2.3 Summary of significant accounting policies
a) Property, Plant and Equipment
Measurement at recognition:
An item of property, plant and equipment that qualifies as an asset is measured on initial
recognition at cost. Following initial recognition, items of property, plant and equipment are
carried at its cost less accumulated depreciation and accumulated impairment losses, if any.
The Company identifies and determines cost of each part of an item of property, plant and
equipment separately, if the part has a cost which is significant to the total cost of that item of
property, plant and equipment and has useful life that is materially different from that of the
remaining item.
The cost of an item of property, plant and equipment comprises of its purchase price including
import duties and other non refundable purchase taxes or levies, directly attributable cost of
bringing the asset to its working condition for its intended use and the initial estimate of
decommissioning, restoration and similar liabilities, if any. Any trade discounts and rebates are
deducted in arriving at the purchase price. Cost includes cost of replacing a part of a plant and
equipment if the recognition criteria are met. Expenses directly attributable to new
manufacturing facility during its construction period are capitalized if the recognition criteria are
met. Expenditure related to plans, designs and drawings of buildings or plant and machinery is
capitalized under relevant heads of property, plant and equipment if the recognition criteria are
met.
Items such as spare parts, stand-by equipment and servicing equipment that meet the definition of
property, plant and equipment are capitalized at cost and depreciated over their useful life. Costs
in nature of repairs and maintenance are recognized in the Statement of Profit and Loss as and
when incurred.
Capital work in progress and Capital advances:
Cost of assets not ready for intended use, as on the Balance Sheet date, is shown as capital work in
progress. Advances given towards acquisition of fixed assets outstanding at each Balance Sheet
date are disclosed as Other Non-Current Assets.
Depreciation:
Depreciation on each part of an item of property, plant and equipment is provided using the
Written Down Value Method based on the useful life of the asset as estimated by the management
and is charged to the Statement of Profit and Loss as per the requirement of Schedule II of the
Companies Act, 2013. The estimate of the useful life of the assets has been assessed based on
technical advice which considers the nature of the asset, the usage of the asset, expected physical
wear and tear, the operating conditions of the asset, anticipated technological changes,
manufacturers warranties and maintenance support, etc. The estimated useful life of items of
property, plant and equipment is mentioned below:
Freehold land is not depreciated.
The Company, based on technical assessment made by technical expert and management
estimate, depreciates certain items of property plant and equipment (as mentioned below) over
estimated useful lives which are different from the useful lives prescribed under Schedule II to the
Companies Act, 2013 (Schedule III). 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.
Freehold land rights have been depreciated over a period of remaining useful life of 78 years.
The useful lives, residual values of each part of an item of property, plant and equipment and the
depreciation methods are reviewed at the end of each financial year. If any of these expectations
differ from previous estimates, such change is accounted for as a change in an accounting estimate.
Derecognition:
The carrying amount of an item of property, plant and equipment is derecognized on disposal or
when no future economic benefits are expected from its use or disposal. The gain or loss arising
from the Derecognition of an item of property, plant and equipment is measured as the difference
between the net disposal proceeds and the carrying amount of the item and is recognized in the
Statement of Profit and Loss when the item is derecognized.
b) Intangible assets
Measurement at recognition:
Intangible assets acquired separately are measured on initial recognition at cost. Intangible assets
arising on acquisition of business are measured at fair value as at date of acquisition. Internally
generated intangibles including research cost are not capitalized and the related expenditure is
recognized in the Statement of Profit and Loss in the period in which the expenditure is incurred.
Following initial recognition, intangible assets are carried at cost less accumulated amortization
and accumulated impairment loss, if any
Amortization:
Intangible Assets with finite lives are amortized on a Written down value basis over the estimated
useful economic life. The amortization expense on intangible assets with finite lives is recognized
in the Statement of Profit and Loss. The estimated useful life of intangible assets is mentioned
below:
The Company, based on technical assessment made by technical expert and management
estimate, depreciates Information Technology Software (as mentioned below) over estimated
useful lives which are different from the useful lives prescribed under Schedule II to the
Companies Act, 2013 (Schedule III). 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 amortization period and the amortization method for an intangible asset with finite useful life
is reviewed at the end of each financial year. If any of these expectations differ from previous
estimates, such change is accounted for as a change in an accounting estimate.
