F Summary of material accounting policy
information
(i) Property, plant and equipment ('PPE')
PPE are stated at historical cost, less accumulated
depreciation and impairment losses, if any.
Historical costs include expenditure directly
attributable to acquisition which are capitalised
until the PPE are ready for use, as intended by
management, including non refundable taxes.
Any trade discount and rebates are deducted in
arriving at the purchase price.
An item of PPE initially recognised is de¬
recognised upon disposal or when no future
economic benefits are expected from its use or
disposal. Gains or losses arising from disposals of
assets are measured as the difference between
the net disposal proceeds and the carrying value
of the asset on the date of disposal and are
recognised in the statement of profit and loss, in
the period of disposal.
The cost of an item of PPE shall be recognised as
an asset if, and only if:
(a) it is probable that future economic benefits
associated with the item will flow to
the Company; and
(b) the cost of the item can be measured reliably.
Items such as spare parts are recognised as PPE
when they meet the definition of PPE.
The Company depreciates PPE over their
estimated useful lives using straight line method
('SLM') as follows (current and previous year):
In case of certain assets included in above table,
the Company uses useful life different from
those specified in Schedule II of the Act which
is duly supported by technical evaluation of
management. 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.
Subsequent costs are included in the asset's
carrying amount or recognised as a separate
asset, as appropriate, only when it is probable
that future economic benefits associated with
the item will flow to the Company and the cost of
the item can be measured reliably. The carrying
amount of any component accounted for as a
separate asset is derecognised when replaced.
All other repairs and maintenance are charged
to the statement of profit and loss during the
reporting period in which they are incurred.
Depreciation methods, estimated useful lives
and residual values are reviewed at each
reporting date, and if expectations differ from
previous estimates, the changes are accounted
for as a change in an accounting estimate and
adjusted prospectively. Depreciation on addition
to PPE or on disposal of PPE is calculated pro¬
rata from the month of such addition or up to
the month of such disposal as the case may be.
The residual value is considered at not more
than 5% of the original cost.
Capital work-in-progress ('CWIP') includes PPE
under construction and not ready for intended
use as on the balance sheet date. CWIP is not
depreciated as these assets are not yet available
for use. Advances paid towards the acquisition
of PPE outstanding at each balance sheet date is
classified as capital advances under ‘Other non¬
current assets’.
(ii) Impairment of non-financial assets
ROU assets, intangible assets and PPE are
evaluated for recoverability whenever events
or changes in circumstances indicate that their
carrying amounts may not be recoverable. For the
purpose of impairment testing, the recoverable
amount (i.e., the higher of the fair value less cost
to sell and the value in use) is determined on an
individual asset basis unless the asset does not
generate cash flows that are largely independent
of those from other assets. In such cases, the
recoverable amount is determined for the CGU
to which the asset belongs.
An impairment loss is recognised in the statement
of profit and loss if the estimated recoverable
amount of an asset or its CGU is lower than its
carrying amount. Impairment losses recognised
in respect of CGU are allocated first to reduce
the carrying amount of any goodwill allocated to
the units and then to reduce the carrying amount
of the other assets in the unit on a pro-rata basis.
Impairment losses recognised (for assets other
than goodwill) in prior periods are assessed
at each reporting date for any indications that
the loss has decreased or no longer exists. An
impairment loss is reversed if there has been
a favourable change in the estimates used
to determine the recoverable amount. An
impairment loss is reversed only to the extent
that the asset’s carrying amount does not
exceed its recoverable amount, nor the carrying
amount that would have been determined, net
of depreciation or amortisation, if no impairment
loss had been recognised.
(iii) Leases
The determination of whether an arrangement is
(or contains) a lease is based on the substance
of the arrangement at the inception of the
lease. The arrangement is, or contains, a lease
if fulfilment of the arrangement is dependent
on the use of a specific asset or assets and the
arrangement conveys a right to use the asset or
assets, even if that right is not explicitly specified
in an arrangement.
