otherwise indicated.
The Company has prepared the standalone financial
statements on the basis that it will continue to operate as
a going concern.
2.2 Summary of material accounting policiesa. Current versus non-current classification
The Company segregates assets and liabilities into
current and non-current categories for presentation
in the balance sheet after considering its normal
operating cycle and other criteria set out in Ind AS
1, “Presentation of Financial Statements". For this '
purpose, current assets and liabilities include the
current portion of non-current assets and liabilities
respectively. Deferred tax assets and liabilities are
always classified as non-current.
The operating cycle is the time between the
acquisition of assets for processing and their
realisation in cash and cash equivalents. The
Company has identified period up to twelve months
I
as its operating cycle.
b. Business combinations and goodwill
Basis of Business combinations:
The Company determines that it has acquired a
business when the acquired set of activities and
assets include an input and a substantive process
that together significantly contribute to the ability to
create outputs. The acquired process is considered
substantive if it is critical to the ability to continue
producing outputs, and the inputs acquired include
an organised workforce with the necessary skills,
knowledge, or experience to perform that process or
it significantly contributes to the ability to continue
producing outputs and is considered unique or scarce
or cannot be replaced without significant cost, effort,
or delay in the ability to continue producing outputs
and accordingly the slump sale transaction between
the Company and its subsidiary as referred in note
61 has been considered as business combinations
involving entities or businesses under common
control.
Business combinations involving entities or
businesses under common control are accounted for
using the pooling of interests method in accordance
with the requirements of Appendix C of Ind AS
103 - Business Combinations. The comparative
information in these standalone financial statements
has been restated as if the combination had occurred
from the beginning of the earliest period presented
as per the requirement of appendix C of Ind AS
103 and assets and liabilities acquired has been
recognised as follows:
• The assets and liabilities of the combining
entities are recognised at their carrying
amounts, as reflected in the consolidated
financial statements of the Company.
• No adjustments are made to reflect fair values
or recognise any new assets or liabilities.
• The investment in the subsidiary shall be
cancelled to the extent of:
- the carrying value of the net assets
acquired, and
- the consideration paid, if any.
• The difference, if any, between the net assets
acquired and investment cancelled, and
consideration agreed of slump sale has been
recongised in Retained earning in the other
equity.
c. Investment in subsidiaries and joint ventures
A subsidiary is an entity that is controlled by another
entity. The Company's investments in its subsidiaries
are accounted at cost less impairment.
A joint venture is a type of joint arrangement
whereby the parties that have joint control of the
arrangement have rights to the net assets of the
joint venture. Joint control is the contractually agreed
sharing of control of an arrangement, which exists
only when decisions about the relevant activities
require unanimous consent of the parties sharing
control.
The Company's investments in its subsidiaries and
joint ventures are accounted at cost less impairment.
Impairment of investments
The Company reviews its carrying value of
investments carried at cost annually, or more
frequently when there is indication for impairment.
If the recoverable amount is less than its carrying
amount, the impairment loss is recorded in the
Statement of Profit and Loss.
When an impairment loss subsequently reverses,
the carrying amount of the Investment is increased
to the revised estimate of its recoverable amount,
so that the increased carrying amount does not
exceed the cost of the Investment. A reversal of
an impairment loss is recognised immediately in
Statement of Profit or Loss.
d. Foreign currencies
The standalone financial statements are presented
in Indian Rupee ('), which is the Company's functional
currency.
Transactions and balances
Transactions in foreign currencies are initially
recorded by the Company's at functional currency
spot rates at the date the transaction first qualifies
for recognition. However, for practical reasons,
the Company uses an average rate if the average
approximates the actual rate at the date of the
transaction.
Monetary assets and liabilities denominated in
foreign currencies are translated at the functional
currency spot rates of exchange at the reporting
date.
Exchange differences arising on settlement or
translation of monetary items are recognised in the
Statement of profit or loss.
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated
using the exchange rates at the dates of the initial
transactions. Non-monetary items measured at fair
value in a foreign currency are translated using the
exchange rates at the date when the fair value is
determined. The gain or loss arising on translation
of non-monetary items measured at fair value is
treated in line with the recognition of the gain or loss
on the change in fair value of the item (i.e., translation
differences on items whose fair value gain or loss is
recognised in OCI or profit or loss are also recognised
in OCI or profit or loss, respectively).
