1.3 Material accounting policies
This note provides a list of the material accounting
policies adopted in the preparation of these
standalone financial statements. These policies have
been consistently applied to all the years presented,
unless otherwise stated.
a. Current versus non-current classification
The Company presents assets and liabilities
in the balance sheet based on current/ non¬
current classification. An asset is treated as
current when it is:
• Expected to be realised or intended to be
sold or consumed in normal operating cycle
• Held primarily for the purpose of trading
• Expected to be realised within twelve
months after the reporting period, or
• Cash or cash equivalent unless restricted
from being exchanged or used to settle
a liability for at least twelve months after
the reporting period. All other assets are
classified as non-current.
A liability is current when:
• It is expected to be settled in normal
operating cycle
• It is held primarily for the purpose of trading
• It is due to be settled within twelve months
after the reporting period, or
• There is no unconditional right to defer the
settlement of the liability for at least twelve
months after the reporting period
The terms of the liability that could, at the option
of the counterparty, result in its settlement by
the issue of equity instruments do not affect its
classification.
The Company classifies all other liabilities
as non-current.
Deferred tax assets and liabilities are classified
as non-current assets and liabilities.
The operating cycle is the time between the
acquisition of assets for processing and their
realisation in cash and cash equivalents. The
Company has identified twelve months as its
operating cycle.
b. Foreign currencies
The Company’s standalone financial statements
are presented in INR, which is also the
functional currency and the currency of the
primary economic environment in which the
Company operates.
Transactions and balances
Transactions in foreign currencies are initially
recorded by the Company at their respective
functional currency spot rates at the date the
transaction first qualifies for recognition.
Monetary assets and liabilities denominated
in foreign currencies are translated at the
functional currency spot rates of exchange at
the reporting date.
Exchange differences arising on settlement or
translation of monetary items are recognised in
profit or loss.
Non-monetary items that are measured in
terms of historical cost in a foreign currency are
translated using the exchange rates at the dates
of the initial transactions. Non-monetary items
measured at fair value in a foreign currency
are translated using the exchange rates at the
date when the fair value is determined. The gain
or loss arising on translation of non-monetary
items measured at fair value is treated in line
with the recognition of the gain or loss on the
change in fair value of the item (i.e., translation
differences on items whose fair value gain or
loss is recognised in OCI or profit or loss are also
recognised in OCI or profit or loss, respectively).
In determining the spot exchange rate to use on
initial recognition of the related asset, expense
or income (or part of it) on the derecognition
of a non-monetary asset or non-monetary
liability relating to advance consideration, the
date of the transaction is the date on which the
Company initially recognises the non-monetary
asset or non-monetary liability arising from the
advance consideration. If there are multiple
payments or receipts in advance, the Company
determines the transaction date for each
payment or receipt of advance consideration.
c. Fair value measurement
The Company measures financial instruments,
such as investments in mutual funds and equity
shares at fair value at each balance sheet date.
Fair value is the price that would be received
to sell an asset or paid to transfer a liability
in an orderly transaction between market
participants at the measurement date. The fair
value measurement is based on the presumption
that the transaction to sell the asset or transfer
the liability takes place either:
• In the principal market for the asset
or liability, or
• In the absence of a principal market, in
the most advantageous market for the
asset or liability
The principal or the most advantageous market
must be accessible by the Company.
The fair value of an asset or a liability is measured
using the assumptions that market participants
would use when pricing the asset or liability,
assuming that market participants act in their
economic best interest.
A fair value measurement of a non-financial
asset takes into account a market participant’s
ability to generate economic benefits by using
the asset in its highest and best use or by selling
it to another market participant that would use
the asset in its highest and best use.
The Company uses valuation techniques that are
appropriate in the circumstances and for which
sufficient data are available to measure fair value,
maximising the use of relevant observable inputs
and minimising the use of unobservable inputs.
