2. Material accounting policies
A. Statement of compliance
The financial statements which comprise the Balance
Sheet, the Statement of Profit and Loss (including Other
Comprehensive Income), the Cash Flow Statement
and the Statement of Changes in Equity (“Financial
Statements”) have been prepared in accordance with
Indian Accounting Standards (Ind ASs) notified under
Section 133 of the Companies Act, 2013 (“the Act”),
read together with the Companies (Indian Accounting
Standards) Rules, 2015, as amended and relevant
amendment rules issued thereafter. The Company has
consistently applied accounting policies to all periods.
B. Basis of preparation and presentation
The financial statements have been prepared on accrual
basis and on the historical cost convention except for
certain financial instruments that are measured at fair
values at the end of each reporting period, as explained
in the accounting policies set out below.
Historical cost is generally based on the fair value
of the consideration given in exchange for goods
and services.
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, regardless of whether that price
is directly observable or estimated using another
valuation technique. In estimating the fair value
of an asset or a liability, the Company takes into
account the characteristics of the asset or liability if
market participants would take those characteristics
into account when pricing the asset or liability at the
measurement date. Fair value for measurement and/
or disclosure purposes in these financial statements is
determined on such a basis, except for share-based
payment transactions that are within the scope of Ind
AS 102, leasing transactions that are within the scope
of Ind AS 116, and measurements that have some
similarities to fair value but are not fair value, such as
net realisable value in Ind AS 2 or value in use in Ind
AS 36. In addition, for financial reporting purposes,
fair value measurements are categorised into Level
1, 2, or 3 based on the degree to which the inputs to
the fair value measurements are observable and the
significance of the inputs to the fair value measurement
in its entirety, which are described as follows:
• Level 1 inputs are quoted prices (unadjusted) in
active markets for identical assets or liabilities that
the entity can access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices
included within Level 1, that are observable for the
asset or liability, either directly or indirectly;
• Level 3 inputs are unobservable inputs for the asset
or liability.
C. Use of estimates and judgements
The preparation of the financial statements in
conformity with Ind AS requires Management to make
judgements, estimates and assumptions that affect the
application of the accounting policies and the reported
amounts of assets and liabilities, income and expenses.
Actual results may differ from those estimates.
The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
The following are the critical judgements and estimates
that have been made in the process of applying the
Company's accounting policies that have the most
significant effect on the amounts recognised in the
financial statements:
a) Useful lives of Property, plant and equipment
Property, plant and equipment represent a
significant proportion of the asset base of the
Company. The charge in respect of periodic
depreciation is derived after determining an
estimate of an asset's expected useful life and
the expected residual value at the end of its life.
The useful lives and residual values of Company's
assets are determined by Management at the time
the asset is acquired and is reviewed at the end
of each reporting period. The lives are based
on historical experience with similar assets as
well as anticipation of future events, which may
impact their life, such as changes in technology.
This reassessment may result in change in
depreciation expense in future periods.
b) Fair value measurement of financial
instruments
Some of the Company's assets and liabilities
are measured at fair value for financial reporting
purposes. In estimating the fair value of an asset
or liability, the Company uses market-observable
data to the extent available. Where Level 1 inputs
are not available, the fair value is measured using
valuation techniques, including the discounted
cash flow model, which involves various
judgments and assumptions. The Company also
engages third party qualified valuers to perform the
valuation in certain cases. The appropriateness of
valuation techniques and inputs to the valuation
model are reviewed by the Management.
c) Income taxes
The Company's tax jurisdiction is India.
Significant judgements are involved in estimating
budgeted profits for the purpose of paying advance
tax, determining the provision for income taxes,
including amount expected to be paid / recovered
for uncertain tax positions.
d) Defined benefit obligations
The Company uses actuarial assumptions viz.,
discount rate, mortality rates, salary escalation
rate etc., to determine such employee benefit
obligations.
e) Claims, provisions and contingent liabilities
The Company has ongoing litigations with various
regulatory authorities and third parties. Where an
outflow of funds is believed to be probable and a
reliable estimate of the outcome of the dispute can
be made based on management's assessment
of specific circumstances of each dispute and
relevant external advice, management provides
for its best estimate of the liability. Such accruals
are by nature complex and can take number
of years to resolve and can involve estimation
uncertainty. Information about such litigations is
disclosed in notes to the financial statements.