In determining the spot exchange rate to use on
initial recognition of the related asset, expense or
income (or part of it) on the derecognition of a non¬
monetary asset or non-monetary liability relating to
advance consideration, the date of the transaction is
the date on which the Company initially recognises
the non-monetary asset or non-monetary liability
arising from the advance consideration. If there
are multiple payments or receipts in advance, the
Company determines the transaction date for each
payment or receipt of advance consideration.
e. Fair value measurement
The Company measures financial instruments, such
as, derivatives at fair value at each balance sheet
date.
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 fair value measurement
is based on the presumption that the transaction
to sell the asset or transfer the liability takes place
either:
• In the principal market for the asset or liability,
or
• In the absence of a principal market, in the most
advantageous market for the asset or liability
The principal or the most advantageous market must
be accessible by the Company.
The fair value of an asset or a liability is measured
using the assumptions that market participants
would use when pricing the asset or liability,
assuming that market participants act in their
economic best interest.
A fair value measurement of a non-financial asset
takes into account a market participant's ability to
generate economic benefits by using the asset in
its highest and best use or by selling it to another
market participant that would use the asset in its
highest and best use.
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 standalone 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:
• Level 1 - Quoted (unadjusted) market prices in
active markets for identical assets or liabilities
• Level 2 - Valuation techniques for which the
lowest level input that is significant to the fair
value measurement is directly or indirectly
observable
• Level 3 - Valuation techniques for which the
lowest level input that is significant to the fair
value measurement is unobservable
For assets and liabilities that are recognised in the
standalone 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.
The Company determines the policies and procedures
for both recurring fair value measurement unquoted
financial assets measured at fair value.
External valuers are involved for valuation of
significant assets and liabilities. Involvement of
external valuers is decided upon annually by the
Management. Selection criteria include market
knowledge, reputation, independence and whether
professional standards are maintained.
At each reporting date, the Company analyses the
movements in the values of assets and liabilities
which are required to be remeasured or re-assessed
as per the Company's accounting policies. For
this analysis, the Company verifies the major
inputs applied in the latest valuation by agreeing
the information in the valuation computation to
contracts and other relevant documents.
The Company also compares the change in the
fair value of each asset and liability with relevant
external sources to determine whether the change is
reasonable.
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.
This note summarises accounting policy for fair
value. Other fair value related disclosures are given
in the relevant notes.
• Disclosures for valuation methods, significant
estimates and assumptions (notes 3, 8, 52 and
53)
• Quantitative disclosures of fair value
measurement hierarchy (note 52)
• Financial instruments (including those carried
at amortised cost) (notes 8, 9, 10, 14, 15, 16,
17, 18, 22, 23, 24, 28, 29, 30, 52 and 53)
f. Revenue from contract with customer
Revenue from contracts with customers is
recognised when control of the goods 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. The Company
has generally concluded that it is the principal in its
revenue arrangements because it typically controls
the goods or services before transferring them to the
customer.
The disclosures of significant accounting judgements,
estimates and assumptions relating to revenue from
contracts with customers are provided in Note 3.
Sale of products
Revenue from sale of products is recognised at the
point in time when control of the asset is transferred
to the customer, generally on delivery of the
products. The normal credit term is 07 to 180 days
upon delivery.
Revenue towards satisfaction of a performance
obligation is measured at the amount of transaction
price (net of variable consideration) allocated to that
performance obligation. The transaction price of
goods sold and services rendered is net of variable
consideration on account of various schemes offered
by the Company as part of the contract.
Variable consideration
If the consideration in a contract includes a variable
amount, the Company estimates the amount of
consideration to which it will be entitled in exchange
for transferring the goods to the customer. The
variable consideration is estimated at contract
inception and constrained until it is highly probable
that a significant revenue reversal in the amount
of cumulative revenue recognised will not occur
when the associated uncertainty with the variable
consideration is subsequently resolved. Some
contracts for the sale of products provide customers
with a right of return. The rights of return give rise to
variable consideration.
• Rights of return
The Company uses the expected value method
to estimate the variable consideration given
the large number of contracts that have similar
characteristics. The Company then applies the
requirements on constraining estimates of
variable consideration in order to determine
the amount of variable consideration that can
be included in the transaction price. A refund
liability is recognised for the goods that are
expected to be returned (i.e., the amount not
included in the transaction price). A right of
return asset (and corresponding adjustment to
cost of sales) is also recognised for the right to
recover the goods from a customer.