Derecognition:
The carrying amount of an intangible asset is derecognized on disposal or when no future
economic benefits are expected from its use or disposal. The gain or loss arising from the
Derecognition of an intangible asset is measured as the difference between the net disposal
proceeds and the carrying amount of the intangible asset and is recognized in the Statement of
Profit and Loss when the asset is derecognized.
Goodwill
Goodwill on acquisition is recognised in the financial statement. Goodwill is not amortised but it is
tested for impairment annually to more frequently, if events or changes in circumstances, indicate
that it might be impaired. It is carried as cost less accumulated impairment losses.
The company had accounted for such intangible assets in the books of accounts in consonance with
Ind-AS-38, being recognition of intangible assets at FV being assets acquired in a Business
Combination. The company had recognised a group of intangible assets as a single asset and had
termed such asset as “goodwill" and all such assets had similar useful life. In case of complex
business combination such as reverse merger of another company with the company, the company
follows IND-AS 103 and has accounted for difference between assets over liabilities as goodwill
which is bunch of intangible assets.
Such intangible assets were acquired with an indefinite useful life. Ordinarily they need not be
amortised.
c) Impairment
Assets that have an indefinite useful life, for example goodwill, are not subject to amortization and
are tested for impairment annually and whenever there is an indication that the asset may be
impaired. Assets that are subject to depreciation and amortization are reviewed for impairment,
whenever events or changes in circumstances indicate that carrying amount may not be
recoverable. Such circumstances include, though are not limited to, significant or sustained
decline in revenues or earnings and material adverse changes in the economic environment.
An impairment loss is recognized whenever the carrying amount of an asset or its cash generating
unit (CGU) exceeds its recoverable amount. The recoverable amount of an asset is the greater of
its fair value less cost to sell and value in use. To calculate value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current
market rates and the risk specific to the asset. For an asset that does not generate largely
independent cash inflows, the recoverable amount is determined for the CGU to which the asset
belongs. Fair value less cost to sell is the best estimate of the amount obtainable from the sale of an
asset in an arm's length transaction between knowledgeable, willing parties, less the cost of
disposal.
Impairment losses, If any, are recognized in the Statement of Profit and Loss and included in
depreciation and amortization expenses. Impairment losses are reversed in the Statement of
Profit and Loss only to the extent that the asset's carrying amount does not exceed the carrying
amount that would have been determined if no impairment loss had previously been recognized.
d) Revenue
The Company generates revenue from sale of varied engineering products in the business of
manufacturing and trading of varied engineering products for Oil and gas industry, Refineries,
Chemical and cement manufacturing company and large number of manufacturing companies in
the fields of water pollution controls equipment's etc. and also from rendering installation and
ancillary services along with the sale of goods, if specified in the contract with customers.
To determine whether to recognise revenue, the Company follows a 5-step process in accordance
with Ind AS 115 - Revenue from contracts with customers:
1. Identifying the contract with a customer
2. Identifying the performance obligations
3. Determining the transaction price
4. Allocating the transaction price to the performance obligations
5. Recognising revenue when/as performance obligation(s) are satisfied.
Revenue is measured at fair value of consideration received or receivable, after deduction of any
trade discounts, volume rebates and any taxes or duties collected on behalf of the government
which are levied on sales such as goods and services tax (GST). In case of multi-element revenue
arrangements, which involve delivery or performance of multiple products, services, evaluation
will be done of all deliverables in an arrangement to determine whether they represent separate
units of accounting at the inception of arrangement. Total arrangement consideration related to
the bundled contract is allocated among the different elements based on their relative fair values
(i.e., ratio of the fair value of each element to the aggregated fair value of the bundled deliverables).
In case the relative fair value of different components cannot be determined on a reasonable basis,
the total consideration is allocated to the different components based on residual value method.
The Company determines when it has satisfied its performance obligation to transfer a product by
evaluating when a customer obtains control of that product. For some contracts, control is
transferred either when the product is delivered to the customer's site or when the product is
shipped, depending on the terms of the contract (including delivery and shipping terms). However,
for some contracts, a customer may obtain control of a product even though that product remains
in the Company's physical possession. In that case, the customer has the ability to direct the use of,
and obtain substantially all of the remaining benefits from, the product even though it has decided
not to exercise its right to take physical possession of that product. Consequently, the entity does
not control the product. Instead, the entity provides custodial services to the customer over the
customer's asset.
Revenue is recognised at a point in time, when (or as) the Company satisfies performance
obligations by transferring the promised goods or services to its customers.
