3 MATERIAL ACCOUNTING POLICY INFORMATION
(a) Property, plant and equipment:
Property, plant and equipment are carried at cost
of acquisition or construction less accumulated
depreciation and/or accumulated impairment
loss, if any. The cost of an item of property, plant
and equipment comprises its purchase price,
including import duties and other non-refundable
taxes or levies and any directly attributable cost
of bringing the asset to its working condition for
its intended use; any trade discounts and rebates
are deducted in arriving at the purchase price.
If significant parts of an item of property, plant
and equipment have different useful lives, than
they are accounted for as separate items (major
components) of property, plant and equipment.
Assets under construction are disclosed as capital
work-in-progress.
Capital work-in-progress includes the cost of
property, plant and equipment that are not ready
to use at the Balance Sheet date.
Subsequent Expenditure:
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/Amortisation:
Depreciation is calculated on pro rata basis on
straight-line method based on estimated useful
life prescribed under Schedule II of the Companies
Act, 2013.
The residual values, useful lives and method of
depreciation of property, plant and equipment is
reviewed at each financial year end and adjusted
prospectively, if appropriate.
Derecognition:
An item of property, plant and equipment is
derecognised upon disposal or when no future
economic benefits are expected from its use or
disposal. Any gain or loss on 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 recognised in the Statement of Profit and Loss
in the year the asset is derecognised.
(b) Intangible assets
Intangible assets that are acquired by the
Company are measured initially at cost. After
initial recognition, an intangible assets is carried
at its cost less any accumulated amortisation and
any accumulated loss. Subsequent expenditure
is capitalised only when it increases the future
economic benefit from the specific asset to which
it relates.
Other Intangible assets are amortised on the
straight line method over a period of 3 years.
Amortisation methods, useful lives and residual
values are reviewed at each reporting date and
adjusted if appropriate.
Impairment Testing of Property, Plant and
Equipment, and other Intangible Assets
The carrying amounts of assets are reviewed at
each Balance Sheet date, if there is any indication
of impairment based on internal/external factors.
An impairment loss is recognised wherever
the carrying amount of an asset exceeds its
estimated recoverable amount. The recoverable
amount is greater of the assets net selling price
and value in use. In assessing the value in use, the
estimated future cash flows are discounted to the
present value using the weighted average cost of
capital. After impairment, depreciation is provided
on revised carrying amount of the assets over
its remaining useful life. Previously recognised
impairment loss is further provided or reversed
depending on changes.
(c) Leases
The Company's lease asset classes primarily
consist of leases for solar plants and vehicles. At
the inception of contract the Company assesses
whether the contract is, or contains a lease. A
contract is, or contains, a lease if the contract
involves use of an identified asset and conveys
the right to control the use of asset for period of
time in exchange for consideration i.e. customer
has right to:
- obtain substantially all the economic benefits
from using the asset and
- direct the use of asset.
Company as a lessee
Recognition and measurement
The Company recognises the right of use asset
and lease liability at the lease commencement
date of lease. The right of use asset is initially
measured at cost, which comprises of the initial
amount of lease liability adjusted for any payment
made at or before commencement date, any
initial direct cost incurred and an estimate of
cost to dismantle or remove an underlying asset
or to restore an asset less any lease incentive
received. The lease liability is initially measured at
present value of lease payments that is not paid at
commencement date discounted at implicit rate
mentioned in lease or incremental borrowing rate.
Lease payments include fixed payments,
including in-substance fixed payments; variable
lease payments that depend on an index or a rate,
initially measured using the index or rate as at
the commencement date; amounts expected to
be payable by the Company under the residual
value guarantee; the exercise price of a purchase
option; if the Company is reasonably certain to
exercise that option and payment of penalties for
terminating the lease, if the lease term considered
reflects that the Company shall exercise a
termination option. The Company generally uses
its incremental borrowing rate as discount rate.
The right-of-use assets is subsequently
depreciated using the straight-line method
from the commencement date to the earlier of
the end of lease term or over the useful life of
right-of-use asset.