The disclosures of significant estimates and
assumptions relating to the estimation of variable
consideration for returns is provided in Note 3.
Other revenue streamsInterest Income
For all debt instruments measured at amortised
cost, interest income is recorded using the effective
interest rate (EIR). EIR is the rate that exactly
discounts the estimated future cash receipts over
the expected life of the financial instrument or a
shorter period, where appropriate, to the gross
carrying amount of the financial asset. When
calculating the effective interest rate, the Company
estimates the expected cash flows by considering
all the contractual terms of the financial instrument
(for example, prepayment, extension, call and similar
options) but does not consider the expected credit
losses. Interest income is included in “other income"
in the Statement of Profit and Loss.
Interest income on bank deposits is recognised on a
time proportion basis taking into account the amount
outstanding and the applicable interest rate. Interest
income is included under the head “other income" in
the Statement of Profit and Loss.
Contract balancesTrade receivables
A receivable is recognised if an amount of
consideration that is unconditional (i.e., only the
passage of time is required before payment of the
consideration is due). Refer to accounting policies of
financial assets in section (p) Financial instruments -
initial recognition and subsequent measurement.
Contract liabilities
A contract liability is recognised if a payment is
received, or a payment is due (whichever is earlier)
from a customer before the Company transfers the
related goods or services. Contract liabilities are
recognised as revenue when the Company performs
under the contract (i.e., transfers control of the
related goods or services to the customer).
Assets and liabilities arising from rights of return
Right of return assets
A right-of-return asset is recognised for the right
to recover the goods expected to be returned
by customers. The asset is measured at the
former carrying amount of the inventory, less
any expected costs to recover the goods and any
potential decreases in value. The Company updates
the measurement of the asset recorded for any
revisions to its expected level of returns, as well as
any additional decreases in the value of the returned
products.
Refund liabilities
A refund liability is recognised for the obligation to
refund some or all of the consideration received (or
receivable) from the customer. The Company's refund
liabilities arise from customers' right of return. The
Company updates its estimates of refund liabilities
(and the corresponding change in the transaction
price) at the end of each reporting period.
g. Government grants
Government grants are recognised where there is
reasonable assurance that the grant will be received,
and all attached conditions will be complied with.
When the grant relates to an expense item, it is
recognised as income on a systematic basis over
the periods that the related costs, for which it is
intended to compensate, are expensed. When the
grant relates to an asset, it is recognised as income
in equal amounts over the expected useful life of the
related asset.
h. Taxes
Tax expense comprises current tax expense and
deferred tax.
Current income tax
Current income tax assets and liabilities are
measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates
and tax laws used to compute the amount are those
that are enacted or substantively enacted, at the
reporting date in the country where the Company
operates and generates taxable income.
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 considers whether it
is probable that a taxation authority will accept an
uncertain tax treatment. The Company shall reflect
the effect of uncertainty for each uncertain tax
treatment by using either most likely method or
expected value method, depending on which method
predicts better resolution of the treatment.
Deferred tax
Deferred tax is provided using the balance sheet
approach on temporary differences between the
tax base of assets and liabilities and their carrying
amounts for financial reporting purposes at the
reporting date.
Deferred tax liabilities are recognised for all taxable
temporary differences, except:
• When the deferred tax liability arises from the
initial recognition of an asset or liability in a
transaction that is not a business combination
and, at the time of the transaction, affects
neither the accounting profit nor taxable profit
or loss and does not give rise to equal taxable
and deductible temporary differences.
• In respect of taxable temporary differences
associated with investments in subsidiaries,
associates and interests in joint ventures, when
the timing of the reversal of the temporary
differences can be controlled and it is probable
that the temporary differences will not reverse
in the foreseeable future
Deferred tax assets are recognised for all deductible
temporary differences, the carry forward of unused
tax credits and any unused tax losses. Deferred tax
assets are recognised to the extent that it is probable
that taxable profit will be available against which
the deductible temporary differences, and the carry
forward of unused tax credits and unused tax losses
can be utilised, except:
• When the deferred tax asset relating to the
deductible temporary difference arises from
the initial recognition of an asset or liability in a
transaction that is not a business combination
and, at the time of the transaction, affects
neither the accounting profit nor taxable profit
or loss and does not give rise to equal taxable
and deductible temporary differences.