The Company recognises contract liabilities for consideration received in respect of unsatisfied
performance obligations and reports these amounts as other liabilities in the statement of
financial position. Similarly, if the Company satisfies a performance obligation before it receives
the consideration, the Company recognises either a contract asset or a receivable in its statement
of financial position, depending on whether something other than the passage of time is required
before the consideration is due.
Sale of products:
Revenue from sale of goods is recognised when the control of goods is transferred to the buyer as
per the terms of the contract, in an amount that reflects the consideration the Company expects to
be entitled to in exchange for those goods. Control of goods refers to the ability to direct the use of
and obtain substantially all of the remaining benefits from goods.
Rendering of services:
Revenue from services is recognized when the stage of completion can be measured reliably. Stage
of completion is measured by the services performed till Balance Sheet date as a percentage of
total services contracted.
Export benefits:
Income from export incentives are recognised on certainty of accrual and in the year of receipt.
Interest, royalties and dividends:
- Interest income is recognised on time proportion basis considering the amount outstanding
and rate applicable. For all financial assets measured at amortised cost, Interest income is
recorded using the effective Interest rate (EIR) i.e. the rate that exactly discounts estimated
future cash receipts through the expected life of the financial asset to the net carrying amount
of the financial assets.
- Subsidy income / RoDTEP etc. is recognized on an certainty and receipt basis.
- Dividend income is recognized when the right to receive payment is established.
- In case of Interest on refund from government authorities, such Interest are accounted For In
the year of receipt. In case of subsidiary from state/central government the same is accounted
For on certainty basis and on receiving confirmation of grant of such subsidies.
- In case of income on transfer of securities, the gains/losses are accounted For on completion of
the settlement of the transaction.
- In case of claims from insurance companies, the income is accrued In the year of claims
settlement by insurance companies."
e) Inventory
Raw materials, work-in-progress, finished goods, packing materials, stores, spares, components
and consumables are carried at the lower of cost and net realizable value. However, materials and
other items held for use in production of inventories are not written down below cost if the
finished goods in which they will be incorporated are expected to be sold at or above cost. The
comparison of cost and net realizable value is made on an item-by item basis.
In determining the cost of raw materials, packing materials, stores, spares, components and
consumables, first in first out cost method is used. Cost of inventory comprises all costs of
purchase, duties, taxes (other than those subsequently recoverable from tax authorities) and all
other costs incurred in bringing the inventory to their present location and condition.
Cost of finished goods and work-in-progress includes the cost of raw materials, packing materials,
an appropriate share of fixed and variable production overheads, excise duty as applicable and
other costs incurred in bringing the inventories to their present location and condition. Fixed
production overheads are allocated on the basis of normal capacity of production facilities.
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.
f) Leases
The Company assesses at contract inception whether a contract is, or contains, a lease in
accordance with Ind AS 116 - Leases. 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.
a) Right-of-use assets ('ROU 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 re-measurement 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.
b) 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.
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 or a change in the assessment of an
option to purchase the underlying asset."
c) Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition exemption to its short-term leases (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 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.
Company as a lessor
Leases for which the Company is a lessor is classified as a finance or operating lease. Whenever the
terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the
contract is classified as a finance lease. All other leases are classified as operating leases.
For operating leases, rental income is recognized on a straight-line basis over the term of the
relevant lease.
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.
When the Company receives grants of non-monetary assets, the asset and the grant are recorded
at fair value amounts and released to profit or loss over the expected useful life in a pattern of
consumption of the benefit of the underlying asset i.e. by equal annual instalments."
When loans or similar assistance are provided by governments or related institutions, with an
interest rate below the current applicable market rate, the effect of this favourable interest is
regarded as a government grant. The loan or assistance is initially recognised and measured at fair
value and the government grant is measured as the difference between the initial carrying value of
the loan and the proceeds received. The loan is subsequently measured as per the accounting
policy applicable to financial liabilities.
h) Impairment of non-financial assets
For impairment assessment purposes, assets are grouped at the lowest levels for which there are
largely independent cash inflows (cash generating units). As a result, some assets are tested
individually for impairment and some are tested at cash-generating unit level.