The lease liability is subsequently measured at
amortised cost using effective interest method.
It is remeasured when there is a change in future
lease payments.
Extension and termination of lease
The Company determines the lease term as the
noncancelable period of a lease, together with
both periods covered by an option to extend the
lease if the Company is reasonably certain to
exercise that option; and periods covered by an
option to terminate the lease if the Company is
reasonably certain not to exercise that option. In
assessing whether the Company is reasonably
certain to exercise an option to extend a lease,
or not to exercise an option to terminate a lease,
it considers all relevant facts and circumstances
that create an economic incentive for the
Company to exercise the option to extend the
lease, or not to exercise the option to terminate
the lease. The Company revises the lease term if
there is a change in the non-cancellable period of
a lease.
Short term leases and low value assets
The Company has elected not to recognise right
of use of assets and lease liabilities for short-term
leases that have lease term of 12 months or less
and leases of low value assets. The Company
recognises the lease payments associated with
these leases as an expense on a straight- line
basis over the lease term in the Statement of
Profit and Loss.
Impairment testing for right of use of assets
Right of use assets are tested for impairment
whenever there is any indication that their carrying
amount is not recoverable. Impairment loss, if any,
is recognised in Statement of Profit and Loss.
(d) Inventories
I nventories are valued at the lower of cost or net
realizable value. Cost is determined on weighted
average cost. The cost of finished goods and
work in progress comprises raw materials, direct
labour, other direct costs and related production
overheads. Net realizable value is the estimated
selling price in the ordinary course of business,
less the estimated costs of completion and the
estimated costs necessary to make the sale.
(e) Financial Instruments
a) Initial recognition and measurement
Financial assets and financial liabilities are
recognised when the Company becomes
a party to the contractual provisions of
the instruments, except trade receivables
that are initially recognised when they are
originated.
Financial assets and financial liabilities are
initially measured at fair value. Transaction
costs that are directly attributable to the
acquisition or issue of financial assets and
financial liabilities (other than financial
assets and financial liabilities at fair value
through profit or loss) are added to or
deducted from the fair value of the financial
assets or financial liabilities, as appropriate,
on initial recognition. Transaction costs
directly attributable to the acquisition of
financial assets or financial liabilities at fair
value through profit or loss are recognised
immediately in profit or loss. However, Trade
receivables that do not contain a significant
financing component are measured at
transaction price.
b) Classification and subsequent measurement
Financial assets
On initial recognition, a financial asset is
classified as - measured at:
- Amortised cost; or
- FVOCI - Debt Investment; or
- FVOCI - equity investment;
- FVTPL
Financial assets are not reclassified
subsequent to their initial recognition unless
the Company changes its business model
for managing financial assets, in which case
all affected financial assets are reclassified
on the first day of the first reporting period
following the change in the business model.
A financial asset is measured at amortised
cost if it meets both of the following
conditions and is not designated as at FVTPL:
- it is held within a business model whose
objective is to hold assets to collect
contractual cash flows; and
- i ts contractual terms give rise on
specified dates to cash flows that are
solely payments of principal and interest
on the principal amount outstanding.
A debt investment is measured at FVOCI if it
meets both of the following conditions and is
not designated as at FVTPL:
- it is held within a business model whose
objective is achieved by both collecting
contractual cash flows and selling
financial assets; and
- i ts contractual terms give rise on
specified dates to cash flows that are
solely payments of principal and interest
on the principal amount outstanding.
On initial recognition of an equity investment
that is not held for trading, the Company
may irrevocably elect to present subsequent
changes in the investment's fair value in OCI.
This election is made on an investment-by¬
investment basis.
Investments representing equity interest in
subsidiaries, associates and joint ventures
are carried at cost less any provision for
impairment. Investments are reviewed
for impairment if events or changes in
circumstances indicate that the carrying
amount may not be recoverable.