Company as a lessee
The Company’s lease asset class consists of lease
for offices and land for various project locations
and office space. The Company assesses
whether a contract contains a lease, at inception
of a contract. A contract is, or contains, a lease
if the contract conveys the right to control
the use of an identified asset for a period of
time in exchange for consideration. To assess
whether a contract conveys the right to control
the use of an identified asset, the Company
assesses whether: (i) the contract involves the
use of an identified asset (ii) the Company has
substantially all of the economic benefits from
use of the asset through the period of the lease
and (iii) the Company has the right to direct the
use of the asset.
At the date of commencement of the lease,
the Company recognises a right of use ('ROU')
asset and a corresponding lease liability for all
lease arrangements in which it is a lessee, except
for leases with a term of twelve months or less
(short-term leases) and leases of low value
assets. For these short-term and leases of low
value assets, the Company recognises the lease
payments as an operating expense on a straight¬
line basis over the term of the lease.
Lease arrangements may include the options to
extend or terminate the lease before the end of
the lease term. ROU assets and lease liabilities
include these options when it is reasonably
certain that they will be exercised. The ROU
assets are initially recognised at cost, which
comprises the initial amount of the lease liability,
adjusted for any lease payments made at or
prior to the commencement date of the lease,
plus any initial direct costs and estimated cost
to dismantle and remove the underlying asset or
restore the site on which it is located, less any
lease incentives received. They are subsequently
measured at cost less accumulated depreciation
and impairment losses, if any.
ROU assets are depreciated from the
commencement date on a SLM basis over the
shorter of the lease term and useful life of the
underlying asset. ROU assets are evaluated
for recoverability whenever events or changes
in circumstances indicate that their carrying
amounts may not be recoverable. For the
purpose of impairment testing, the recoverable
amount (i.e., the higher of the fair value less cost
to sell and the value-in-use) is determined on an
individual asset basis unless the asset does not
generate cash flows that are largely independent
of those from other assets. In such cases, the
recoverable amount is determined for the CGU
to which the asset belongs.
The lease liability is initially measured at the
present value of the future lease payments.
The lease payments are discounted using the
interest rate implicit in the lease or, if not readily
determinable, using the incremental borrowing
rates in the country of domicile of these
leases. Lease liabilities are remeasured with a
corresponding adjustment to the related ROU
asset if the Company changes its assessment
on whether it will exercise an extension or a
termination option.
Lease liabilities and ROU assets have been
separately presented in the balance sheet.
Lease payments have been classified as
financing cash flows.
(iv) 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.
a. Initial recognition and measurement
The Company recognises financial assets
and liabilities when it becomes a party to
the contractual provisions of the instrument.
Financial assets (except trade receivables)
and financial liabilities are recognised at
fair value on initial recognition. Transaction
costs that are directly attributable to the
acquisition or issue of financial assets and
liabilities that are not at fair value through
profit or loss are added to the fair value on
initial recognition. Regular purchase and
sale of financial assets are recognised on
the trade date.
Further, trade receivables are recognised
initially at the amount of consideration
that is unconditional unless they contain
significant financing components, in which
case they are recognised at fair value. The
Company’s trade receivables do not contain
any significant financing component and
hence are measured at the transaction price
in accordance with Ind AS 115 "Revenue
from Contracts with Customers”.
b. Subsequent measurement
For subsequent measurement, the Company
classifies a financial asset in accordance
with the below criteria:
- The Company’s business model for
managing the financial asset; and
- The contractual cash flow
characteristics of the financial asset.
Non derivative financial instruments
(a) Financial assets carried at amortised
cost
A financial asset is subsequently
measured at amortised cost if it is
held within a business model whose
objective is to hold the asset 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.
(b) Financial assets at fair value through
other comprehensive income
('FVOCI')
A financial asset is subsequently
measured at FVOCI if it is held within
a business model whose objective is
achieved by both collecting contractual
cash flows and selling financial assets
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.
(c) Financial assets at fair value through
profit or loss ('FVTPL')
A financial asset which is not classified
in any of the above categories are
subsequently fair valued through
profit or loss.
(d) Financial liabilities
Financial liabilities are subsequently
carried at amortised cost using the
effective interest method. For trade
and other payables maturing within
one year from the balance sheet date,
the carrying amounts approximate
fair value due to the short maturity of
these instruments.