• In respect of deductible temporary differences
associated with investments in subsidiaries,
associates and interests in joint ventures,
deferred tax assets are recognised only to the
extent that it is probable that the temporary
differences will reverse in the foreseeable
future and taxable profit will be available
against which the temporary differences can
be utilised
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 asset to be recovered.
In assessing the recoverability of deferred tax
assets, the Company relies on the same forecast
assumptions used elsewhere in the standalone
financial statements and in other management
reports.
Deferred tax assets and liabilities are measured at
the tax rates that are expected to apply in the year
when the asset is realised, or the liability is settled,
based on tax rates (and tax laws) that have been
enacted or substantively enacted at the reporting
date.
Deferred tax relating to items recognised outside
profit or loss is recognised outside profit or 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 which intends
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.
Goods and Services Tax(GST) paid on acquisition of
assets or on incurring expenses
Expenses and assets are recognised net of the
amount of Goods and Service Tax paid, except:
• When the tax incurred on a purchase of
assets or services is not recoverable from the
taxation authority, in which case, the tax paid
is recognised as part of the cost of acquisition
of the asset or as part of the expense item, as
applicable
• When receivables and payables are stated with
the amount of tax included
The net amount of tax recoverable from, or payable
to, the taxation authority is included as part of other
current assets/liabilities in the balance sheet.
Minimum alternate tax
Minimum alternate tax (MAT) paid in a year is charged
to the statement of profit and loss as current tax
for the year. The deferred tax asset is recognised
for MAT credit available only to the extent that it is
probable that the Company will pay normal income
tax during the specified period, i.e., the period for
which MAT credit is allowed to be carried forward.
In the year in which the Company recognises MAT
credit as an asset, it is created by way of credit to the
statement of profit and loss and shown as part of
deferred tax asset. The Company reviews the “MAT
credit entitlement" asset at each reporting date and
writes down the asset to the extent that it is no
longer probable that it will pay normal tax during the
specified period.
i. Property, plant and equipment
Freehold land is carried at historical cost (net of
accumulated impairment loss, if any). All other
items of Plant and equipment are stated at cost,
net of accumulated depreciation and accumulated
impairment losses, if any. Such cost includes the
cost of replacing part of the plant and equipment
and borrowing costs for long-term construction
projects if the recognition criteria are met. 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.
Likewise, when a major inspection is performed, its
cost is recognised in the carrying amount of the plant
and equipment as a replacement if the recognition
criteria are satisfied. All other repair and maintenance
costs are recognised in profit or loss as incurred.
Capital work in progress is stated at cost, net of
accumulated impairment loss, if any.
Depreciation is calculated on a straight-line basis
over the estimated useful lives of the assets as
follows:
The Company, based on technical assessment made
by technical expert and management estimate,
depreciates certain items of plant and equipment
over estimated useful lives which are different
from the useful life prescribed in Schedule II to the
Companies Act, 2013. 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 Company reviews the estimated residual values
and expected useful lives of assets at least annually.
In particular, the Company considers the impact of
health, safety and environmental legislation in its
assessment of expected useful lives and estimated
residual values.
An item of property, plant and equipment and any
significant part initially recognised is derecognised
upon disposal or when no future economic benefits
are expected from its use or disposal. Any gain or
loss arising on derecognition of the asset (calculated
as the difference between the net disposal proceeds
and the carrying amount of the asset) is included in
the statement of profit and loss when the asset is
derecognised.
The residual values, useful lives and methods of
depreciation of property, plant and equipment are
reviewed at each financial year end and adjusted
prospectively, if appropriate.
j. Intangible assets
Intangible assets acquired separately are measured
on initial recognition at cost. Following initial
recognition, intangible assets are carried at cost less
any accumulated amortisation and accumulated
impairment losses. Internally generated intangibles,
excluding capitalised development costs, are not
capitalised and the related expenditure is reflected in
profit or loss in the period in which the expenditure is
incurred.
The useful lives of intangible assets are assessed as
finite.