A financial asset which is not classified in
any of the above categories are measured
at FVTPL. However, in cases where the
Company has made an irrevocable election for
particular investments in equity instruments
that would otherwise be measured at FVTPL
the subsequent changes in fair value are
recognized in Other Comprehensive Income.
c) Financial liabilities and equity instruments
Debt and equity instruments issued by the
Company are classified as either financial
liabilities or as equity in accordance with the
substance of the contractual arrangements
and the definitions of a financial liability and
an equity instrument.
Equity instruments
An equity instrument is any contract that
evidences a residual interest in the assets of
an entity after deducting all of its liabilities.
Equity instruments issued by the Company is
recognised at the proceeds received, net of
directly attributable transaction costs.
Financial liabilities
The Company's financial liabilities
include trade and other payables, loans
and borrowings and derivative financial
instruments. Subsequent measurement
of financial liabilities depends on their
classification as fair value through
Profit and loss or at amortized cost. All
changes in fair value of financial liabilities
classified as FVTPL are recognized in the
Statement of Profit and Loss. Amortised
cost category is applicable to loans and
borrowings, trade and other payables.
After initial recognition the financial liabilities
are measured at amortised cost using the
Effective Interest Rate method.
d) Derecognition of financial assets & liabilities
Derecognition of financial assets
The Company derecognises a financial asset
when the contractual rights to the cash flows
from the financial asset expire, or it transfers
the rights to receive the financial asset and
substantially all the risks and rewards of
ownership of the asset to another party. If
the Company neither transfers nor retains
substantially all of the risks and rewards
of ownership and continues to control the
transferred asset, the Company recognises
its retained interest in the asset and an
associated liability for the amount it may
have to pay.
Derecognition of financial liabilities
A financial liability is derecognised when
the contractual obligation under the liability
is discharged or cancelled or expired. 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 in the respective carrying amounts
is recognised in profit or loss.
e) Offsetting of financial instruments
Financial assets and financial liabilities are
offset and the net amount presented in the
balance sheet when, and only when, the
Company currently has a legally enforceable
right to set off the amounts and it intends
either to settle them on a net basis or to
realise the asset and settle the liability
simultaneously.
f) Impairment
The Company applies the Expected Credit
Loss (ECL) model for recognising impairment
loss on financial assets. With respect to
trade receivables and financial assets that
are debt instruments and are measured at
amortised cost, the Company measures the
loss allowance at an amount equal to lifetime
expected credit losses.
Lifetime expected credit losses are the
expected credit losses that result from all
possible default events over the expected life
of a financial instrument.
Expected credit losses are recognized for
all financial assets subsequent to initial
recognition other than financials assets
measured at FVTPL category. For financial
assets other than trade receivables, as per Ind
AS 109, the Company recognises 12 month
expected credit losses for all originated or
acquired financial assets if at the reporting
date the credit risk of the financial asset has
not increased significantly since its initial
recognition. The impairment losses and
reversals are recognised in Statement of
Profit and Loss.
g) Write-off
The gross carrying amount of a financial
asset is written off (either partially or in full)
to the extent that there is no realistic prospect
of recovery. This is generally the case when
the Company determines that the debtor
does not have assets or sources of income
that could generate sufficient cash flows to
repay the amounts subject to the write- off.
However, financial assets that are written
off could still be subject to enforcement
activities under the Company's recovery
procedures, taking into account legal advice
where appropriate. Any recoveries made are
recognised in profit or loss.
h) Derivative Financial Instruments:
The Company uses foreign exchange
forward contracts to hedge its exposure to
movements in foreign exchange rates on
its long-term borrowings. The use of these
foreign exchange forward contracts reduces
the risk to the Company. The Company
does not use the foreign exchange forward
contracts for trading or speculation purpose.
These derivatives are initially recognised at
fair value on the date a derivative contract
is entered into and are subsequently
remeasured to their fair value at the end of
each reporting period. No hedge accounting
is applied to these derivatives, which are
carried at fair value with changes being
recognised in the statement of profit and loss.
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