All assets and liabilities for which fair value
is measured or disclosed in the standalone
financial statements are categorised within the
fair value hierarchy, described as follows, based
on the lowest level input that is significant to
the fair value measurement as a whole (Note 37
Fair value measurement):
• Level 1 — Quoted (unadjusted) market
prices in active markets for identical
assets or liabilities
• Level 2 — Valuation techniques for which
the lowest level input that is significant to
the fair value measurement is directly or
indirectly observable
• Level 3 — Valuation techniques for which
the lowest level input that is significant to
the fair value measurement is unobservable
For assets and liabilities that are recognised
in the standalone financial statements on a
recurring basis, the Company determines
whether transfers have occurred between levels
in the hierarchy by re-assessing categorisation
(based on the lowest level input that is
significant to the fair value measurement as a
whole) at the end of each reporting period.
External valuers are involved for valuation
of significant assets, such as unquoted
financial assets.
For the purpose of fair value disclosures, the
Company has determined classes of assets and
liabilities on the basis of the nature, characteristics
and risks of the asset or liability and the level of
the fair value hierarchy as explained above.
This note summarises accounting policy for fair
value. Other fair value related disclosures are
given in the relevant notes.
• Disclosures for valuation methods,
significant estimates and assumptions
• Quantitative disclosures of fair value
measurement hierarchy
• Financial instruments (including those
carried at amortised cost)
d. Revenue recognition
Revenue from contract with customer
The Company earns revenue primarily from
rendering rating and other related services.
Revenue is recognised upon transfer of control of
promised services to customers in an amount that
reflects the consideration which the Company
expects to receive in exchange for those services.
Revenue is measured based on the transaction
price, which is the consideration, adjusted
for volume discounts, price concessions and
incentives, if any, as specified in the contract
with the customer. Revenue also excludes taxes
collected from customers.
The Company exercises judgement in
determining whether the performance obligation
is satisfied at a point in time or over a period of
time. The Company considers indicators such as
how customer consumes benefits as services are
rendered or who controls the asset as it is being
created or existence of enforceable right to
payment for performance to date and alternate
use of such service, transfer of significant risks
and rewards to the customer, acceptance of
delivery by the customer, etc.
For each performance obligation identified,
the Company determines at contract inception
whether it satisfies the performance obligation
over time or satisfies the performance obligation
at a point in time. If the Company does not satisfy
a performance obligation over time (similar to
percentage completion method), the performance
obligation is considered to be satisfied at a point
in time (similar to completed contract method).
• Recognising revenue over time: For each
performance obligation satisfied over time
the Company recognises revenue over time
by measuring the progress towards complete
satisfaction of that performance obligation.
The objective when measuring progress is
to depict the Company’s performance in
transferring control of services promised
to the customer (i.e. the satisfaction of
an entity’s performance obligation). The
Company uses input method to measure
the progress achieved towards satisfaction
of the performance obligation.
• Recognising revenue at a point in time:
Revenue is recognised on satisfaction of the
respective performance obligation. Factors
which are considered in determining whether
the performance obligation is satisfied
completely include applicable contractual
terms, milestones indicative of satisfactory
completion of performance obligation, history
of client acceptance for similar products etc.
Contract assets
Contract assets are recognised when there is
excess of revenue earned over billings on contracts.
Contract assets are classified as trade receivables
(only act of invoicing is pending) when there is
unconditional right to receive cash, and only passage
of time is required, as per contractual terms. In other
cases this is classified as other current assets.
Contract liabilities
Unearned and deferred revenue ("contract
liability”) is recognised when there is billings in
excess of revenues
e. Other income
Interest income
Interest income is recognised using the effective
interest rate method. The effective interest rate
is the rate that exactly discounts estimated
future cash receipts through the expected life of
the financial asset to the gross carrying amount
of a financial asset. When calculating the
effective interest rate, the Company estimates
the expected cash flows by considering all the
contractual terms of the financial instrument but
does not consider the expected credit losses.
Dividend income
Dividends are recognised in the Statement of
Profit and Loss only when the right to receive
payment is established, it is probable that the
economic benefits associated with the dividend
will flow to the Company and the amount of the
dividend can be measured reliably.
Sale of investments
Difference between the sale price and carrying
value of investment as determined at the end of
the previous year is recognized as profit or loss
on sale / redemption on investment on trade
date of transaction.
f. Taxes
(i) Current tax
Current tax assets and liabilities are
measured at the amount expected to be
recovered from or paid to the taxation
authorities. The tax rates and tax laws used
to compute the amount are those that
are enacted or substantively enacted, at
the reporting date in the countries where
the Company operates and generates
taxable income.