f) Leases
The Company evaluates if an arrangement
qualifies to be a lease as per the requirements
of Ind AS 116 Leases. Identification of a lease
requires significant judgment. The Company uses
significant judgement in assessing the lease term
(including anticipated renewals) and the applicable
discount rate. The Company determines the lease
term as the non-cancellable period of a lease,
together with both periods covered by an option
to extend the lease if the Company is reasonably
certain to exercise that option; and periods
covered by an option to terminate the lease if the
Company is reasonably certain not to exercise
that option. In assessing whether the Company is
reasonably certain to exercise an option to extend
a lease, or not to exercise an option to terminate
a lease, it considers all relevant facts and
circumstances that create an economic incentive
for the Company to exercise the option to extend
the lease, or not to exercise the option to terminate
the lease. The Company revises the lease term
if there is a change in the non-cancellable period
of a lease. The discount rate is generally based
on the incremental borrowing rate specific to the
lease being evaluated or for a portfolio of leases
with similar characteristics.
g) Other estimates
The preparation of financial statements
involves estimates and assumptions that
affect the reported amount of assets, liabilities,
disclosure of contingent liabilities at the date of
financial statements and the reported amount
of revenues and expenses for the reporting
period. Specifically, the Company estimates the
probability of collection of accounts receivable by
analysing historical payment patterns, customer
concentrations, customer credit-worthiness and
current economic trends. If the financial condition
of a customer deteriorates, additional allowances
may be required.
D. Classification of Assets and Liabilities as Current
and Non-Current
All Assets and Liabilities have been classified as current
or non-current as per the Company's normal operating
cycle and other criteria set out in the Schedule III to
the Act. Based on the nature of product and activities
of the Company and their realisation in cash and cash
equivalent, the Company has determined its operating
cycle as twelve months for the purpose of current and
non-current classification of assets and liabilities
E. Inventories
Inventories are valued at the lower of cost and net
realisable value after providing for obsolescence
and other losses, where considered necessary.
Cost includes all charges in bringing the goods to
the point of sale. Net realisable value represents
the estimated selling price for inventories less all
estimated costs of completion and costs necessary to
make the sale.
The method of determining cost of various categories
of inventories is as follows:
F. Property, plant and equipment and Capital work
in progress
Property, plant and equipment are measured at cost
less accumulated depreciation and impairment losses,
if any. Cost comprises the purchase price net of any
trade discounts and rebates, any import duties and
other taxes (other than those subsequently recoverable
from the tax authorities), any directly attributable
expenditure in making the asset ready for its intended
use and cost of borrowing till the date of capitalisation
in the case of assets involving material investment and
substantial lead time.
An item of Property, plant and equipment is
de-recognised upon disposal or when no future
economic benefits are expected to arise from the
continued use of asset. Any gain/loss arising on the
disposal or retirement of an item of Property, plant and
equipment is determined as the difference between the
sale proceeds and the carrying amount of the asset and
is recognised in the statement of profit or loss.
Depreciation
Depreciation on buildings is provided on the straight-line
method as per the useful life prescribed in Schedule II
to the Act.
Depreciation on plant and equipment is provided on
straight-line method over 10-25 years, based on the
useful life assessed as per technical assessment, taking
into account the nature of asset, the estimated usage
of the asset, the operating conditions of the asset,
past history of replacement, anticipated technological
changes, maintenance report etc.
Depreciation on other tangible fixed assets viz.
furniture and fixtures, office equipment and vehicles
are provided on written down value method as per the
useful life prescribed in Schedule II of the Act.
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.
Leasehold improvements are amortised over the lower
of estimated useful life and lease term.
Assets individually costing C5,000 and below are fully
depreciated in the period of acquisition.
G. Intangible Assets
Intangible assets are carried at cost, net of accumulated
amortisation and impairment losses, if any. Cost of
an intangible asset comprises of purchase price and
attributable expenditure on making the asset ready for
its intended use.
Intangible assets are amortised on the straight-line
method over their estimated useful life.
An intangible asset is derecognized on disposal,
or when no future economic benefits are expected
from use or disposal. Gains or losses arising from
de-recognition of an intangible asset, measured as the
difference between the net disposal proceeds and the
carrying amount of the asset, are recognised in profit
or loss when the asset is derecognized.
H. Impairment
a) Financial assets
In accordance with Ind AS 109, the Company
applies expected credit loss (ECL) model for
measurement and recognition of impairment
loss. The Company follows 'simplified approach'
for recognition of impairment loss allowance on
trade receivables. The application of simplified
approach does not require the Company to track
changes in credit risk. Rather, it recognises
impairment loss allowance based on lifetime
ECLs at each reporting date, right from its initial
recognition.