The Company’s policy is to recognise
transfers into and transfers out of fair
value hierarchy levels as at the end of
the reporting period.
(e) Debt instruments at amortised cost
A ‘debt instrument’ is subsequently
measured at the amortised cost using
the Effective Interest Rate ('EIR')
method. 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. The EIR amortisation is included
in 'Other income' in the profit or loss.
The losses arising from impairment
are recognised in the statement of
profit and loss.
(f) Equity instruments
All equity instruments in scope of Ind
AS 109 are measured at fair value.
Equity instruments which are held
for trading are classified as at FVTPL.
For all other equity instruments, the
Company may make an irrevocable
election to present subsequent
changes in FVOCI. The Company
makes such election on an instrument-
by-instrument basis. The classification
is made on initial recognition and is
irrevocable. If the Company decides
to classify an equity instrument as
at FVOCI, then all fair value changes
on the instrument, including foreign
exchange gain or loss and excluding
dividends, are recognised in the OCI.
There is no recycling of the amounts
from OCI to profit or loss, even on sale
of investment. However, the Company
may transfer the cumulative gain or
loss within equity. Equity instruments
included within the FVTPL category
are measured at fair value with all
changes recognised in the statement
of profit and loss.
(g) Financial liabilities subsequently
measured at amortised cost
Financial liabilities that are not held-
for-trading and are not designated as
at FVTPL are measured at amortised
cost in subsequent accounting
periods. After initial recognition, such
financial liabilities are subsequently
measured at amortised cost using the
EIR 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. 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. The EIR amortisation is included
as finance costs in the statement of
profit and loss.
c. De-recognition of financial instruments
A financial asset is primarily derecognised
(i.e., removed from the Company’s
balance sheet) when:
- The contractual rights to receive cash
flows from the asset have expired, or
- The Company has transferred its rights
to receive contractual cash flows from
the asset or has assumed an obligation
to pay the received cash flows in full
without material delay to a third party
under a ‘pass-through’ arrangement,
and either (a) the Company has
transferred substantially all the risks
and rewards of the asset, or (b) the
Company has neither transferred nor
retained substantially all the risks
and rewards of the asset, but has
transferred control of the asset.
When the Company has transferred its rights
to receive cash flows from an asset or has
entered into a pass-through arrangement,
it evaluates if and to what extent it has
retained the risks and rewards of ownership.
When it has neither transferred nor retained
substantially all of the risks and rewards of
the asset, nor transferred control of the
asset, the Company continues to recognise
the transferred asset to the extent of the
Company’s continuing involvement. In
that case, the Company also recognises an
associated liability. The transferred asset
and the associated liability are measured
on a basis that reflects the rights and
obligations that the Company has retained.
On de-recognition 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 OCI and accumulated in
equity is recognised in profit or loss if such
gain or loss would have otherwise been
recognised in profit or loss on disposal of
that financial asset.
d. Offsetting financial instruments
Financial assets and liabilities are offset and
the net amount is reported in the balance
sheet where there is a legally enforceable
right to offset the recognised amounts and
there is an intention to settle on a net basis
or realise the asset and settle the liability
simultaneously. The legally enforceable
right must not be contingent on future
events and must be enforceable in the
normal course of business and in the event
of default, insolvency or bankruptcy of the
group or the counterparty.
e. Impairment of financial assets
The Company assesses at each date of
balance sheet whether a financial asset or
a group of financial assets is impaired. Ind
AS 109 ""Financial Instruments"" requires
expected credit losses to be measured
through a loss allowance. The Company
recognises lifetime expected losses for
all trade receivables that do not have a
financing component. In determining the
loss allowances for trade receivables, the
Company has used a practical expedient
by computing the expected credit loss
allowance for trade receivables based on a
provision matrix. The provision matrix takes
into account historical credit loss experience
and is adjusted for forward-looking
information. The expected loss allowance
is based on the ageing of the receivables
that are due and allowance rates used in the
provision matrix. For all other financial assets,
expected loss allowance are measured at an
amount equal to the 12-months expected
credit losses or at an amount equal to the
lifetime credit losses if the credit risk on the
financial asset has increased significantly
since initial recognition.
