B. Material accounting policies
(i) Basis of preparation
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) and presentation
requirements of Division II of Schedule III to the
Companies Act, 2013, (Ind AS compliant Schedule III).
The standalone financial statements have been
prepared on an accrual basis and under the historical
cost convention, except for the following assets and
liabilities which have been measured at fair value:
- Certain financial assets measured at fair value [refer
accounting policy regarding financial instruments];
and
- Defined benefit plans - plan assets measured at
fair value [refer accounting policy 1 B(ii)(i)]
The standalone financial statements are presented in
Indian Rupee (Rs.) and all the values are rounded off
to the nearest crore, except number of shares, face
value of share, earning per share or wherever otherwise
indicated. Wherever the amount represented Rs. ‘0'
(zero) construes value less than Rupees fifty lakhs.
Adding the individual figures may therefore not always
result in the exact total given.
(ii) Summary of material 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:
- 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 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. Fair value measurement
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 n the principal market for the asset or
liability, or
• I n 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.
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:
• 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.
The Company's management determines the
policies and procedures for both recurring fair
value measurement, such as investments (other
than investment in subsidiaries) measured
at fair value.
External valuers are involved for valuation of
significant assets and liabilities. The management
selects external valuer on various criteria such as
market knowledge, reputation, independence and
whether professional standards are maintained
by valuer. The management decides, after
discussions with the Company's external valuers,
which valuation techniques and inputs to use for
each case.
At each reporting date, the management analyses
the movements in the values of assets and
liabilities which are required to be re-measured
or re-assessed as per the Company's accounting
policies. For this analysis, the management
verifies the major inputs applied in the latest
valuation by agreeing the information in the
valuation computation to contracts and other
relevant documents.
The management, in conjunction with the
Company's external valuers, also compares the
change in the fair value of each asset and liability
with relevant external sources to determine
whether the change is reasonable.
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 (note 23)
• Quantitative disclosures of fair value
measurement hierarchy (note 31)
• Financial instruments (including those carried
at amortised cost) (note 30)
c. Revenue recognition
Revenue from contracts with customers is
recognised when control of the goods and
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 and services. The Company
has generally concluded that it is the principal
in its revenue arrangements, because it typically
controls the goods or services before transferring
them to the customer.
Revenue is measured at the fair value of the
consideration received or receivable taking
into account the contractually defined terms of
payment and net of taxes collected on behalf of
the government such as goods and service tax,
etc. Revenue is recognised to the extent it is
probable that the economic benefits will flow to the
Company and the revenue and costs, if applicable,
can be measured reliably.
Revenue from services
Revenue from management services are
recognised at the point in time i.e. as and when
services are rendered.
Interest Income
For all debt instruments/ subsidies measured
at amortised cost, interest income is recorded
using the effective interest rate (EIR). EIR is the
rate that exactly discounts the estimated future
cash receipts over the expected life of the financial
instrument/ subsidies 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
Dividend income is recognised when the
Company’s right to receive dividend is established,
which is generally when shareholders approve
the dividend.
d. Income taxes
Tax expense comprises current income tax and
deferred tax.
Current income tax
Current income-tax is measured at the amount
expected to be paid to the tax authorities in
accordance with the Income-tax Act, 1961
enacted in India. The tax rates and tax laws used
to compute the amount are those that are enacted
or substantively enacted, at the reporting date and
includes any adjustment to tax payable in respect
of previous years.
Current income tax relating to items recognised
outside statement of profit or loss is recognised
outside statement of profit or loss {either in other
comprehensive income (OCI) 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.
Deferred tax
Deferred tax is provided using 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, 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
- I n respect of taxable temporary differences
associated with investments in subsidiaries,
associates and interests in joint ventures,
when the timing of the reversal of the
temporary differences can be controlled and
it is probable that the temporary differences
will not reverse in the foreseeable future
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
- In respect of deductible temporary
differences associated with investments in
subsidiaries, associates and interests in joint
ventures, deferred tax assets are recognised
only to the extent that it is probable that the
temporary differences will reverse in the
foreseeable future and taxable profit will
be available against which the temporary
differences 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.
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 statement of profit or loss is recognised
outside statement of 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.
e. Property, plant and equipment
The Company has measured property, plant and
equipment (PPE) except vehicle, furniture and
fixture and office equipment at fair value as on
transition date i.e. April 01,2015 which has become
its deemed cost. In respect of vehicle, furniture
and fixture and office equipment, the Company
has applied applicable Ind AS from a retrospective
basis and arrived at the carrying value as per Ind
AS as at transition date.
PPE are stated at cost, net of accumulated
depreciation and accumulated impairment losses.
Cost comprises the purchase price, including
import duties and non- refundable purchase taxes,
and any directly attributable cost of bringing the
asset to its working condition for its intended use.
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.
Subsequent expenditure related to an item of PPE
is capitalised only when it is probable that future
economic benefits associated with the item will
flow to the Company.
Capital work-in-progress (CWIP)
Capital work in progress are stated at cost, net of
impairment loss, if any.
Depreciation charge
Depreciation on property, plant and equipment
is provided on a straight-line basis based on the
estimated useful lives of an asset as prescribed
under Schedule II to the Companies Act, 2013.
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 de-recognition 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 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.
f. Other intangible assets
The Company had measured intangible assets
at carrying value as recognised in the standalone
financial statements as on transition date
i.e. April 01, 2015, which became its deemed cost.
Intangible assets acquired separately are
measured on initial recognition at cost. Following
initial recognition, intangible assets are carried
at cost less accumulated amortization and
accumulated impairment losses, if any.
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.
Gains or losses arising from de-recognition of an
intangible asset are measured as the difference
between the net disposal proceeds and the
carrying amount of the asset and are recognised
in the statement of profit or loss when the asset
is derecognised.
A summary of amortisation policy applied to the
Company’s intangible assets is as below:
g. Leases
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
(refer note 1(B)(ii)(g)(iii) below). The Company
recognises lease liabilities to make lease payments
and right-of-use assets representing the right to
use the underlying assets.
i) 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 re¬
measurement of lease liabilities. The cost
of right-of-use assets includes the amount
of lease liabilities recognised, initial direct
costs incurred, and lease payments made at
or before the commencement date less any
lease incentives received. Right-of-use assets
are depreciated on a straight-line basis from
the commencement date over the shorter of
the lease term and the estimated useful lives
of the assets, as follows:
If ownership of the leased asset transfers to
the Company at the end of the lease term or
the cost reflects the exercise of a purchase
option, depreciation is calculated using the
estimated useful life of the asset.
The right-of-use assets are also subject to
impairment. Refer to the accounting policies in
section (l) Impairment of non-financial assets.
ii) Lease liabilities
At the commencement date of the lease,
the Company recognises lease liabilities
measured at the present value of lease
payments to be made over the lease term.
The lease payments include fixed payments
(including in-substance fixed payments) less
any lease incentives receivable, variable
lease payments that depend on an index
or a rate, and amounts expected to be paid
under residual value guarantees. The lease
payments also include the exercise price of
a purchase option reasonably certain to be
exercised by the Company and payments of
penalties for terminating the lease, if the lease
term reflects the Company exercising the
option to terminate. 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.
I n 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 re-measured 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.
Lease liabilities and Right-of-use assets have
been presented as a separate line in the
balance sheet. Lease payments have been
classified as cash used in financing activities.
iii) Short-term leases and leases of low-
value assets
The Company has elected not to recognise
right-of-use assets and lease liabilities for
short term leases of all assets that have a
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.
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