For recognition of impairment loss on other
financial assets and risk exposure, the Company
determines whether there has been a significant
increase in the credit risk since initial recognition.
If credit risk has not increased significantly,
12-month ECL is used to provide for impairment
loss. However, if credit risk has increased
significantly, lifetime ECL is used. If in subsequent
period, credit quality of the instrument improves
such that there is no longer a significant increase
in credit risk since initial recognition, then the entity
reverts to recognising impairment loss allowance
based on 12 month ECL.
Lifetime ECLs are the expected credit losses
resulting from all possible default events over
the expected life of a financial instrument.
The 12-month ECL is a portion of the lifetime ECL
which results from default events that are possible
within 12 months after the reporting date.
ECL is the difference between all contractual cash
flows that are due to the Company in accordance
with the contract and all the cash flows that
the entity expects to receive (i.e. all shortfalls),
discounted at the original Effective Interest Rate
(EIR). When estimating the cash flows, an entity
is required to consider:
(i) All contractual terms of the financial
instrument (including prepayment, extension
etc.) over the expected life of the financial
instrument. However, in rare cases when
the expected life of the financial instrument
cannot be estimated reliably, then the entity
is required to use the remaining contractual
term of the financial instrument.
(ii) Cash flows from the sale of collateral held or
other credit enhancements that are integral
to the contractual terms.
As a practical expedient, the Company uses a
provision matrix to determine impairment loss on
portfolio of its trade receivables. The provision
matrix is based on its historically observed
default rates over the expected life of the trade
receivables and is adjusted for forward- looking
estimates. At every reporting date, the historical
observed default rates are updated and changes
in forward-looking estimates are analysed.
ECL impairment loss allowance (or reversal)
recognised during the period is recognised as
income/expense in the Statement of Profit and
Loss. ECL is presented as an allowance, i.e. as an
integral part of the measurement of those assets
in the Balance Sheet.
b) Non-financial assets
The Company assesses at each reporting date
whether there is any objective evidence that a
non-financial asset or a group of non-financial
assets is impaired. If any such indication
exists, the Company estimates the amount of
impairment loss.
An impairment loss is calculated as the difference
between an asset's carrying amount and
recoverable amount. Losses are recognised in
the Statement of Profit and Loss and reflected
in an allowance account. When the Company
considers that there are no realistic prospects
of recovery of the asset the relevant amounts
are written off. If the amount of impairment loss
subsequently decreases and the decrease can be
related objectively to an event occurring after the
impairment was recognised then the previously
recognised impairment loss is reversed through
the Statement of Profit and Loss.
The recoverable amount of an asset or cash
generating unit is the greater of its value in use
and its fair value less costs to sell. In assessing
value in use, the estimated future cash flows
are discounted to their present value using the
pre-tax discount rate that reflects current market
assessments of the time value of money and the
risks specific to the asset. For the purpose of
impairment testing assets are grouped together
into the smallest group of assets that generate
cash inflows from continuing use that are largely
independent of the cash inflows of other assets or
group of asset ("the cash generating unit").
I. Functional and presentation currency
Items included in the financial statements of the
Company are measured using the currency of the
primary economic environment in which the entity
operates (i.e. the “functional currency”). The financial
statements are presented in Indian Rupee (C), the
national currency of India, which is the functional
currency of the Company.
J. Foreign currency transactions and translations
Foreign currency transactions are recorded at
exchange rates prevailing on the date of the transaction
or at rates that closely approximate the rate at the date
of transactions. The date of transaction for the purpose
of determining the exchange rate on initial recognition
of the related asset, expense or income (part of it) is
the date on which the entity initially recognises the
non-monetary asset or non-monetary liability arising
from payment or receipt of advance consideration.
Foreign currency denominated monetary assets and
liabilities are restated into the functional currency
using exchange rates prevailing on the balance sheet
date. Gains and losses arising on settlement and
restatement of foreign currency denominated monetary
assets and liabilities are recognised in the statement
of profit and loss. Non-monetary assets and liabilities
that are measured in terms of historical cost in foreign
currencies are not translated.
K. Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which
are assets that necessarily take a substantial period
of time to get ready for their intended use or sale, are
added to the cost of those assets, until such time as
the assets are substantially ready for their intended
use or sale.
Interest income earned on the temporary investment
of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs
eligible for capitalization.