Current tax relating to items recognised
outside profit or loss is recognised outside
profit or loss (either in other comprehensive
income or in equity). Current tax items are
recognised in correlation to the underlying
transaction either in OCI or directly in
equity. Management periodically evaluates
positions taken in the tax returns with
respect to situations in which applicable
tax regulations are subject to interpretation
and considers whether it is probable that a
taxation authority will accept an uncertain
tax treatment. The Company shall reflect
the effect of uncertainty for each uncertain
tax treatment by using either most likely
method or expected value method,
depending on which method predicts
better resolution of the treatment.
(ii) Deferred tax
Deferred tax is recognised on temporary
differences between the carrying amounts
of assets and liabilities for financial
reporting purposes and the corresponding
amounts used for taxation purposes.
Deferred tax liabilities are recognised for
all taxable temporary differences, except:
• When the deferred tax liability arises
from the initial recognition of goodwill
or an asset or liability in a transaction
that is not a business combination
and, at the time of the transaction,
affects neither the accounting profit
nor taxable profit or loss
Deferred tax assets are recognised for
all deductible temporary differences,
the carry forward of unused tax credits
and any unused tax losses. Deferred tax
assets are recognised to the extent that
it is probable that taxable profit will be
available against which the deductible
temporary differences, and the carry
forward of unused tax credits and unused
tax losses can be utilised, except:
• When the deferred tax asset relating to
the deductible temporary difference
arises from the initial recognition of an
asset or liability in a transaction that
is not a business combination and, at
the time of the transaction, affects
neither the accounting profit nor
taxable profit or loss
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.
Deferred tax assets and liabilities are
measured at the tax rates that are expected
to apply in the year when the asset is realised,
or the liability is settled, based on tax rates
(and tax laws) that have been enacted or
substantively enacted at the reporting date.
Deferred tax relating to items recognised
outside profit or loss is recognised outside
profit or loss (either in other comprehensive
income or in equity). Deferred tax items are
recognised in correlation to the underlying
transaction either in OCI or directly in equity.
The Company offsets deferred tax assets
and deferred tax liabilities if and only if it
has a legally enforceable right to set off
current tax assets and current tax liabilities
and the deferred tax assets and deferred
tax liabilities relate to income taxes levied
by the same taxation authority on either
the same taxable entity or different taxable
entities which intend either to settle current
tax liabilities and assets on a net basis, or
to realise the assets and settle the liabilities
simultaneously, in each future period in
which significant amounts of deferred
tax liabilities or assets are expected to be
settled or recovered.
g. Property, plant and equipment
The cost of an item of property, plant and
equipment shall be recognized as an asset if,
and only if 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.
(i) Depreciation on PPE is the systematic
allocation of the depreciable amount
over its useful life and is provided on
a straight line basis over such useful
lives as prescribed in Schedule II of the
Companies Act, 2013.
The Company has established the
estimated range of useful lives for different
categories of PPE as follows:
Depreciation on additions is being
provided on a pro rata basis from the date
of such additions.
Depreciation on sale or disposal is provided
on a pro rata basis till the date of such
sale or disposal.
The Company reviews the estimated
residual values and expected useful lives of
assets at least annually.
An item of property, plant and equipment
and any significant part initially recognised
is derecognised upon disposal or when no
future economic benefits are expected from
its use or disposal. Any gain or loss arising
on derecognition of the asset (calculated
as the difference between the net disposal
proceeds and the carrying amount of the
asset) is included in the statement of profit
and loss when the asset is derecognised.
The residual values, useful lives and
methods of depreciation of property,
plant and equipment are reviewed at
each financial year end and adjusted
prospectively, if appropriate.
(ii) Capital work in progress is stated at cost,
net of accumulated impairment loss, if
any. Plant and equipment are stated at
cost, net of accumulated depreciation and
accumulated impairment losses, if any. Cost
of an item of property, plant and equipment
comprises its purchase price, including
import duties and non-refundable purchase
taxes, after deducting trade discounts and
rebates, any directly attributable cost of
bringing the item to its working condition
for its intended use and estimated cost of
dismantling and removing the item and
restoring the site on which it is located.