At each reporting date, the Company assesses whether there is any indication based on
internal/external factors, that an asset may be impaired. If any such indication exists, the Company
estimates the recoverable amount of the asset. If such recoverable amount of the asset or the
recoverable amount of the cash generating unit to which the asset belongs is less than its carrying
amount, the carrying amount is reduced to its recoverable amount and the reduction is treated as
an impairment loss and is recognised in the statement of profit and loss. If, at the reporting date
there is an indication that a previously assessed impairment loss no longer exists, the recoverable
amount is reassessed which is the higher of fair value less costs of disposal and value-in-use and the
asset is reflected at the recoverable amount subject to a maximum of depreciated historical cost.
Impairment losses previously recognised are accordingly reversed in the statement of profit and
loss.
To determine value-in-use, management estimates expected future cash flows from each cash¬
generating unit and determines a suitable discount rate in order to calculate the present value of
those cash flows. The data used for impairment testing procedures are directly linked to the
Company's latest approved budget, adjusted as necessary to exclude the effects of future re¬
organisations and asset enhancements. Discount factors are determined individually for each
cash-generating unit and reflect current market assessment of the time value of money and asset-
specific risk factors.
i) Foreign currency
Initial Recognition:
On initial recognition, transactions in foreign currencies entered into by the Company are
recorded in the functional currency (i.e. Indian Rupees), by applying to the foreign currency
amount, the spot exchange rate between the functional currency and the foreign currency at the
date of the transaction. Exchange differences arising on foreign exchange transactions settled
during the year are recognized in the Statement of Profit and Loss."
Measurement of foreign currency items at reporting date:
Foreign currency monetary items of the Company are translated at the closing exchange rates.
Non-monetary items that are measured at historical cost in a foreign currency, are translated
using the exchange rate at the date of the transaction. Non-monetary items that are measured at
fair value in a foreign currency, are translated using the exchange rates at the date when the fair
value is measured.
Exchange differences:
Exchange differences arising on the settlement/restatement of monetary items at the exchange
rates different from those at which they were initially recorded during the year or reported in the
previous standalone financial statements, are recognised as income or expense in the year in
which they arise.
j) 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.
> Non-derivative Financial Assets
Initial recognition and measurement:
The Company recognizes a financial asset in its Balance Sheet when it becomes party to the
contractual provisions of the instrument. All financial assets are recognized initially at fair value,
plus in the case of financial assets not recorded at fair value through profit or loss (FVTPL),
transaction costs that are attributable to the acquisition of the financial asset.
Where the fair value of a financial asset at initial recognition is different from its transaction price,
the difference between the fair value and the transaction price is recognized as a gain or loss in the
Statement of Profit and Loss at initial recognition if the fair value is determined through a quoted
market price in an active market for an identical asset (i.e. level 1 input) or through a valuation
technique that uses data from observable markets (i.e. level 2 input).
In case the fair value is not determined using a level 1 or level 2 input as mentioned above, the
difference between the fair value and transaction price is deferred appropriately and recognized
as a gain or loss in the Statement of Profit and Loss only to the extent that such gain or loss arises
due to a change in factor that market participants take into account when pricing the financial
asset.
However, trade receivables that do not contain a significant financing component are measured at
transaction price.
Subsequent measurement:
For subsequent measurement, the Company classifies a financial asset in accordance with the
below criteria:
I. The Company's business model for managing the financial asset and
ii. The contractual cash flow characteristics of the financial asset.
Based on the above criteria, the Company classifies its financial assets into the following
categories:
i. Financial assets measured at amortized cost
ii. Financial assets measured at fair value through other comprehensive income (FVTOCI)
iii. Financial assets measured at fair value through profit or loss (FVTPL)
i. Financial assets measured at amortized cost:
A financial asset is measured at the amortized cost if both the following conditions are met:
a) The Company's business model objective for managing the financial asset is to hold
financial assets in order to collect contractual cash flows, and
b) 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.
This category applies to cash and bank balances, trade receivables, loans and other financial
assets of the Company.Such financial assets are subsequently measured at amortized cost
using the effective interest method.
Under the effective interest method, the future cash receipts are exactly discounted to the
initial recognition value using the effective interest rate. The cumulative amortization using the
effective interest method of the difference between the initial recognition amount and the
maturity amount is added to the initial recognition value (net of principal repayments, if any) of
the financial asset over the relevant period of the financial asset to arrive at the amortized cost
at each reporting date. The corresponding effect of the amortization under effective interest
method is recognized as interest income over the relevant period of the financial asset. The
same is included under other income in the Statement of Profit and Loss.