All other borrowing costs are recognised in profit or loss
in the period in which they are incurred.
L. Employee benefits
a) Defined contribution plans
Employee benefits in the form of provident fund,
superannuation, employees' state insurance fund
and labour welfare fund are considered as defined
contribution plans and the contributions are
charged to the statement of profit and loss during
the year when the contributions to the respective
funds are due and as and when services are
rendered by employees.
Provident fund
Eligible employees receive benefits from a
provident fund. Both the employee and the
Company make monthly contributions to the
provident fund plan equal to a specified percentage
of the covered employee's salary. For certain
employees, the Company makes the contributions
to 'The Employee's Provident Fund of The Andhra
Pradesh Paper Mills Limited' trust maintained
by the Company and for other employees, the
contributions are made to Regional Provident
Fund Commissioner. In respect of contribution
to the trust, the rate at which the annual interest
is payable to the beneficiaries by the trust is
determined by the Government. The Company
has an obligation to make good the shortfall, if
any, between the return from the investments of
the trust and the notified interest rate.
Superannuation
Certain employees of the Company are
participants in the superannuation plan ('the Plan')
which is a defined contribution plan. The Company
contributes to the superannuation fund maintained
with an Insurer.
b) Defined benefit plans
Gratuity
The Company provides for gratuity, a defined
benefit retirement plan ('the Gratuity Plan')
covering eligible employees. The Gratuity
Plan provides a lump-sum payment to vested
employees at retirement, death, incapacitation
or termination of employment, of an amount
based on the respective employee's salary and
the tenure of employment with the Company.
Liabilities with regard to the Gratuity Plan are
determined by actuarial valuation at each Balance
Sheet date using the projected unit credit method.
The Company fully contributes all ascertained
liabilities to the gratuity fund maintained with
the Insurer.
Defined benefit costs are categorised as follows:
a. Service cost (including current service cost,
past service cost, as well as gains and losses
on curtailments and settlements);
b. Net interest expense or income; and
c. Re-measurement
The Company presents the first two components of
defined benefit costs in the statement of profit and
loss in the line item 'Employee benefits expense'.
Curtailment gains and losses are accounted for
as past service costs. Net interest is calculated by
applying the discount rate at the beginning of the
period to the net defined benefit liability or asset.
Remeasurement, comprising actuarial gains and
losses, the effect of the changes to the asset
ceiling (if applicable) and the return on plan assets
(excluding net interest), is reflected immediately
in the balance sheet with a charge or credit
recognised in other comprehensive income in
the period in which they occur. Remeasurement
recognised in other comprehensive income is
reflected immediately in retained earnings and is
not reclassified to profit or loss.
c) Short-term and other long-term
employee benefits
The employees of the Company are entitled
to compensated absences. The employees
can carry forward a portion of the unutilised
accumulating compensated absences and utilise
it in future periods or receive cash at retirement
or termination of employment. The Company
records an obligation for compensated absences
in the period in which the employee renders
the services that increases this entitlement.
The Company measures the expected cost of
compensated absences as the additional amount
that the Company expects to pay as a result of
the unused entitlement that has accumulated at
the end of the reporting period. The Company
fully contributes all ascertained liabilities to the
fund maintained with the Insurer. The Company
recognises accumulated compensated absences
based on actuarial valuation. Non-accumulating
compensated absences are recognised in the
period in which the absences occur.
M. Revenue recognition
a) Sale of goods
Revenue is recognised upon transfer of promised
goods or services to customers in an amount
that reflects the consideration the Company
expects to receive in exchange for those goods
or services. Revenue is reduced for estimated
customer returns, rebates and other similar
allowances, taxes or duties collected on behalf of
the government. An entity shall recognise revenue
when the entity satisfies a performance obligation
by transferring a goods or services (i.e. an asset)
to a customer. An asset is transferred when the
customer obtains control of that asset.
b) Export benefits
Export benefits are recognised on an accrual
basis and when there is a reasonable certainty of
realisation of such benefits / incentives.
c) Other income
Dividend income from investments is recognised
when the shareholder's right to receive payment
has been established.
Interest income is accrued on a time basis, by
reference to the principal outstanding and at the
effective interest rate applicable, which is the
rate that exactly discounts estimated future cash
receipts through the expected life of the financial
asset to that asset's net carrying amount on initial
recognition.
