2. Significant accounting policies
a. Basis ofpreparation:
The 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).
For all periods up to and including the year ended 31 March 2017, the Company prepared its financial
statements in accordance accounting standards notified under the section 133 of the Companies Act 2013,
read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP). These financial
statements for the year ended 31 March 2018 are the first the Company has prepared in accordance with
Ind AS.
The financial statements have been prepared on a historical cost basis, except for the following assets and
liabilities which have been measured at fair value:
? Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial
instruments).
? Plan Assets of defined benefit obligations.
The financial statements are presented in INR and all values are in Lakhs, except wherever otherwise
indicated.
b. 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 oftrading
? 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.
c. Business combinations and goodwill
Business combinations other than business combinations under common control are accounted for using
the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration
transferred measured at acquisition date fair value and the amount of any non-controlling interests in the
acquiree. For each business combination, the Company elects whether to measure the non-controlling
interests in the acquiree at fair value or at the proportionate share of the acquiree's identifiable net assets.
Acquisition-related costs are expensed as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their
acquisition date fair values. For this purpose, the liabilities assumed include contingent liabilities
representing present obligation and they are measured at their acquisition fair values irrespective of the
fact that outflow of resources embodying economic benefits is not probable. However, the following assets
and liabilities acquired in a business combination are measured at the basis indicated below:
? Deferred tax assets or liabilities, and the assets or liabilities related to employee benefit arrangements
are recognised and measured in accordance with Ind AS 12 Income Tax and Ind AS 19 Employee Benefits
respectively.
? Liabilities or equity instruments related to share based payment arrangements of the acquiree or share
- based payments arrangements of the Company entered into to replace share-based payment
arrangements of the acquiree are measured in accordance with Ind AS 102 Share-based Payments at the
acquisition date.
? Assets (or disposal groups) that are classified as held for sale in accordance with Ind AS 105 Non-current
Assets Held for Sale and Discontinued Operations are measured in accordance with that standard.
? Reacquired rights are measured at a value determined on the basis of the remaining contractual term
of the related contract. Such valuation does not consider potential renewal of the reacquired right.
When the Company acquires a business, it assesses the financial assets and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded
derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, any previously held equity interest is re-measured at its
acquisition date fair value and any resulting gain or loss is recognised in profit or loss or OCI, as appropriate.
Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition
date. Contingent consideration classified as an asset or liability that is a financial instrument and within the
scope of Ind AS 109 Financial Instruments, is measured at fair value with changes in fair value recognised in
profit or loss. If the contingent consideration is not within the scope of Ind AS 109, it is measured in
accordance with the appropriate Ind AS. Contingent consideration that is classified as equity is not re¬
measured at subsequent reporting dates and subsequent its settlement is accounted for within equity.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred
and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair
value of the net assets acquired is in excess of the aggregate consideration transferred, the Company re¬
assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and
reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the
reassessment still results in an excess of the fair value of net assets acquired over the aggregate
consideration transferred, then the gain is recognised in OCI and accumulated in equity as capital reserve.
However, if there is no clear evidence of bargain purchase, the entity recognises the gain directly in equity
as capital reserve, without routing the same through OCI.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the
purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date,
allocated to each of the Company's cash-generating units that are expected to benefit from the
combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
A cash generating unit to which goodwill has been allocated is tested for impairment annually, or more
frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash
generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying
amount ofany goodwill allocated to the unit and then to the other assets of the unit pro rata based on the
carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised in profit or loss.
An impairment loss recognised for goodwill is not reversed in subsequent periods.
Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is
disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the
operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is
measured based on the relative values of the disposed operation and the portion of the cash-generating
unit retained.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which
the combination occurs, the Company reports provisional amounts for the items for which the accounting
is incomplete. Those provisional amounts are adjusted through goodwill during the measurement period,
or additional assets or liabilities are recognised, to reflect new information obtained about facts and
circumstances that existed at the acquisition date that, if known, would have affected the amounts
recognized at that date. These adjustments are called as measurement period adjustments. The
measurement period does not exceed one year from the acquisition date.
Business combinations under common control
Common control business combination means a business combination involving entities or businesses in
which all the combining entities or businesses are ultimately controlled by the same party or parties both
before and after the business combination. Common control business combinations will include
transactions, such as transfer of subsidiaries or businesses, between entities within a group.