Intangible assets with finite lives are amortised over
the useful economic life and assessed for impairment
whenever there is an indication that the intangible
asset may be impaired. The amortisation period and
the amortisation method for an intangible asset with
a finite useful life are reviewed at least at the end
of each reporting period. Changes in the expected
useful life or the expected pattern of consumption
of future economic benefits embodied in the asset
are considered to modify the amortisation period or
method, as appropriate, and are treated as changes
in accounting estimates. The amortisation expense
on intangible assets with finite lives is recognised
in the statement of profit and loss unless such
expenditure forms part of carrying value of another
asset.
An intangible asset is derecognised upon disposal
(i.e., at the date the recipient obtains control) or
when no future economic benefits are expected
from its use or disposal. Any gain or loss arising
upon derecognition of the asset (calculated as the
difference between the net disposal proceeds and
the carrying amount of the asset) is included in
the statement of profit and loss. when the asset is
derecognised.
Research and development costs
Research costs are expensed as incurred.
Development expenditures on an individual project
are recognised as an intangible asset when the
Company can demonstrate:
• The technical feasibility of completing the
intangible asset so that the asset will be
available for use or sale
• Its intention to complete and its ability and
intention to use or sell the asset
• How the asset will generate future economic
benefits
• The availability of resources to complete the
asset
• The ability to measure reliably the expenditure
during development
Following initial recognition of the development
expenditure as an asset, the asset is carried at cost
less any accumulated amortisation and accumulated
impairment losses. Amortisation of the asset begins
when development is complete, and the asset is
available for use. It is amortised over the period of
expected future benefit. Amortisation expense is
recognised in the statement of profit and loss unless
such expenditure forms part of carrying value of
another asset. During the period of development, the
asset is tested for impairment annually.
A summary of the policies applied to the Company's
intangible assets is, as follows:
k. 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.
Company as a lessee
The Company applies a single recognition and
measurement approach for all leases, except for
short-term leases and leases of low-value assets.
The Company recognises lease liabilities to make
lease payments and right-of-use assets representing
the right to use the underlying assets.
• 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).
Right-of-use assets are measured at cost, less
any accumulated depreciation and impairment
losses, and adjusted for any remeasurement
of lease liabilities. 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. Right-of-use assets are depreciated
on a straight-line basis over the shorter of the
lease term and the estimated useful lives of the
assets, as follows:
• Land 90-99 years
• Building 5- 15 years
If ownership of the leased asset transfers to
the Company at the end of the lease term or the
cost reflects the exercise of a purchase option,
depreciation is calculated using the estimated
useful life of the asset.
The right-of-use assets are also subject to
impairment. Refer to the accounting policies in
section (l) Impairment of non-financial assets.
• Lease Liabilities
At the commencement date of the lease, the
Company recognises lease liabilities measured
at the present value of lease payments to be
made over the lease term. 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 (unless they are
incurred to produce inventories) in the period in
which the event or condition that triggers the
payment occurs.
In calculating the present value of lease
payments, the Company uses its incremental
borrowing rate at the lease commencement
date because the interest rate implicit in the
lease is not readily determinable. After the
commencement date, the amount of lease
liabilities is increased to reflect the accretion
of interest and reduced for the lease payments
made. In addition, the carrying amount of
lease liabilities is remeasured if there is a
modification, a change in the lease term, a
change in the lease payments (e.g., changes
to future payments resulting from a change in
an index or rate used to determine such lease
payments) or a change in the assessment of an
option to purchase the underlying asset.
• Short-term leases and leases of low-value
assets
The Company applies the short-term lease
recognition exemption to its short-term
leases of building, machinery and equipment
(i.e., those leases that have a lease term of
12 months or less from the commencement
date and do not contain a purchase option).
It also applies the lease of low-value assets
recognition exemption to leases of office
equipment that are considered to be low value.
Lease payments on short-term leases and
leases of low-value assets are recognised as
expense on a straight-line basis over the lease
term.
The Company applies the low-value assets
recognition exemption on a lease-by-lease
basis In making this assessment, the Company
also factors below key aspects:
• The assessment is conducted on an absolute
basis and is independent of the size, nature, or
circumstances of the lessee.
• The assessment is based on the value of the
asset when new, regardless of the asset's age
at the time of the lease.
• The lessee can benefit from the use of the
underlying asset either independently or
in combination with other readily available
resources, and the asset is not highly dependent
on or interrelated with other assets.