N. 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 recognised when the Company
becomes a party to the contractual provisions of the
instruments. Financial assets and financial liabilities
are initially measured at fair value. 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 asset or financial liabilities,
as appropriate, on initial recognition. Transaction costs
directly attributable to the acquisition of financial asset
or financial liabilities at fair value through profit or
loss are recognised immediately in the Statement of
the Profit and Loss. While, loans and borrowings and
payables are recognised net of directly attributable
transaction costs.
Purchase 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 trade) are recognised on trade date.
For the purpose of subsequent measurement, financial
instruments of the Company are classified in the
following categories: Non-derivative financial assets
comprising amortised cost, investments in subsidiaries,
equity instruments at fair value through other
comprehensive income (FVTOCI) or fair value through
profit or loss (FVTPL) and non-derivative financial
liabilities at amortised cost. Management determines
the classification of its financial instruments at initial
recognition.
The classification of financial instruments depends on
the objective of the Company's business model for
which it is held and on the substance of the contractual
terms / arrangements.
a) Non - derivative financial assets
i. Financial assets at amortised cost
A financial asset shall be measured at amortised
cost if both of the following conditions are met:
- The financial asset is held within a business
model whose objective is to hold financial assets
in order to collect contractual cash flows; and
- The contractual terms of the financial asset give
rise on specified dates to cash flows that are
solely payments of principal and interest on the
principal amount outstanding.
They are presented as current assets, except
for those maturing later than 12 months after the
reporting date which are presented as non-current
assets. Financial assets are measured initially at
fair value plus transaction costs and subsequently
carried at amortized cost using the effective
interest method, less any impairment loss.
Financial assets at amortised cost are represented
by trade receivables, security deposits, cash
and cash equivalents, loans / Inter-Corporate
deposits given / placed and eligible current and
non-current assets.
Cash comprises cash on hand, cash at bank,
cheques on hand and demand deposits with
banks. Cash equivalents are short-term balances
(with an original maturity of three months or
less from the date of acquisition), highly liquid
investments that are readily convertible into
known amounts of cash and which are subject to
insignificant risk of changes in value.
ii. Investments in Equity instruments at
FVTOCI
On initial recognition, the Company can make
an irrevocable election (on an instrument-by¬
instrument basis) to present the subsequent
changes in fair value in other comprehensive
income (OCI) pertaining to investments in equity
instruments. This election is not permitted
if the equity investment is held for trading.
These elected investments are initially measured
at fair value plus transaction costs. Subsequently,
they are measured at fair value with gains
and losses arising from changes in fair value
recognised in other comprehensive income and
accumulated in the "equity instruments through
other comprehensive income". The cumulative
gain or loss is not reclassified to profit or loss on
disposal of the investments.
A financial asset is held for trading if:
- It has been acquired principally for the
purpose of selling it in the near term; or
- On initial recognition it is part of a portfolio
of identified financial instruments that the
Company manages together and has a recent
actual pattern of short-term profit-taking; or
- It is a derivative that is not designated and
effective as a hedge instrument or a financial
guarantee.
Dividends on these investments in equity
instruments are recognised in the Statement
of Profit and Loss when the Company's right
to receive the dividends is established and the
amount of dividend can be measured reliably.
iii. Financial assets at fair value through profit or
loss (FVTPL)
FVTPL is a residual category for financial assets.
A financial asset which does not meet the criteria
for categorization as at amortised cost or as
FVTOCI, is classified as FVTPL.
In addition, the Company may elect to designate
the financial asset, which otherwise meets
amortised cost or FVTOCI criteria, as FVTPL
if doing so eliminates or significantly reduces a
measurement or recognition inconsistency.
Financial assets included within the FVTPL
category are measured at fair value at the end
of each reporting period, with any gains or losses
arising on re-measurement recognised in the
Statement of Profit and Loss. The net gain or loss
recognised in the Statement of Profit and Loss
incorporates any dividend or interest earned on
the financial asset and is included in the 'Other
income' line item.
De-recognition of financial assets
The Company de-recognises financial assets
when the contractual right to the cash flows
from the asset expires or when it transfers the
financial asset and substantially all the risks and
rewards of ownership of the asset to another
party. On de-recognition of a financial asset
(except as mentioned above for financial assets
measured at FVTOCI), the difference between the
carrying amount and the consideration received
and receivable is recognised in the Statement of
Profit and Loss.
b) Non-derivative financial liabilities
i. Financial liabilities at fair value through
profit or loss (FVTPL)
Financial liabilities at FVTPL are stated at
fair value, with any gains or losses arising
on re-measurement recognised in profit or
loss. The net gain or loss recognised in profit
or loss incorporates any interest paid on the
financial liability and is included in the 'Other
income' line item.
ii. Financial liability subsequently measured
at amortised cost
Financial liabilities at amortised cost
represented by borrowings, trade and other
payables are initially recognized at fair value,
and subsequently measured at amortised
cost using the effective interest method.