Business combinations involving entities or businesses under common control shall be accounted for using
the pooling of interest method. As per the said method, the assets and liabilities of the combining entities
are reflected at their carrying amounts. The balance of the retained earnings appearing in the financial
statements of the transferor is aggregated with the corresponding balance appearing in the financial
statements of the transferee. Alternatively, it is transferred to General Reserve, ifany.
The difference, if any, between the amount recorded as share capital issued plus any additional
consideration in the form ofcash or other assets and the amount of share capital of the transferor shall be
transferred to capital reserve and should be presented separately from other capital reserves
d. Foreign currencies
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company's entities at their respective
functional currency spot rates at the date the transaction first qualifies for recognition. Adjustments are
made for any variation in the sales realizations / purchase payments on conversion into Indian currency
upon actual receipt / payment.
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).
Fair value measurement
The Company measures financial instruments, such as, derivatives at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is based
on the presumption that the transaction to sell the asset or transfer the liability takes place either:
? In the principal market for the asset or liability, or
? In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would
use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to
generate economic benefits by using the asset in its highest and best use or by selling it to another market
participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximising the use of relevant observable inputs and minimising
the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the 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 financial statements on a recurring basis, the Company
determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation
(based on the lowest level input that is significant to the fair value measurement as a whole) at the end of
each reporting period.
External valuers are involved for valuation of significant assets, such as properties and unquoted financial
assets, and significant liabilities, such as contingent consideration.
At each reporting date, the management analyses the movements in the values of assets and liabilities
which are required to be remeasured 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.
On an interim basis, the management and the Company's external valuers present the valuation results to
the Audit Committee and the Company's independent auditors. This includes a discussion of the major
assumptions used in the valuations.
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.
f. Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company
and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is
measured at the fair value of the consideration received or receivable, taking into account contractually
defined terms of payment and excluding taxes or duties collected on behalf of the government.
Sales tax/ value added tax (VAT) / Goods and Service Tax (GST) is not received by the Company on its own
account. Rather, it is tax collected on value added to the commodity by the seller on behalf of the
government. Accordingly, it is excluded from revenue.
The specific recognition criteria described below must also be met before revenue is recognised.
i) Sale of goods
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the
goods have passed to the buyer, usually on delivery of the goods. Revenue from the sale of goods is
measured at the fair value of the consideration received or receivable, net of returns and allowances, trade
discounts and volume rebates.
ii) Rendering of services
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company
and revenue can be reliably measured.
Revenue from user charges towards waste disposal is recognised as and when the related services are
performed i.e. when the waste is collected, transported and is received at the dumping yards.
Revenue from consultancy and maintenance contracts is recognised as and when the related services are
performed.
Hi) 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 finance income in the statement of profit and loss.
iv) Dividends
Revenue is recognised when the Company's right to receive the payment is established, which is generally
when shareholders approve the dividend.
g. 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 recognised 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 recognised as income in equal amounts over the
expected useful life ofthe related asset.
When the Company receives grants of non-monetary assets, the asset and the grant are recorded at fair
value amounts and released to profit or loss over the expected useful life in a pattern of consumption of
the benefit of the underlying asset i.e. by equal annual instalments. When loans or similar assistance are
provided by governments or related institutions, with an interest rate below the current applicable market
rate, the effect of this favourable interest is regarded as a government grant. The loan or assistance is
initially recognised and measured at fair value and the government grant is measured as the difference
between the initial carrying value of the loan and the proceeds received. The loan is subsequently measured
as per the accounting policy applicable to financial liabilities.
h. Taxes
i) 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.
ii) 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 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.
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.
In the situations where the Company is entitled to a tax holiday under the Income-tax Act, 1961 enacted
in India or tax laws prevailing in the respective tax jurisdictions where they operate, no deferred tax
(asset or liability) is recognized in respect of temporary differences which reverse during the tax holiday
period, to the extent the concerned entity's gross total income is subject to the deduction during the
tax holiday period. Deferred tax in respect of temporary differences which reverse after the tax holiday
period is recognized in the year in which the temporary differences originate. However, the Company
restricts recognition of deferred tax assets to the extent it is probable that sufficient future taxable
income will be available against which such deferred tax assets can be realized. For recognition of
deferred taxes, the temporary differences which originate first are considered to reverse first.
