3 Significant Accounting Policies
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:
i) Expected to be realised or intended to be sold or consumed in normal operating cycle
ii) Held primarily for the purpose of trading
iii) Expected to be realised within twelve months after the reporting period, or
iv) 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:
i) It is expected to be settled in normal operating cycle
ii) It is held primarily for the purpose of trading
iii) It is due to be settled within twelve months after the reporting period, or
iv) There is no unconditional right to defer the settlement of the liability for at least twelve months after
the reporting period
All other liabilities are classified 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 12 months as its operating cycle.
b) Fair value measurement
The Company has applied the fair value measurement wherever necessitated at each reporting period.
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:
i) In the principal market for the asset or liability;
ii) 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 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 the 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, maximizing 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 financial statements are
categorized 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:
Level 1 : Quoted (unadjusted) market prices in active market 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; and
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 recognized in the financial statements on a recurring basis, the
Company determines whether transfers have occurred between levels in the hierarchy by re-assessing
categorization (based on the lowest level input that is significant to the fair value measurement as a
whole) at the end of each reporting period.
The Company has designated the respective team leads to determine the policies and procedures for
both recurring and non - recurring fair value measurement. External valuers are involved, wherever
necessary with the approval of Company's board of directors. Selection criteria include market
knowledge, reputation, independence and whether professional standards are maintained.
For the purpose of fair value disclosure, the Company has determined classes of assets and liabilities
on the basis of the nature, characteristics and risk of the asset or liability and the level of the fair value
hierarchy as explained above. The component wise fair value measurement is disclosed in the relevant
notes.
c) Revenue Recognition
Sale of goods
Revenue from sale of products is recognized, in accordance with the sales contract, on delivery ofgoods
to the customer. Revenue from product sales are shown net of taxes.
Sale of services
Revenue on software development services comprises revenue priced on a time and material andfixed-
price contracts. Revenue priced on a time and material contracts are recognized as related services
are performed. Revenue from fixed-price, fixed time-frame contracts is recognized in accordance with
the percentage of completion method.
Revenue from technical service, training, support and other services is recognized as the relatedservices
are performed over the duration of the contract/course.
Interest 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.
Rental income
Rental income from operating lease is recognised on a straight line basis over the term of the relevant
lease, if the escalation is not a compensation for increase in cost inflation index.
Dividend income
Dividend income is recognized when the company’s right to receive dividend is established by the
reporting date, which is generally when shareholders approve the dividend.
d) Property, plant and equipment and capital work in progress
Presentation
Property, plant and equipment and capital work in progress are stated at cost, net of accumulated
depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part
of the plant and equipment and borrowing costs of a qualifying asset, if the recognition criteria are met.
When significant parts of plant and equipment are required to be replaced at intervals, the Company
depreciates them separately based on their specific useful lives. All other repair and maintenance
costs are recognised in profit or loss as incurred.
Advances paid towards the acquisition of tangible assets outstanding at each balance sheet date, are
disclosed as capital advances under long term loans and advances and the cost of the tangible assets
not ready for their intended use before such date, are disclosed as capital work in progress.
Component Cost
All material/ significant components have been identified for our plant and have been accounted separately.
The useful life of such component are analysed independently and wherever components are having
different useful life other than plant they are part of, useful life of components are considered for calculation
of depreciation.
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying
amount of the item if it is probable that the future economic benefits embodied within the part will flow
to the Company and its cost can be measured reliably. The costs of repairs and maintenance are
recognised in the statement of profit and loss as incurred.
Derecognition
Gains or losses arising from derecognition of property, plant and equipment 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 and loss when the asset is derecognized.
e) Depreciation on property, plant and equipment
Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. The
depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less 5%
being its residual value.
Depreciation is provided on straight line method, over the useful lives specified in Schedule II to the
CompaniesAct, 2013 except for the following items, where useful life estimated on technical assessment,
past trends and differ from those provided in Schedule II of the Companies Act, 2013.
Depreciation for PPE on additions is calculated on pro-rata basis from the date of such additions. For
deletion/ disposals, the depreciation is calculated on pro-rata basis up to the date on which such
assets have been discarded/ sold. Additions to fixed assets, costing 5000 each or less are fully
depreciated retaining its residual value.
