2. Summary of material accounting policies
2.1 Basis of presentation
The standalone financial statements of the Company have been prepared in accordance with Indian Accounting
Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 as amended from
time to time, notified under section 133 of the Companies Act, 2013 ('Act') and other relevant provisions of the
Act. The financial statements have been prepared on a historical cost basis, except for share based payments,
non-current assets and disposal group classified as held for sale, derivative financial instruments and certain
financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments).
The financial statements are presented in Million INR except earnings per share data, number of equity shares
and unless stated otherwise. All values are rounded to the nearest Million except when otherwise indicated.
2.2 Segment information
Operating segments (Note 33) are reported consistently with the internal reporting provided to the Chief
Operating Decision Maker (CoDM). Performance is measured based on segment results (profit before tax) as
included in internal reporting which is reviewed by one of the Executive directors who is also the Company's
CoDM. Segment profit is used to measure performance as management believes that such information is
most relevant in evaluating the results of certain segments relative to other entities that operate within these
industries. Inter-segment pricing is determined on an arm's length basis.
2.3 Current and non-current classification
An asset is current when:
• Expected to be realized or intended to be sold or consumed in normal operating cycle
• Held primarily for the purpose of trading
• Expected to be realized 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 Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets or liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realization in cash and
cash equivalents. The Company has identified twelve months as its operating cycle.
2.4 Foreign currencies
Transactions in foreign currencies are recorded at the exchange rate prevailing on the date of the transaction.
Realized gains and losses and also exchange differences arising on translation at year end exchange rates of
monetary assets and monetary liabilities outstanding at the end of the year are recognized in the statement of
Profit and Loss.
2.5 Revenue from contracts with customers
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the
customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange
for those goods or services. The Company has concluded that it is principal in its revenue arrangements because
it typically controls the goods or services before transferring them to the customer. The policy of recognising the
revenue is determined by the five-stage model proposed by Ind AS 115 “Revenue from contract with customers''.
Sale of goods
Revenue from the sale of goods is recognised when the performance obligation is satisfied and usually coincides
with the point in time when control of the asset is transferred to the customer, generally on the date of the bill
of lading for export sales and generally on delivery for domestic sales. The normal credit term is 30 to 90 days
upon delivery. The Company considers whether there are other promises in the contract that are separate
performance obligations to which a portion of the transaction price needs to be allocated. In determining the
transaction price for the sale of goods, the Company considers the effect of variable consideration, the existence
of significant financing components, non-cash consideration, and consideration payable to the customer, if
any.
Tooling Income
Revenue from tooling income is recognised when the performance obligation is satisfied and usually coincides
with at the point in time when the control of the die is transferred, which is generally on receipt of the customer's
approval as per the terms of the contract. The normal credit term is 30 to 90 days.
Sale of Services
Revenue from the sale of services is in nature of job work on customer product which normally takes 1-4 days for
completion and accordingly, revenue is recognised when products are sent to the customer on which job work
is completed. The normal credit period is 60 days.
2.6 Other Revenue
Export incentives
Revenue from export incentives are accounted for on export of goods if the entitlements can be estimated with
reasonable assurance and condition precedent to claim are fulfilled.
Interest income
For all debt instruments measured either at amortised cost or at fair value through other comprehensive
income, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts
the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter
period, where appropriate, to the gross carrying amount of the financial asset or to the amortised cost of a
financial liability. When calculating the effective interest rate, the Company estimates the expected cash flows
by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call
and similar options) but does not consider the expected credit losses. Interest income is included in other income
in the statement of profit and loss.
Dividends
Revenue is recognised when the Company's right to receive the payment is established, which is generally when
shareholders of the investor company approve the dividend.
2.7 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 recognized 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 recognized as income in equal amounts over the expected
useful life of the related asset.
2.8 Taxes
Current income tax
Current income 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.
Current income tax relating to items recognized outside profit or loss is recognized outside profit or loss (either
in other comprehensive income or in equity). Current tax items are recognized 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 establishes
provisions where appropriate.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognized for all taxable temporary differences.
Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax
credits and any unused tax losses. Deferred tax assets are recognized 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.
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. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized 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 recognized outside profit or loss is recognized either in other comprehensive
income or in equity. Deferred tax items are recognized in correlation to the underlying transaction either in OCI
or directly in equity.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same
taxation authority.
Goods and Services taxes paid on acquisition of assets or on incurring expenses
Expenses and assets are recognized net of the amount of Goods and Services taxes paid, except:
• When the tax incurred on a purchase of assets or services is not recoverable from the taxation authority,
in which case, the tax paid is recognized as part of the cost of acquisition of the asset or as part of the
expense item, as applicable
• When receivables and payables are stated with the amount of tax included
The net amount of tax recoverable from, or payable to, the taxation authority is included as part of receivables
or payables in the balance sheet.