) GST paid on acquisition of assets or on incurring expenses
Expenses and assets are recognised net ofthe amount of sales/value added 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 recognised as part of the cost of acquisition of the asset or
as part ofthe 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.
Property, plant and equipment
Capital work in progress is stated at cost, net of accumulated impairment loss, if any. Plant and
equipment is 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 for
long-term construction projects 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. Likewise, when a major inspection is performed, its cost is recognised in
the carrying amount of the plant and equipment as a replacement if the recognition criteria are
satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred. The present
value of the expected cost for the decommissioning of an asset after its use is included in the cost of
the respective asset if the recognition criteria for a provision are met.
Depreciation is calculated on a straight-line basis over the estimated useful lives ofthe assets as follows:
- Building 30 years
- Computers 3 years
- Computer servers 6 years
- Plant & Machinery-15 years
- Lab and electrical equipment 10 years
- Office equipment 5 years
- Furniture & Fixtures 10 years
- Vehicles 8 years
An item of property, plant and equipment and any significant part initially recognised is derecognised
upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or
loss arising on derecognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount ofthe asset) is included in the statement of profit and loss when the
asset is derecognised.
The residual values, useful lives and methods of depreciation of property, plant and equipment are
reviewed at each financial year end and adjusted prospectively, if appropriate.
j. Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial
recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated
impairment losses. Internally generated intangibles, excluding capitalised development costs, are not
capitalised and the related expenditure is reflected in profit or loss in the period in which the
expenditure is incurred.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortised over the useful economic life and assessed for
impairment whenever there is an indication that the intangible asset may be impaired. The
amortisation period and the amortisation method for an intangible asset with a finite useful life are
reviewed at least at the end of each reporting period. Changes in the expected useful life or the
expected pattern of consumption of future economic benefits embodied in the asset are considered to
modify the amortisation period or method, as appropriate, and are treated as changes in accounting
estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement
of profit and loss unless such expenditure forms part of carrying value ofanother asset.
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually,
either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed
annually to determine whether the indefinite life continues to be supportable. If not, the change in
useful life from indefinite to finite is made on a prospective basis.
Intangible assets are de-recognised either on their disposal or where no future economic benefits are
expected from their use. 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 recognised in the statement of profit or loss when the asset is derecognised.
A summary of the policies applied to the Company's intangible assets is, as follows:
k. 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.
l. Leases
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract
is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a
period of time in exchange for consideration.
To assess whether a contract conveys the right to control the use of an identified asset, the Company
assesses whether
- The contract involves use of an identified asset, whether specified explicitly or implicitly;
- The Company has the right to obtain substantially all of the economic benefits from use of the asset
throughout the period of use;
- The Company has right to direct the use of the asset by either having right to operate the asset or
the Company having designed the asset in a way that predetermines how and for what purpose it
will be used
As lessee The Company's lease asset classes primarily consist of leases for buildings and plant and
machinery. The Company, at the inception of a contract, assesses whether the contract is a lease or
not. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified
asset for a time in exchange for a consideration.
The Company elected to use the following practical expedients on initial application
- Applied a single discount rate to a portfolio of leases with similar characteristics
- Applied the exemption not to recognise right-of-use assets and liabilities for leases with less than
12 months of lease term on the date of initial application
- Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial
application.
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract
is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a
period of time in exchange for consideration. To assess whether a contract conveys the right to control
the use ofan identified asset, the Company uses the definition of a lease in Ind AS 116. At inception or
on reassessment of a contract that contains a lease component, the Company allocates the
consideration in the contract to each lease component on the basis of their relative stand-alone prices.
However, for the leases of buildings in which it is a lessee, the Company has elected not to separate
non-lease components and account for the lease and non-lease components as a single lease
component.
The Company recognises a right-of-use asset and a lease liability at the lease commencement date. The
right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability
adjusted for any lease payments made at or before the commencement date, plus any initial direct
costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the
underlying asset or the site on which it is located, less any lease incentives received
The right-of-use assets is subsequently measured at cost less any accumulated depreciation,
accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability. The
right-of-use assets is depreciated using the straight-line method from the commencement date over
the shorter of lease term or useful life of right-of-use asset. The estimated useful lives of right-of-use
assets are determined on the same basis as those of property, plant and equipment. Right-of-use assets
are tested for impairment whenever there is any indication that their carrying amounts may not be
recoverable. Impairment loss, if any, is recognized in the Statement of Profit and Loss. The lease liability
is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted using the Company's incremental borrowing rate.
