1E. Summary of other accounting polices
1E.1 Revenue recognition
Other Operating Revenues:
Other operating revenues comprise of income from ancillary activities incidental to the operations of the Company and is recognised when the
right to receive the income is established as per the terms of the contract.
Dividend, Interest Income and Other Income:
Dividend income from investments is recognised when the Company's right to receive payment has been established (provided that it is probable
that the economic benefits will flow to the Company and the amount of income can be measured reliably).
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable (provided that
it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably).
Fee on financial guarantee provided by the Company is accrued as Other income.
1E.2 Foreign currency transactions
The Company's foreign operations (including foreign branches) are an integral part of the Company's activities. In preparing the standalone
financial statements, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of
exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies
are restated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not
restated.
Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for:
• Exchange difference on translation of derivative instruments designated as cash flow hedge (see Note 1E.16 below for hedging accounting
policies).
1E.3 Borrowing costs
Borrowing costs (general and specific borrowings) that are 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.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
1E.4 Government Grants
Government grants (including export incentives and incentives on specified goods manufactured in the eligible unit) are recognised only when
there is reasonable assurance that the Company will comply with the conditions attached to them and the grants will be received.
Government grants relating to income are recognised in profit or loss on a systematic basis over the periods in which the Company recognises as
expenses the related costs for which the grants are intended to compensate. Grant relating to assets are netted off against the acquisition cost
of the asset.
The benefit of a government loan at a below market rate of interest is treated as a government grant, measured at the difference between
proceeds received and the fair value of the loan based on prevailing market rates.
1E.5 Employee benefits
Retirement benefit costs and termination benefits:
Payments to defined contribution plans i.e., Company's contribution to superannuation fund, employee state insurance and other funds are
determined under the relevant schemes and/ or statute and charged to the Statement of Profit and Loss in the period of incurrence when the
services are rendered by the employees.
For defined benefit plans i.e. Company's liability towards gratuity (funded), Company's contribution to provident fund, other retirement/
termination benefits and compensated absences, the cost of providing benefits is determined using the projected unit credit method with
actuarial valuations being carried out at the end of each annual reporting period. In respect of provident fund, contributions made to trusts
administered by the Company, the interest rate payable to the members of the trust shall not be lower than the statutory rate of interest
declared by the Central Government under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 and shortfall, if any, shall be
contributed by the Company and charged to the Statement of Profit and Loss.
Defined benefit costs are comprised of:
• service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
• net interest expense or income; and
• re-measurement.
The Company presents the first two components of defined benefit costs in profit or loss in the line item 'Employee benefits expense'. Curtailment
gains and losses are accounted for as past service costs.
Re-measurement of net defined benefit liability/ asset pertaining to gratuity and remeasurement of net defined liability pertaining to provident
fund comprise of actuarial gains/ losses (i.e. changes in the present value resulting from experience adjustments and effects of changes in
actuarial assumptions) and is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in
the period in which they occur. Re-measurement recognised in other comprehensive income is reflected immediately in retained earnings and is
not reclassified to profit or loss.
Liability for termination benefits like expenditure on Voluntary Retirement Scheme is recognised at the earlier of when the Company can no
longer withdraw the offer of termination benefit or when the Company recognises any related restructuring costs.
Short-term and other long-term employee benefits:
A liability is recognised for benefits accruing to employees in respect of salaries, wages, performance incentives, medical benefits and other short
term benefits in the period the related service is rendered, at the undiscounted amount of the benefits expected to be paid in exchange for that
service.
Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows
expected to be made by the Company in respect of services provided by employees up to the reporting date.
1E.6 Share-based payment arrangements
Equity-settled share-based payments to employees (primarily employee stock option plan) are measured by reference to the fair value of the
equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting
period, based on the Company's estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end
of each year, the Company revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original
estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment
to the share options outstanding account.
1E.7 Income Taxes
Income tax expense represents the sum of the tax currently payable and deferred tax. 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.
Current tax:
Current tax is determined on taxable profits for the period chargeable to tax in accordance with the applicable tax rates and the provisions of the
Income Tax Act, 1961 including other applicable tax laws that have been enacted.
Deferred tax:
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the standalone 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.
Deferred tax asset is recognised for the carry forward of unused tax losses and unused tax credits (MAT credit entitlement) to the extent that it
is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised.
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 the asset to be recovered.