2.9 Leases
As a Lessee
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset
is available for use by the Company. Lease payments are allocated between the principal (liability) and finance
cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate
of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over
the shorter of the asset's useful life and the lease term on a straight-line basis. If the Company is reasonably
certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset's useful
life.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include
the net present value of the following lease payments:
- fixed payments (including in-substance fixed payments), less any lease incentives receivable
- amounts expected to be payable by the lessee under residual value guarantees
- payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option
Lease payments to be made under reasonably certain extension options are also included in the measurement
of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot
be readily determined, which is generally the case for leases in the Company, the lessee's incremental borrowing
rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain
an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security
and conditions.
Right-of-use assets are measured at cost comprising the following:
- the amount of the initial measurement of lease liability
- any lease payments made at or before the commencement date less any lease incentives received
- any initial direct costs, and
- restoration costs.
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, as follows:
- Leasehold land - up to 95 years
- Building - up to 13 years
- Vehicles - up to 6 years
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line
basis as an expense in profit or loss.
Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT-equipment
and small items of office equipments.
As a Lessor
Lease income from operating leases where the Company is a lessor is recognised in income on a straight-line
basis over the lease term unless the receipts are structured to increase in line with expected general inflation
to compensate for the expected inflationary cost increases. The respective leased assets are included in the
balance sheet based on their nature.
2.10 Property, plant and equipment
Freehold land is carried at historical cost. All other items of property, plant and equipment are stated at historical
cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of items.
Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Company and
cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate
asset is derecognised when replaced. All other repairs and maintenance are charged to profit and loss during
the reporting period in which they are incurred.
Depreciation is calculated on a straight-line basis over the estimated useful lives, of the assets as follows (single
shift basis):
• Building 3 to 60 years
• Furniture and fixtures 5 to 10 years
• Office equipment 5 to 10 years
• Vehicles 5 to 8 years
• Other fixed assets 3 to 10 years
The depreciation policy historically applied by CIE to productive assets (plant, machinery and tools) is to
systematically apply depreciation based on the useful lives of the assets concerned. These useful lives were
estimated in accordance with the actual production capacity of the assets and their residual value, as well as a
maximum useful life for each asset.
For certain plants and machineries, the Management applies unit of production method for depreciation. By
using the units of production method, annual depreciation charges adapt to changes in production levels, on
the understanding that this best reflects the expected pattern of consumption of the future economic benefits
embodied by the assets. Units of production method of depreciation is calculated for these categories of plant,
machinery, based on the actual production levels attained by the assets and their residual value.
For other plant and equipment, where usage and efflux of time is primary determinant, the Company continues
to depreciate assets using straight-line basis over the estimated useful lives of the assets as follows:
• Plant and equipment (other than those stated above) 3 to 25 years
The Company, based on technical assessment made by technical expert and management estimate,
depreciates certain items of building, plant and equipment over estimated useful lives or based on production,
which are different from the useful life prescribed in Schedule II to the Companies Act, 2013. 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.
An item of property, plant and equipment and any significant part initially recognized is derecognized 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 income statement when the asset is derecognized.
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.
2.H Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets
acquired in a business combination is their fair value at the date of acquisition. 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.
Amortisation is calculated on a straight-line basis over the estimated useful lives of 3 to 5 years.
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 recognized in the statement of profit and loss.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the
net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit or loss
when the asset is derecognized.
2.12 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily
takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost
of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist
of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also
includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
2.13 Inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition is accounted for as follows:
- Raw materials: Cost includes cost of purchase and other costs incurred in bringing the inventories to their
present location and condition. Cost is determined on weighted average basis.
- Finished goods and work in progress: Cost includes cost of direct materials and labour cost and a proportion
of manufacturing overheads based on the normal operating capacity but excluding borrowing costs. Cost
is determined on weighted average basis.
- Stores and spares: Cost includes cost of purchase and other costs incurred in bringing the inventories to
their present location and condition. Cost is determined on weighted average basis.
- Loose tools: Cost includes cost of purchase and other costs incurred in bringing the inventories to their
present location and condition. Cost is determined on weighted average basis.
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.
The comparison of cost and net realisable value is made on an item-by-item basis.
2.14 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 fair value less costs of
disposal and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels
for which there are separately identifiable cash inflows which are largely independent of the cash flows from
other assets or groups of assets (cash-generating units). 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 the 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.
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 year. 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 for
the market in which the asset is used.
Impairment losses of continuing operations, including impairment on inventories, are recognized 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 recognized 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 recognized 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 recognized 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 recognized. 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 recognized for the asset in prior year. Such
reversal is recognized in the statement of profit or loss unless the asset is carried at a revalued amount, in which
case, the reversal is treated as a revaluation increase.
Goodwill is tested for impairment annually as at 31 December, 2024 or upon identification of an impairment
indicator. Impairment is determined for goodwill by assessing the recoverable amount of each CGU to which
the goodwill relates. In assessing the recoverable amount of the CGU, 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. When the recoverable amount of the CGU is less than its
carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed
in future periods.
Intangible assets with indefinite useful lives are tested for impairment annually as at 31 December at the CGU
level, as appropriate, and when circumstances indicate that the carrying value may be impaired.
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