Such cost includes the cost of replacing
part of the plant and equipment and
borrowing costs for long-term construction
projects if the recognition criteria are met.
All other repair and maintenance costs are
recognised in profit or loss as incurred. The
present value of the expected cost for the
decommissioning of an asset after its use
is included in the cost of the respective
asset if the recognition criteria for a
provision are met. Subsequent expenditure
is capitalized only if it is probable that the
future economic benefits associated with
the expenditure will flow to the Company.
(iii) Advances paid towards acquisition of PPE
outstanding at each Balance Sheet date is
classified as capital advances under other
noncurrent assets
h. Intangible assets
Intangible assets acquired separately are
measured on initial recognition at cost. Following
initial recognition, intangible assets are carried
at cost less any accumulated amortisation and
accumulated impairment losses. Internally
generated intangibles, excluding capitalised
development costs, are not capitalised and the
related expenditure is reflected in profit or loss in
the period in which the expenditure is incurred.
The useful lives of intangible assets are assessed
as either finite or indefinite.
Intangible assets with finite lives are amortised
over the useful economic life and assessed for
impairment whenever there is an indication
that the intangible asset may be impaired.
The amortisation period and the amortisation
method for an intangible asset with a finite
useful life are reviewed at least at the end
of each reporting period. Changes in the
expected useful life or the expected pattern
of consumption of future economic benefits
embodied in the asset are considered to
modify the amortisation period or method,
as appropriate, and are treated as changes in
accounting estimates.
The amortisation expense on intangible assets
with finite lives is recognised in the statement
of profit and loss unless such expenditure forms
part of carrying value of another asset.
Intangible assets with indefinite useful lives are
not amortised, but are tested for impairment
annually, either individually or at the cash¬
generating unit level. The assessment of
indefinite life is reviewed annually to determine
whether the indefinite life continues to be
supportable. If not, the change in useful life
from indefinite to finite is made on a prospective
basis. Subsequent expenditure is capitalized
only when it increases the future economic
benefits embodied in the specific asset to
which it relates. All other expenditure, including
expenditure on internally generated goodwill, is
recognized in profit or loss as incurred.
An intangible asset is derecognised upon
disposal (i.e., at the date the recipient obtains
control) or when no future economic benefits
are expected from its use or disposal. Any gain
or loss arising upon derecognition of the asset
(calculated as the difference between the net
disposal proceeds and the carrying amount of the
asset) is included in the statement of profit and
loss when the asset is derecognised. Subsequent
expenditure is capitalized only if it is probable
that the future economic benefits associated
with the expenditure will flow to the Company.
The Company has determined the useful life for
software as 3 years.
i. Intangible assets under development
Identifiable intangible assets under development
are recognised when the Company controls
the asset, it is probable that future economic
benefits attributed to the asset will flow to
the Company and the cost of the asset can
be reliably measured. Intangible assets under
development is measured at historical cost
and not amortised. These assets are tested for
impairment on an annual basis.
The Company assesses at contract inception
whether a contract is, or contains, a lease. That
is, if the contract conveys the right to control
the use of an identified asset for a period of
time in exchange for consideration.
Company as a lessee
The Company applies a single recognition and
measurement approach for all leases, except
for short-term leases and leases of low-value
assets. The Company recognises lease liabilities
to make lease payments and right-of-use assets
representing the right to use the underlying assets.
a) Right-of-use assets
The Company recognises right-of-use assets
at the commencement date of the lease (i.e.,
the date the underlying asset is available
for use). Right-of-use assets are measured
at cost, less any accumulated depreciation
and impairment losses, and adjusted for any
remeasurement of lease liabilities. The cost
of right-of-use assets includes the amount
of lease liabilities recognised, initial direct
costs incurred, and lease payments made at
or before the commencement date less any
lease incentives received.
Depreciation is computed using the straight¬
line method from the commencement date
to the end of the useful life of the underlying
asset or the end of the lease term, whichever
is shorter. The estimated useful lives of right-
of-use assets are determined on the same
basis as those of the underlying property
and equipment. In the balance sheet, the
right-of-use assets and lease liabilities are
presented separately.
Right-of-use 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 Cash Generating Unit
(CGU) to which the asset belongs.