• If the asset is subleased or expected to be
subleased, the head lease does not qualify as
a lease of a low-value asset.
Company as a lessor
Leases in which the Company does not transfer
substantially all the risks and rewards incidental
to ownership of an asset is classified as operating
leases. Rental income arising is accounted for on
a straight-line basis over the lease terms. Initial
direct costs incurred in negotiating and arranging an
operating lease are added to the carrying amount of
the leased asset and recognised over the lease term
on the same basis as rental income. Contingent rents
are recognised as revenue in the period in which they
are earned.
l. Inventories
Inventories are valued at the lower of cost and net
realisable value.
Costs incurred in bringing each product to its present
location and condition are accounted for as follows:
• Raw materials: cost includes cost of purchase
and other costs incurred in bringing the
inventories to their present location and
condition. Cost is determined on first in, first
out basis.
• Finished goods and intermediate products
(including manufactured components): cost
includes cost of direct materials and labor and a
proportion of manufacturing overheads based
on the normal operating capacity but excluding
borrowing costs. Cost is determined on first in,
first out basis.
• Traded goods: cost includes cost of purchase
and other costs incurred in bringing the
inventories to their present location and
condition. Cost is determined on first in, first
out basis.
• Stores and spares, consumables and packing
materials: cost includes cost of purchase and
other costs incurred in bringing the inventories
to their present location and condition. Cost is
determined on first in, first out basis.
Net realisable value is the estimated selling price in
the ordinary course of business, less estimated costs
of completion and the estimated costs necessary to
make the sale.
m. Impairment of non-financial assets
The Company assesses, at each reporting date,
whether there is an indication that an asset may
be impaired. If any indication exists, or when annual
impairment testing for an asset is required, the
Company estimates the asset's recoverable amount.
An asset's recoverable amount is the higher of an
asset's or cash-generating unit's (CGU) fair value less
costs of disposal and its value in use. The recoverable
amount is determined for an individual asset, unless
the asset does not generate cash inflows that are
largely independent of those from other assets or
groups of assets. When the carrying amount of an
asset or CGU exceeds its recoverable amount, the
asset is considered impaired and is written down to
its recoverable amount.
In assessing value in use, the estimated future cash
flows are discounted to their present value using a
pre-tax discount rate that reflects current market
assessments of the time value of money and the
risks specific to the asset. In determining fair value
less costs of disposal, recent market transactions
are taken into account. If no such transactions can
be identified, an appropriate valuation model is used.
These calculations are corroborated by valuation
multiples, quoted share prices for publicly traded
companies or other available fair value indicators.
The Company bases its impairment calculation on
detailed budgets and forecast calculations, which are
prepared separately for each of the Company's CGUs
to which the individual assets are allocated. These
budgets and forecast calculations generally cover a
period of five years. For longer periods, a long-term
growth rate is calculated and applied to project future
cash flows after the fifth year. To estimate cash flow
projections beyond periods covered by the most
recent budgets/forecasts, the Company extrapolates
cash flow projections in the budget using a steady or
declining growth rate for subsequent years, unless
an increasing rate can be justified. In any case, this
growth rate does not exceed the long-term average
growth rate for the products, industries, or country
or countries in which the Company operates, or for
the market in which the asset is used.
Impairment losses, including impairment on
inventories, are recognised in the statement of profit
and loss.
The impairment assessment for all assets is made
at each reporting date to determine whether
there is an indication that previously recognised
impairment losses no longer exist or have decreased.
If such indication exists, the Company estimates the
asset's or CGU's recoverable amount. A previously
recognised impairment loss is reversed only if there
has been a change in the assumptions used to
determine the asset's recoverable amount since the
last impairment loss was recognised. The reversal is
limited so that the carrying amount of the asset does
not exceed its recoverable amount, nor exceed the
carrying amount that would have been determined,
net of depreciation, had no impairment loss been
recognised for the asset in prior years. Such reversal
is recognised in the statement of profit and loss,
Goodwill is tested for impairment annually as at 31st
March 2026 and when circumstances indicate that
the carrying value may be impaired.
Impairment is determined for goodwill by assessing
the recoverable amount of each CGU (or group of
CGUs) to which the goodwill relates. When the
recoverable amount of the CGU is less than it's
carrying amount, an impairment loss is recognised.
Impairment losses relating to goodwill cannot be
reversed in future periods.
|