The residual values, estimated useful lives and methods of depreciation of property, plant and equipment
are reviewed at each financial year end and adjusted prospectively, if appropriate.
f) Intangible assets
Intangible assets acquired separately
Intangible assets acquired separately are measured on initial recognition at cost. The cost of a separately
acquired intangible asset comprises (a) its purchase price, including import duties and non-refundable
purchase taxes, after deducting trade discounts and rebates; and (b) any directly attributable cost of
preparing the asset for its intended use.
Following initial recognition, intangible assets are carried at cost less any accumulated amortisation
and accumulated impairment losses.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination and recognised separately from goodwill are
initially recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at
cost less accumulated amortisation and accumulated impairment losses, on the same basis as
intangible assets that are acquired separately.
Intangible assets internally generated
Expenditure on research activities is recognised as an expense in the year in which it is incurred.
An internally -generated intangible asset arising from development (or from the development phase of
an internal project) is recognised if, and only if, the intangible asset first meets the recognition criteria
referred in Ind AS 38 "Intangible Assets". Where no internally-generated intangible asset can be
recognised, development expenditure is recognised in the statement of profit and loss in the period in
which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less
accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets
that are acquired separately.
Useful life and amortisation of intangible assets
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.
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 life
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually.
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 cost and measurement
Subsequent costs are capitalised only when it increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditures, including expenditure on internally-generated
intangibles, are recognised in the statement of profit and loss as incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less
accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets
that are acquired separately.
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.
g) Investment property
Investment properties are properties held to earn rentals and/or for capital appreciation (including property
under construction for such purposes).
Investment properties are measured initially at cost, including transaction costs. Subsequent to initial
recognition, investment properties are measured in accordance with Ind AS 16 - Property, plant and
equipment's requirements for cost model. The cost includes the cost of replacing parts and borrowing
costs for long-term construction projects if the recognition criteria are met. When significant parts of
the investment property are required to be replaced at intervals, the Company depreciates them
separately based on their specific useful lives. All other repair and maintenance costs are recognised
in the statement of profit and loss as incurred.
Company depreciates investment property as per the useful life prescribed in Schedule II of the
Companies Act, 2013.
Though the Company measures investment property using the cost-based measurement, the fair value
of investment property is disclosed in the notes. Fair values are determined based on an annual
evaluation performed by an accredited external independent valuer applying a valuation model.
An investment property is derecognised upon disposal or when the investment property is permanently
withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss
arising on derecognition of the property (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 in the period in
which the property is derecognised.
h) Non Current Assets Held for Sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be
recovered principally through a sale transaction rather than through continuing use. This condition is
regarded as met only when the asset (or disposal group) is available for immediate sale in its present
condition subject only to terms that are usual and customary for sales of such asset (or disposal
group) and its sale is highly probable. Management must be committed to the sale, which should be
expected to qualify for recognition as a completed sale within one year from the date of classification.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their
carrying amount and fair value less costs to sell.
i) Inventories
Inventories are carried at the lower of cost and net realisable value. Cost includes cost of purchase and
other costs incurred in bringing the inventories to their present location and condition. Costs are
determined on weighted average basis as follows :
i) Raw materials, packing materials and Store and Spare Parts : At purchase cost including
other cost incurred in bringing materials/consumables to their present location and condition.
ii) Work in progress: At material cost, conversion costs and appropriate share of production overheads
(iii) Finished goods and waste: At material cost, conversion costs, appropriate share of production
overheads and Excise Duty. Post implementation of GST from July 1,2017 no excise duty is
included in the closing stock of finished goods as at March 31,2023.
j) Financial Instruments
Financial assets
Financial assets and financial liabilities are recognised when an entity becomes a party to the contractual
provisions of the instruments.
Initial recognition and measurement
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded
at fair value through profit or loss, transaction costs that are attributable to the acquisition of the
financial asset. Purchases or sales of financial assets that require delivery of assets within a time
frame established by regulation or convention in the market place (regular way trades) are recognised
on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified on the basis of their contractual
cash flow characteristics and the entity's business model of managing them.