The effective interest method is a method of
calculating the amortised cost of a financial
liability and of allocating interest expense
over the relevant period. The effective
interest rate is the rate that exactly discounts
estimated future cash payments through
the expected life of the financial liability, or
(where appropriate) a shorter period, to the
net carrying amount on initial recognition.
De-recognition of financial liabilities
The Company de-recognises financial
liabilities, when and only when, the Company's
obligations are discharged, cancelled or
have expired. The difference between the
carrying amount of the financial liabilities
de-recognised and the consideration paid
and payable is recognised in the Statement
of Profit and Loss.
O. Leases
The Company's lease asset classes primarily consist
of leases for building and vehicles. The Company,
at the inception of a contract, assesses whether the
contract is a lease or not. A contract is, or contains,
a lease if the contract conveys the right to control the
use of an identified asset for a time in exchange for a
consideration.
The Company recognises a right-of-use asset and
a lease liability at the lease commencement date.
The right-of-use asset is initially measured at cost,
which comprises the initial amount of the lease liability
adjusted for any lease payments made at or before
the commencement date, plus any initial direct costs
incurred and an estimate of costs to dismantle and
remove the underlying asset or to restore the underlying
asset or the site on which it is located, less any lease
incentives received
The right-of-use asset is subsequently depreciated
using the straight-line method from the commencement
date to the end of the lease term.
The lease liability is initially measured at the present
value of the lease payments that are not paid at the
commencement date, discounted using the Company's
incremental borrowing rate. It is remeasured when
there is a change in future lease payments arising
from a change in an index or rate, if there is a change
in the Company's estimate of the amount expected to
be payable under a residual value guarantee, or if the
Company changes its assessment of whether it will
exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way,
a corresponding adjustment is made to the carrying
amount of the right-of-use asset or is recorded in profit
or loss if the carrying amount of the right-of-use asset
has been reduced to zero.
The Company has elected not to recognise right-of-use
assets and lease liabilities for short-term leases that
have a lease term of 12 months or less and leases of
low-value assets. The Company recognises the lease
payments associated with these leases as an expense
over the lease term.
P. Taxation
Income tax expense represents the sum of the current
tax and deferred tax.
i. Current tax
Current tax is determined as the amount of tax
payable in respect of the taxable income for
the year as determined in accordance with the
applicable tax rates and the provisions of the
Income-tax Act, 1961. Taxable profit differs from
'profit before tax' as reported in the statement
of profit and loss because of items of income
or expense that are taxable or deductible in
other years and items that are never taxable
or deductible under the Income-tax Act, 1961.
The tax rates and tax laws used to compute the
current tax amount are those that are enacted or
substantively enacted by the reporting date and
applicable for the period. The Company offsets
current tax assets and current tax liabilities, where
it has a legally enforceable right to set off the
recognized amounts and where it intends either
to settle on a net basis or to realize the asset and
liability simultaneously.
ii. Deferred Tax
Deferred tax is recognised on temporary
differences between the carrying amounts of
assets and liabilities in the financial statements
and the corresponding tax bases used in the
computation of taxable profit. Deferred tax
liabilities are generally recognised for all taxable
temporary differences. Deferred tax assets are
generally recognised for all deductible temporary
differences to the extent that it is probable that
taxable profits will be available against which
those deductible temporary differences can be
utilised. Such deferred tax assets and liabilities
are not recognised if the temporary difference
arises from the initial recognition (other than in a
business combination) of assets and liabilities in
a transaction that affects neither the taxable profit
nor the accounting profit.
The carrying amount of deferred tax assets is
reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to
allow all or part of such deferred tax assets to
be utilised.
Deferred tax liabilities and assets are measured
at the tax rates that are expected to apply in the
period in which the liability is settled or the asset
realised, based on tax rates (and tax laws) that
have been enacted or substantively enacted by
the end of the reporting period.
Current and deferred tax are recognised in
profit or loss, except when they relate to items
that are recognised in other comprehensive
income or directly in equity, in which case, the
current and deferred tax are also recognised in
other comprehensive income or directly in equity
respectively.
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