(i) At the commencement date of the lease,
the Company recognises lease liabilities
measured at the present value of lease
payments to be made over the lease
term. The lease payments include fixed
payments (including in substance fixed
payments) less any lease incentives
receivable, variable lease payments
that depend on an index or a rate, and
amounts expected to be paid under
residual value guarantees. The lease
payments also include the exercise price
of a purchase option reasonably certain
to be exercised by the Company and
payments of penalties for terminating
the lease, if the lease term reflects
the Company exercising the option to
terminate. Variable lease payments that
do not depend on an index or a rate are
recognised as expenses (unless they are
incurred to produce inventories) in the
period in which the event or condition
that triggers the payment occurs.
In calculating the present value of
lease payments, the Company uses
its incremental borrowing rate at the
lease commencement date because
the interest rate implicit in the lease
is not readily determinable. After the
commencement date, the amount of
lease liabilities is increased to reflect the
accretion of interest and reduced for
the lease payments made. In addition,
the carrying amount of lease liabilities
is remeasured if there is a modification,
a change in the lease term, a change
in the lease payments (e.g., changes
to future payments resulting from a
change in an index or rate used to
determine such lease payments) or a
change in the assessment of an option
to purchase the underlying asset.
(ii) 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).
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.
k. Impairment of non-financial assets
The Company assesses, at each reporting date,
whether there is an indication that an asset may
be impaired. If any indication exists, or when
annual impairment testing for an asset is required,
the Company estimates the asset’s recoverable
amount. An asset’s recoverable amount is the
higher of an asset’s or cash-generating unit’s
(CGU) fair value less costs of disposal and
its value in use. The recoverable amount is
determined for an individual asset, unless the
asset does not generate cash inflows that are
largely independent of those from other assets
or group of assets. When the carrying amount of
an asset or CGU exceeds its recoverable amount,
the asset is considered impaired and is written
down to its recoverable amount.
In assessing value in use, the estimated future
cash flows are discounted to their present value
using a pre-tax discount rate that reflects current
market assessments of the time value of money
and the risks specific to the asset. In determining
fair value less costs of disposal, recent market
transactions are taken into account. If no such
transactions can be identified, an appropriate
valuation model is used. These calculations are
corroborated by valuation multiples, quoted
share prices for publicly traded companies or
other available fair value indicators.
The Company bases its impairment calculation
on detailed budgets and forecast calculations,
which are prepared separately for each of the
Company’s CGUs to which the individual assets
are allocated. These budgets and forecast
calculations generally cover a period of five
years. For longer periods, a long-term growth
rate is calculated and applied to project future
cash flows after the fifth year. To estimate cash
flow projections beyond periods covered by the
most recent budgets/forecasts, the Company
extrapolates cash flow projections in the
budget using a steady or declining growth rate
for subsequent years, unless an increasing rate
can be justified. In any case, this growth rate
does not exceed the long-term average growth
rate for the products, industries, or country or
countries in which the Company operates, or for
the market in which the asset is used.
Impairment losses of continuing operations
are recognised in the statement of profit and
loss, except for properties previously revalued
with the revaluation surplus taken to OCI. For
such properties, the impairment is recognised
in OCI up to the amount of any previous
revaluation surplus.
For assets excluding goodwill, an assessment
is made at each reporting date to determine
whether there is an indication that previously
recognised impairment losses no longer exist
or have decreased. If such indication exists,
the Company estimates the asset’s or CGU’s
recoverable amount. A previously recognised
impairment loss is reversed only if there has been
a change in the assumptions used to determine
the asset’s recoverable amount since the last
impairment loss was recognised. The reversal is
limited so that the carrying amount of the asset
does not exceed its recoverable amount, nor
exceed the carrying amount that would have
been determined, net of depreciation, had no
impairment loss been recognised for the asset
in prior years. Such reversal is recognised in the
statement of profit and loss unless the asset is
carried at a revalued amount, in which case, the
reversal is treated as a revaluation increase.
l. Impairment of Contract asset
In accordance with Ind-AS 109, the Company
applies Expected Credit Loss (ECL) model for
measurement and recognition of impairment
loss on the following contract asset:
The Company follows ‘simplified approach’ for
recognition of impairment loss allowance on
contract asset which do not contain a significant
financing component.
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.
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