The lease liability is subsequently remeasured by increasing the carrying amount to reflect interest on
the lease liability, reducing the carrying amount to reflect the lease payments made and remeasuring
the carrying amount to reflect any reassessment or lease modifications or to reflect revised in¬
substance fixed lease payments. The Company recognises the amount of the re-measurement of lease
liability due to modification as an adjustment to the right-of-use asset and statement of profit and loss
depending upon the nature of modification. Where the carrying amount of the right-of-use asset is
reduced to zero and there is a further reduction in the measurement of the lease liability, the Company
recognises any remaining amount of the re-measurement in Statement of Profit and Loss.
Lease payments included in the measurement of the lease liability comprise the following:
a. Fixed payments including in-substance fixed payments
b. Variable lease payments that depend on an index or a rate, initially measured using the index or
rate as at the commencement date
c. Amounts expected to be payable under a residual value guarantee and
d. the exercise price under a purchase option that the Company and its associate is reasonably certain
to exercise, lease payments in an optional renewal period if the Company is reasonably certain to
exercise an extension option, and penalties for early termination of a lease unless the Company is
reasonably certain not to terminate early.
The lease liability is measured at amortized cost using the effective interest method. It is remeasured
when there is a change in future lease payments arising from a change in an index or rate, if there is a
change in the Company's estimate of the amount expected to be payable under a residual value
guarantee, if the Company changes its assessment of whether it will exercise a purchase, extension or
termination option or if there is a revised in substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying
amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-
use asset has been reduced to zero. The Company presents right-of-use assets that do not meet the
definition of investment property in 'property, plant and equipment' and lease liabilities in 'financial
liabilities' in the statement of financial position.
The Company has elected not to recognise right-of-use assets and lease liabilities for short-term leases
that have a lease term of 12 months or less and leases for which the underlying asset is of low value.
The Company recognises the lease payments associated with these leases as an expense in the
Statement of Profit or Loss over the lease term.
m. 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 are 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 first in, first out basis.
Finished goods and work in progress: cost includes cost of direct materials and labour and a proportion
of manufacturing overheads based on the normal operating capacity, but excluding borrowing costs.
Cost is determined on first in, first out 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.
a. 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 Company s of assets. When the carrying amount of
an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down
to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset. In determining fair value less costs of disposal, recent market transactions are
taken into account. If no such transactions can be identified, an appropriate valuation model is used.
These calculations are corroborated by valuation multiples, quoted share prices for publicly traded
companies or other available fair value indicators.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are
prepared separately for each of the Company's CGUs to which the individual assets are allocated. These
budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term
growth rate is calculated and applied to project future cash flows after the fifth year. To estimate cash
flow projections beyond periods covered by the most recent budgets/forecasts, the Company
extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent
years, unless an increasing rate can be justified. In any case, this growth rate does not exceed the long¬
term average growth rate for the products, industries, or country or countries in which the entity
operates, or for the market in which the asset is used.
Impairment losses, including impairment on inventories, are recognised in the statement of profit and
loss. For assets excluding goodwill, an assessment is made at each reporting date to determine whether
there is an indication that previously recognised impairment losses no longer exist or have decreased.
If such indication exists, the Company estimates the asset's or CGU's recoverable amount. A previously
recognised impairment loss is reversed only if there has been a change in the assumptions used to
determine the asset's recoverable amount since the last impairment loss was recognised. The reversal
is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed
the carrying amount that would have been determined, net of depreciation, had no impairment loss
been recognised for the asset in prior years. Goodwill is tested for impairment annually as at each
reporting date and when circumstances indicate that the carrying value may be impaired.
Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or Company
of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its
carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be
reversed in future periods.
o. Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash
on hand, deposits held at call with financial institutions, other short-term, highly liquid investments
with original maturities of three months or less that are readily convertible to known amounts of cash
and which are subject toan insignificant risk of changes in value, and bank overdrafts. Bank overdrafts
are shown within borrowings in current liabilities in the balance sheet.
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