The amortized cost of a financial asset is also adjusted for loss allowance, if any.
ii. Non-derivative Financial assets measured at FVTOCI:
A financial asset is measured at FVTOCI if both of the following conditions are met:
a) The Company's business model objective for managing the financial asset is achieved both
by collecting contractual cash flows and selling the financial assets, and
b) 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.
iii. Non-derivative Financial assets measured at FVTPL:
A financial asset is measured at FVTPL unless it is measured at amortized cost or at FVTOCI as
explained above. This is a residual category. Such financial assets are subsequently measured
at fair value at each reporting date. Fair value changes are recognized in the Statement of Profit
and Loss.
Derecognition:
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar
financial assets) is derecognized (i.e. removed from the Company's Balance Sheet) when any of the
following occurs:
I. The contractual rights to cash flows from the financial asset expires;
ii. The Company transfers its contractual rights to receive cash flows of the financial asset and has
substantially transferred all the risks and rewards of ownership of the financial asset;
iii. The Company retains the contractual rights to receive cash flows but assumes a contractual
obligation to pay the cash flows without material delay to one or more recipients under a ‘pass¬
through' arrangement (thereby substantially transferring all the risks and rewards of
ownership of the financial asset);
iv. The Company neither transfers nor retains substantially all risk and rewards of ownership and
does not retain control over the financial asset.
In cases where Company has neither transferred nor retained substantially all of the risks and
rewards of the financial asset, but retains control of the financial asset, the Company continues to
recognize such financial asset to the extent of its continuing involvement in the financial asset. In
that case, the Company also recognizes an associated liability. The financial asset and the
associated liability are measured on a basis that reflects the rights and obligations that the
Company has retained.
On Derecognition of a financial asset, (except as mentioned in ii above for financial assets
measured at FVTOCI), the difference between the carrying amount and the consideration
received is recognized in the Statement of Profit and Loss.
Impairment of financial assets:
The Company applies expected credit losses (ECL) model for measurement and recognition of loss
allowance on the following:
I. Trade receivables
ii. Financial assets measured at amortized cost (other than trade receivables)
iii. Financial assets measured at fair value through other comprehensive income (FVTOCI)
In case of trade receivables and lease receivables, the Company follows a simplified approach
wherein an amount equal to lifetime ECL is measured and recognized as loss allowance.
In case of other assets (listed as ii and iii above), the Company determines if there has been a
significant increase in credit risk of the financial asset since initial recognition. If the credit risk of
such assets has not increased significantly, an amount equal to 12-month ECL is measured and
recognized as loss allowance. However, if credit risk has increased significantly, an amount equal
to lifetime ECL is measured and recognized as loss allowance.
ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/
expense in the Statement of Profit and Loss under the head ‘Other expenses'.
> Non-derivative Financial Liabilities
Initial recognition and measurement:
The Company recognizes a financial liability in its Balance Sheet when it becomes party to the
contractual provisions of the instrument. All financial liabilities are recognized initially at fair value
minus, in the case of financial liabilities not recorded at fair value through profit or loss (FVTPL),
transaction costs that are attributable to the acquisition of the financial liability.
Where the fair value of a financial liability at initial recognition is different from its transaction
price, the difference between the fair value and the transaction price is recognized as a gain or loss
in the Statement of Profit and Loss at initial recognition if the fair value is determined through a
quoted market price in an active market for an identical asset (i.e. level 1 input) or through a
valuation technique that uses data from observable markets (i.e. level 2 input).
In case the fair value is not determined using a level 1 or level 2 input as mentioned above, the
difference between the fair value and transaction price is deferred appropriately and recognized
as a gain or loss in the Statement of Profit and Loss only to the extent that such gain or loss arises
due to a change in factor that market participants take into account when pricing the financial
liability.
Subsequent measurement
All financial liabilities of the Company are subsequently measured at amortized cost using the
effective interest method
Derecognition:
A financial liability is derecognized when the obligation under the liability is discharged or
cancelled or expires. When an existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as the Derecognition of the original liability
and the recognition of a new liability. The difference between the carrying amount of the financial
liability derecognized and the consideration paid is recognized in the Statement of Profit and Loss.
k) Fairvalue
The Company measures financial instruments at fair value in accordance with the accounting
policies mentioned above. 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 pricipal market for the assest or liability, or
> In the absence of principal market, in the most advantageous market for the assets or liability
All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorized within the fair value hierarchy that categorizes into three levels, described as follows,
the inputs to valuation techniques used to measure value. The fair value hierarchy gives the
highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 inputs)
and the lowest priority to unobservable inputs (Level 3 inputs).