When determining whether the credit
risk of a financial asset has increased
significantly since initial recognition,
the Company considers reasonable and
supportable information that is relevant
and available without undue cost or
effort. This includes both quantitative and
qualitative information and analysis, based
on the Company's historical experience and
informed credit assessment, that includes
forward looking information.
The Company calculates impairment
allowance under the simplified approach
for trade receivables and does not perform
individual assessment of credit risk of
trade receivables.
(v) Income tax
Tax expense for the year comprises of current
tax and deferred tax. Current tax is measured by
the amount of income tax expected to be paid
to the taxation authorities on the taxable profits
after considering tax allowances, exemptions
adjustments to tax payable in respect of previous
years, and using applicable tax rates and
laws. Deferred tax is recognised on temporary
differences between the accounting base and
the tax base for the year and quantified using
the tax rates and income tax laws enacted or
substantively enacted as on the balance sheet
date. Current and deferred taxes are recognised
in the profit or loss, except when they relate to
items that are recognised in OCI or directly in
equity, in which case, the current and deferred
tax are also recognised in OCI or directly in equity.
There are certain transactions and calculations
for which the ultimate tax determination is
uncertain. The Company recognises liabilities
for anticipated tax issues based on estimates
of whether additional taxes will be due. The
uncertain tax positions are measured at the
amount expected to be paid to taxation
authorities when the Company determines that
the probable outflow of economic resources
will occur. Where the final tax outcome of these
matters is different from the amounts that
were initially recorded, such differences will
impact the current and deferred income tax
assets and liabilities in the period in which such
determination is made.
Deferred tax is recognised using the balance
sheet approach. Deferred tax assets and
liabilities are recognised for deductible and
taxable temporary differences arising between
the tax base of assets and liabilities and
their carrying amount in standalone financial
statements, except when the deferred tax
arises from the initial recognition of goodwill
or an asset or liability in a transaction that is
not a business combination and affects neither
accounting nor taxable profits or loss at the time
of the transaction.
Deferred tax asset is recognised to the extent 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.
Deferred tax liabilities are recognised for all
taxable temporary differences. Deferred tax is
measured at the tax rates that are expected to
apply to the period when the asset is realised
or the liability is settled, based on the laws that
have been enacted or substantively enacted by
the reporting date.
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.
The measurement of deferred tax reflects the tax
consequences that would follow from the manner
in which the Company expects, at the reporting
date, to recover or settle the carrying amount
of its assets and liabilities. For this purpose,
the carrying amount of investment property is
presumed to be recovered through sale.
Current tax and deferred tax assets and liabilities
are offset when there is a legally enforceable
right to set off the recognised amount and there
is an intention to settle the asset and liability
on a net basis.
Accruals for uncertain tax positions require
management to make judgements of potential
exposures. Accruals for uncertain tax positions
are measured using either the most likely amount
or the expected value amount depending on
which method the entity expects to better
predict the resolution of the uncertainty. Tax
benefits are not recognised unless the tax
positions will probably be accepted by the tax
authorities. This is based upon management’s
interpretation of applicable laws and regulations
and the expectation of how the tax authority will
resolve the matter. Once considered probable
of not being accepted, management reviews
each material tax benefit and reflects the effect
of the uncertainty in determining the related
taxable amounts.
(vi) Borrowings
Borrowings are initially recognised at net
of transaction costs incurred and measured
at amortised cost. Any difference between
the proceeds (net of transaction costs) and
the redemption amount is recognised in the
statement of profit and loss over the period of the
borrowings using the effective interest method.
Borrowing costs includes interest and
amortisation of ancillary costs incurred in
connection with the arrangement of borrowings.
Borrowing costs directly attributable to the
acquisition, construction or production of an
asset that necessarily takes a substantial period
of time to get ready for its intended use or
sale are capitalised as part of the cost of the
respective asset. All other borrowing costs are
expensed in the period in which they occur. The
Company ceases capitalising borrowing costs
when substantially all the activities necessary to
prepare the qualifying asset for its intended use
or sale are complete.
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