Financial assets are classified into the following categories:
• Financial instruments (other than equity instruments) at amortised cost
• Financial Instruments (other than equity instruments) at Fair value through Other comprehensive
income (FVTOCI)
• Other Financial Instruments, derivatives and equity instruments at fair value through profit or loss
(FVTPL)
• Equity instruments measured at fair value through other comprehensive income (FVTOCI)
Financial instruments other than equity instruments at amortised cost
The Company classifies a financial instruments (other than equity instruments) at amortised cost, if
both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual
cash flows; and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments
of principal and interest (SPPI) on the principal amount outstanding.
Such financial assets are subsequently measured at amortised cost using the effective interest rate
(EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition
and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance
income in the profit or loss. The losses arising from impairment are recognised in the profit or loss.
Financial instruments other than equity instruments at FVTOCI
The Company classifies a financial instrument (other than equity instrument) at FVTOCI, if both of the
following criteria are met:
a) The objective of the business model is achieved both by collecting contractual cash flows and
selling the financial assets, and
b) The asset’s contractual cash flows represent SPPI.
Debt instruments included within the FVTOCI category are measured as at each reporting date at fair
value. Fair value movements are recognized in the other comprehensive income (OCI). However, the
group recognizes interest income, impairment losses and reversals and foreign exchange gain or loss
in the profit and loss statement. On derecognition of the asset, cumulative gain or loss previously
recognised in OCI is reclassified from the equity to profit and loss. Interest earned whilst holding
FVTOCI debt instrument is reported as interest income using the EIR method.
Financial instruments other than equity instruments at FVTPL
The Company classifies all other financial instruments, which do not meet the criteria for categorization
as at amortized cost or as FVTOCI, as at FVTPL.
Financial instruments included within the FVTPL category are measured at fair value with all changes
recognized in the profit and loss.
Equity investments
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are
held for trading are classified as at FVTPL. Where the Company makes an irrevocable election of
equity instruments at FVTOCI, it recognises all subsequent changes in the fair value in other
comprehensive income, without any recycling of the amounts from OCI to profit and loss, even on sale
of such investments.
Equity instruments included within the FVTPL category are measured at fair value with all changes
recognized in the profit and loss.
Financial assets are measured at FVTPL except for those financial assets whose contractual terms
give rise to cash flows on specified dates that represents solely payments of principal and interest
thereon, are measured as detailed below depending on the business model:
Derecognition
A financial asset is primarily derecognised when:
• The rights to receive cash flows from the asset have expired, or
• The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation
to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement?
and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the
Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has
transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass¬
through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When
it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred
control of the asset, the Company continues to recognise the transferred asset to the extent of the Company’s
continuing involvement. In that case, the Company also recognises an associated liability. The transferred asset
and the associated liability are measured on a basis that reflects the rights and obligations that the Company
has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of
the original carrying amount of the asset and the maximum amount of consideration that the Company could be
required to repay.
Impairment of financial assets
In accordance with Ind AS 109, the Company applies expected credit loss (ECL) model for measurement and
recognition of impairment loss on the following financial assets and credit risk exposure:
a) Financial assets that are debt instruments, and are measured at amortised cost e.g., loans, debt securities,
deposits, trade receivables and bank balance.
b) Financial assets that are debt instruments and are measured at FVTOCI
c) Trade receivables or any contractual right to receive cash or another financial asset that result from
transactions that are within the scope of Ind AS 11 and Ind AS 18.
The Company follows ‘simplified approach’ for recognition of impairment loss allowance on:
• Trade receivables or contract revenue receivables; and
• All lease receivables resulting from transactions within the scope of Ind AS 17
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 Expected Credit Loss (ECL) at each reporting date,
right from its initial recognition.
For recognition of impairment loss on other financial assets and risk exposure, the Company determines that
whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not
increased significantly, 12 months ECL is used to provide for impairment loss. However, if credit risk has increased
significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that
there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognising
impairment loss allowance based on 12-month ECL.
Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a
financial instrument. The 12 months ECL is a portion of the lifetime ECL which results from default events that are
possible within 12 months after the reporting date.
ECL is the difference between all contractual cash flows that are due to the Company in accordance with the
contract and all the cash flows that the entity expects to receive (i.e., all cash shortfalls), discounted at the
original EIR. When estimating the cash flows, the Company considers all contractual terms of the financial
instrument (including prepayment, extension, call and similar options) over the expected life of the financial
instrument and Cash flows from the sale of collateral held or other credit enhancements that are integral to the
contractual terms.