Level 1 — quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 — inputs other than quoted prices included within Level 1 that are observable for the asset
or liability, either directly or indirectly
Level 3 — inputs that are unobservable for the asset or liability
For assets and liabilities that are recognized in the financial statements at fair value on a recurring
basis, the Company determines whether transfers have occurred between levels in the hierarchy
by re-assessing categorization at the end of each reporting period and discloses the same.
> Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into
and are subsequently re-measured to their fair value at the end of each reporting period.
> Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance
sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an
intention to settle on a net basis, to realise the assets and settle the liabilities 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 Company or
the counterparty.
> Equity investment in subsidiaries
Investments representing equity interest in subsidiaries are measured for at cost less impairment
in accordance with Ind AS 27 Separate Financial Statements. Where an indication of impairment
exists, the carrying amount of the investment is assessed and written down immediately to its
recoverable amount. On disposal of these investments, the difference between net disposal
proceeds and the carrying amounts are recognised in the statement of profit and loss.
> Equity investment in Joint Venture
Investments representing equity interest in joint ventures are initially measured at cost in
accordance with Ind AS 111 “Joint Arrangements" and after initial recognition, the investment in
the joint venture is accounted for using equity method as prescribed under IND AS 28
“Investments in Associates and Joint Ventures". The carrying amount is adjusted for the investor's
share of the post-acquisition profits or losses of the joint venture. Any dividends received from the
joint venture reduce the carrying amount of the investment. Where an indication of impairment
exists, the carrying amount of the investment is assessed and written down immediately to its
recoverable amount. On disposal of these investments, the difference between net disposal
proceeds and the carrying amounts are recognised in the statement of profit and loss.
l) Income Taxes
Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not
recognised in other comprehensive income or directly in equity.
Current tax:
Current income tax is measured at the amount expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961. Current tax items are recognised in correlation to the
underlying transaction either in other comprehensive income or directly in equity.
Current tax is measured using tax rates that have been enacted by the end of reporting period for
the amounts expected to be recovered from or paid to the taxation authorities.
In cases where Company has neither transferred nor retained substantially all of the risks and
rewards of the financial asset, but retains control of the financial asset, the Company continues to
recognize such financial asset to the extent of its continuing involvement in the financial asset. In
that case, the Company also recognizes an associated liability. The financial asset and the
associated liability are measured on a basis that reflects the rights and obligations that the
Company has retained.
Deferred tax:
Deferred tax liabilities are generally recognised in full for all taxable temporary differences.
Deferred tax assets are recognised to the extent that it is probable that the underlying tax loss,
unused tax credits (Minimum alternate tax credit entitlement) or deductible temporary difference
will be utilised against future taxable income. This is assessed based on the Company's forecast of
future operating results, adjusted for significant non-taxable income and expenses and specific
limits on the use of any unused tax loss or credit. 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 deferred tax asset to be recovered.
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 items are recognised in
correlation to the underlying transaction either in other comprehensive income or directly in
equity.
Minimum Alternative Tax (‘MAT') credit entitlement under the provisions of the Indian Income-
tax Act, 1961 is recognised as a deferred tax asset when it is probable that future economic benefit
associated with it in the form of adjustment of future income tax liability, will flow to the Company
and the asset can be measured reliably. MAT credit entitlement is set off to the extent allowed in
the year in which the Company becomes liable to pay income taxes at the enacted tax rates. MAT
credit entitlement is reviewed at each reporting date and is recognised to the extent that is
probable that future taxable profits will be available against which they can be used. MAT credit
entitlement has been presented as deferred tax asset in Balance Sheet. Significant management
judgment is required to determine the probability of recognition of MAT credit entitlement.
Presentation of current and deferred tax:
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to
set off the recognised amounts and there is an intention to settle the asset and liability on a net
basis.
Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right
to set off current tax assets against current tax liabilities; and the deferred tax assets and the
deferred tax liabilities relate to income taxes levied by the same taxation authority.
m) Dividend
The Company recognises a liability to pay dividend to equity holders of the parent when the
distribution is authorized and the distribution is no longer at the discretion of the Company. As per
the corporate laws in India, a distribution is authorised when it is approved by the shareholders. A
corresponding amount is recognised directly in equity.
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