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
is realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company
expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Uncertainty over income tax treatments
If there is uncertainty over tax treatment of an item, the Company will predict the resolution of the uncertainty. If it is probable that the taxation
authority will accept the tax treatment, there will be no impact on the amounts of taxable profits/losses, tax bases, unused tax losses/credits and
tax rates. If it is not probable that tax authority will accept the tax treatment, company will show the effect of the uncertainty for each uncertain
tax treatment by using either the most likely outcome or the expected outcome of the uncertainty
1E.8 Property, plant and equipment
Property, plant and equipment held for use in the production or supply of goods or services, or for administrative purposes, are stated in the
balance sheet. Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised
impairment loss. Cost includes professional fees, and other direct costs and, for qualifying assets, borrowing costs capitalised in accordance with
the Company's accounting policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed
and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for
their intended use.
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the
Company and the cost of the item can be measured reliably.
Depreciation is recognised so as to write off the cost of assets (other than freehold land and properties under construction) less their residual
values over their useful lives, using the straight-line method. 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.
When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major
components) of Property, Plant and Equipment and accordingly the depreciation is computed based on estimated useful lives of the assets.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the
continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as
the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
De-recognition:
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the
continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as
the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
1E.9 Intangible assets
Intangible assets acquired separately:
The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate
being accounted for on a prospective basis.
De-recognition of intangible assets:
An intangible asset is derecognised 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,
is recognised in profit or loss when the asset is derecognised.
Transition to Ind AS
On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment and intangible
assets measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment and intangible
assets.
1E.10 Impairment losses
At the end of each reporting period, the Company determines whether there is any indication that its assets (property, plant and equipment,
intangible assets and investments in equity instruments in subsidiaries, joint ventures and associates carried at cost) have suffered an impairment
loss with reference to their carrying amounts. If any indication of impairment exists, the recoverable amount (i.e. higher of the fair value less
costs of disposal and value in use) of such assets is estimated and impairment is recognised, if the carrying amount exceeds the 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 for which the estimates of future cash flows have not
been adjusted.
Intangible assets under development and goodwill are tested for impairment annually at each balance sheet date. When it is not possible to
estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which
the asset belongs.
When an impairment loss subsequently reverses (other than impairment of goodwill), the carrying amount of the asset (or cash-generating
unit) is increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the carrying amount
carried had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is
recognised immediately in profit or loss.
1E.11 Leases
The Indian Accounting Standard on leases (Ind AS 116) requires entity to determine whether a contract is or contains a lease at the inception
of the contract.
Ind AS 116 requires lessee to recognise a liability to make lease payments and an asset representing the right-of-use asset during the lease term
for all leases except for short term leases and leases of low-value assets, if they choose to apply such exemptions.
Payments associated with short-term leases and low-value assets are recognized as expenses in profit or loss. Short-term leases are leases with
a lease term of 12 months or less. Low-value assets comprise of office equipment and small items of plant and equipment and office furniture.
At the commencement date, Company recognise a right-of-use asset measured at cost and a lease liability measured at the present value of the
lease payments that are not paid at that date. The lease payments shall be discounted using the interest rate implicit in the lease, if that rate can
be readily determined. If that rate cannot be readily determined, the lessee shall use the lessee's incremental borrowing rate.
The cost of the right-of-use asset comprise of, the amount of the initial measurement of the lease liability, any lease payments made at or before
the commencement date, less any lease incentives received.
At the commencement date, the lease payments included in the measurement of the lease liability comprise (a) fixed payments less any
lease incentives receivable; (b) variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the
commencement date; (c) amounts expected to be payable by the lessee under residual value guarantees; (d) the exercise price of a purchase
option if the lessee is reasonably certain to exercise that option and (e) payments of penalties for terminating the lease, if the lease term reflects
the lessee exercising an option to terminate the lease.
Depreciation on Right-of-use asset is recognised in Statement of Profit and Loss on a straight line basis over the period of lease and the Company
separately recognises interest on lease liability as a component of finance cost in statement of profit and Loss.
1E.12 Inventories
Inventories are stated at lower of cost and net realisable value.
Cost of raw materials and components, stores, spares, consumable tools and stock-in-trade comprises cost of purchases and includes taxes and
duties and is net of eligible credits under CENVAT/ VAT/GST schemes. Cost of work-in-progress, work-made components and finished goods
comprises direct materials, direct labour and an appropriate proportion of variable and fixed overheads, which is allocated on a systematic basis.
Cost of inventories also includes all other related costs incurred in bringing the inventories to their present location and condition.
Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the
sale.
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