ECL allowance (or reversal) recognized during the period is recognized as income/ expense in the statement of
profit and loss, net of lien available on securities held against the receivables. This amount is reflected under the
head ‘other expenses’ in the profit and loss. The balance sheet presentation for various financial instruments is
described below:
• Financial assets measured as at amortised cost, contractual revenue receivables and lease
receivables: ECL is presented as an allowance, which reduces the net carrying amount. Until the asset
meets write-off criteria, the Company does not reduce impairment allowance from the gross carrying amount.
• Debt instruments measured at FVTOCI: Since financial assets are already reflected at fair value, impairment
allowance is not further reduced from its value. Rather, ECL amount is presented as ‘accumulated impairment
amount’ in the OCI.
For assessing increase in credit risk and impairment loss, the company combines financial instruments on the
basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable
significant increases in credit risk to be identified on a timely basis.
For impairment purposes, significant financial assets are tested on individual basis at each reporting date. Other
financial assets are assessed collectively in groups that share similar credit risk characteristics. Accordingly,
the impairment testing is done retrospectively on the following basis:
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at FVTPL and as at amortised cost.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs
that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit
and loss.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables,
net of directly attributable transaction costs.
The Company’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts,
financial guarantee contracts and derivative financial instruments.
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at FVTPL
Financial liabilities at FVTPL include financial liabilities held for trading and financial liabilities designated upon
initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they
are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial
instruments entered into by the Company that are not designated as hedging instruments in hedge relationships
as defined by Ind AS 109. Separated embedded derivatives are also classified as held for trading unless they are
designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in the profit or loss.
For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized
in OCI. These gains/ loss are not subsequently transferred to profit and loss. However, the company may transfer
the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the
statement of profit or loss. The company has not designated any financial liability as at fair value through profit
and loss.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost
using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as
well as through the EIR amortisation process.
Derivative financial instruments
The Company holds derivative financial instruments such as foreign exchange forward and options contracts to
mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these
contracts is generally a bank.
(a) Derivatives fair valued through profit or loss
This category has derivative financial assets or liabilities which are not designated as hedges.
Although the Company believes that these derivatives constitute hedges from an economic perspective, they
may not qualify for hedge accounting under Ind AS 109, Financial Instruments. Any derivative that is either not
designated a hedge, or is so designated but is ineffective as per Ind AS 109, is categorized as a financial asset
or financial liability, at fair value through profit or loss.
Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs
are recognized in net profit in the Statement of Profit and Loss when incurred. Subsequent to initial recognition,
these derivatives are measured at fair value through profit or loss and the resulting exchange gains or losses are
included in other income. Assets / liabilities in this category are presented as current assets / current liabilities
if they are either held for trading or are expected to be realized within 12 months after the Balance Sheet date.
Derecognition of financial liabilities
A financial liability is derecognised 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 in the respective carrying
amounts is recognised in the statement of profit or loss.
Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial
recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities.
For financial assets which are debt instruments, a reclassification is made only if there is a change in the
business model for managing those assets. Changes to the business model are expected to be infrequent. The
Company’s senior management determines change in the business model as a result of external or internal
changes which are significant to the Company’s operations. Such changes are evident to external parties. A
change in the business model occurs when the Company either begins or ceases to perform an activity that is
significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively
from the reclassification date which is the first day of the immediately next reporting period following the change
in business model. The Company does not restate any previously recognised gains, losses (including impairment
gains or losses) or interest.
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.
k) Foreign currency transactions and translations
Transactions and balances
Transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at
the rates of exchange prevailing at the dates of the transactions. However, for practical reasons, the Company
uses an average rate, if the average approximates the actual rate at the date of the transaction.
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).
The Company enters into forward exchange contract to hedge its risk associated with Foreign currency
fluctuations. The premium or discount arising at the inception of a forward exchange contract is amortized
as expense or income over the life of the contract. In case of monetary items which are covered by forward
exchange contract, the difference between the yearend rate and rate on the date of the contract is recognized
as exchange difference.Any profit or loss arising on cancellation of a forward exchange contract is recognized
as income or expense for that year.
l) Borrowing Costs
Borrowing cost include interest computed using Effective Interest Rate method, amortisation of
ancillary costs incurred and exchange differences arising from foreign currency borrowings to the
extent they are regarded as an adjustment to the interest cost.
Borrowing costs that are directly attributable to the acquisition, construction, production of a qualifying
asset are capitalised as part of the cost of that asset which takes substantial period of time to get ready for
its intended use. The Company determines the amount of borrowing cost eligible for capitalisation by
applying capitalisation rate to the expenditure incurred on such cost. The capitalisation rate is determined
based on the weighted average rate of borrowing cost applicable to the borrowings of the Company which
are outstanding during the period, other than borrowings made specifically towards purchase of the qualifying
asset. The amount of borrowing cost that the Company capitalises during the period does not exceed the
amount of borrowing cost incurred during that period. All other borrowings costs are expensed in the period
in which they occur.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs
are recognised in the statement of profit and loss in the period in which they are incurred.
m) Government grants
Government grants are recognised at fair value where there is a reasonable assurance that the grant
will be received and all the attached conditions are complied with.
In case of revenue related grant, the income is recognised on a systematic basis over the period for which
it is intended to compensate an expense and is disclosed under “Other operating revenue” or netted off
against corresponding expenses wherever appropriate. Receivables of such grants are shown under “Other
Financial Assets”. Export benefits are accounted for in the year of exports based on eligibility and when
there is no uncertainty in receiving the same. Receivables of such benefits are shown under Other Financial
Assets.
Government grants related to assets, including non-monetary grants at fair value, shall be presented in the
balance sheet by setting up the grant as deferred income. The grant set up as deferred income is recognised
in profit or loss on a systematic basis over the useful life of the asset.
n) 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 in the countries where the Company operates and
generates taxable income.
Current income 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 establishes provisions where appropriate.
Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in
the form of adjustment to future tax liability, is recognised as an asset viz. MAT Credit Entitlement, to the
extent there is convincing evidence that the Company will pay normal Income tax and it is highly probable
that future economic benefits associated with it will flow to the Company during the specified period. The
Company reviews the “MAT Credit Entitlement” at each Balance Sheet date and writes down the
carrying amount of the same to the extent there is no longer convincing evidence to the effect that the
Company will pay normal Income tax during the specified period.
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 recognised for all taxable temporary differences.
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. Where there is deferred tax assets arising from carry forward of unused tax
losses and unused tax created, they are recognised to the extent of deferred tax liability.
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.
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.
o) Retirement and other employee benefits
Short-term employee benefits
A liability is recognised for short-term employee benefit in the period the related service is rendered at the
undiscounted amount of the benefits expected to be paid in exchange for that service.
Defined contribution plans
Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no
obligation, other than the contribution payable to the provident fund and super annuation fund. The Company
recognizes contribution payable to the provident fund scheme as an expense, when an employee renders
the related service. If the contribution payable to the scheme for service received before the balance sheet
date exceeds the contribution already paid, the deficit payable to the scheme is recognized as a liability
after deducting the contribution already paid. If the contribution already paid exceeds the contribution due
for services received before the balance sheet date, then excess is recognized as an asset to the extent
that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
Defined benefit plans
The Company operates a defined benefit gratuity plan in India, which requires contributions to be made to
a separately administered fund. The cost of providing benefits under the defined benefit plan is determined
using the projected unit credit method.
Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding
amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding
amounts included in net interest on the net defined benefit liability), are recognised immediately in the
balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which
they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
Compensated absences
The Company has a policy on compensated absences which are both accumulating and non-accumulating
in nature. The expected cost of accumulating compensated absences is determined by actuarial valuation
performed by an independent actuary at each balance sheet date using projected unit credit method on the
additional amount expected to be paid / availed as a result of the unused entitlement that has accumulated
at the balance sheet date. Expense on non-accumulating compensated absences is recognized in the
period in which the absences occur.
Other long term employee benefits
Liabilities recognised in respect of other long-term employee benefits are measured at the present value of
the estimated future cash outflows expected to be made by the Company in respect of services provided by
the employees up to the reporting date.
p) 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. 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 groups 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.
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