2 Material Accounting Policies
a. Statement of compliance and basis of
preparation
The standalone financial statements of the
Company have been prepared in accordance with
Indian Accounting standards (Ind AS) notified
under Companies (Indian Accounting standards)
Rules, 2015 (as amended from time to time)
presentation requirements of Division II of
Schedule III to the Companies Act, 2013, (as
amended time to time), (Ind AS compliant Schedule
III) and other provision of the act, as applicable to
the SFS.
The standalone financial statements of the
Company have been prepared on a historical cost
(i) Certain financial assets and liabilities measured
at fair value (refer accounting policy regarding
financial instruments),
(ii) Defined benefit plan- plan assets measured at
fair value and
(iii) Derivative financial instruments.
(iv) Equity settled ESOP at grant date fair value.
The accounting policies and related notes further
described the specific measurements applied for
each of the assets and liabilities.The standalone
financial statements are presented in INR and all
values are rounded to the nearest lacs (INR 00,000),
except when otherwise stated. Certain amounts
that are required to be disclosed and do not appear
due to rounding off are expressed as 0.00.
The Company has prepared the financial
statements on the basis that it will continue to
operate as a going concern.
b. Investment in subsidiaries
A subsidiary is an entity that is controlled by
another entity.
The Company's investments in its subsidiaries are
accounted at cost less impairment.
Impairment of investments
The Company reviews its carrying value of
investments carried at cost annually, or more
frequently when there is indication for impairment.
If the recoverable amount is less than its carrying
amount, the impairment loss is recorded in the
Statement of Profit and Loss.
When an impairment loss subsequently reverses,
the carrying amount of the Investment is increased
to the revised estimate of its recoverable amount,
so that the increased carrying amount does not
exceed the cost of the Investment. A reversal of an
impairment loss is recognised immediately in
Statement of Profit or Loss.
c. Current versus non-current classification
The Company segregates assets and liabilities into
current and non-current categories for
presentation in the balance sheet after considering
its normal operating cycle and other criteria set
out in Ind AS 1, "Presentation of Financial
Statements". For this purpose, current assets and
liabilities include the current portion of non-current
assets and liabilities respectively. Deferred tax
assets and liabilities are always classified as non¬
current.
The operating cycle is the time between the
acquisition of assets for processing and their
realization in cash and cash equivalents. The
Company has identified period up to twelve
months as its operating cycle.
d. Foreign currencies
The Company's standalone financial statements are
presented in Indian Rupees (INR), which is also the
Company's functional currency.
Transaction and balances
Transactions in foreign currencies are initially
recorded by the Company at their respective
functional currency spot rates at the date the
transaction first qualifies for recognition. 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
statement of profit and 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).
In determining the spot exchange rate to use on
initial recognition of the related asset, expense or
income (or part of it) on the derecognition of a
non-monetary asset or non-monetary liability
relating to advance consideration, the date of the
transaction is the date on which the Company
initially recognises the non-monetary asset or non¬
monetary liability arising from the advance
consideration. If there are multiple payments or
receipts in advance, the Company determines the
transaction date for each payment or receipt of
advance consideration.
e. Revenue from operations
Revenue from contract with customers
Revenue from contracts with customers is
recognised when control of the goods or services
are transferred to the customer at an amount that
reflects the consideration to which the Company
expects to be entitled in exchange for those goods
or services. The Company has 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.
The Company collects Goods and service tax (GST)
on behalf of the government and therefore, these
are not economic benefits flowing to the Company.
Hence, they are excluded from revenue.
The specific recognition criteria described below
must also be met before revenue is recognised.
Sale of Goods
Revenue from sale of goods is recognised at the
point in time when control of the goods is
transferred to the customer, generally on delivery
of the goods. Revenue from the sale of goods is
measured at the transaction price of the
consideration received or receivable, net of sales
returns and allowances and trade discounts.
Rendering of Services
a) Revenue from erection service is recognised
as per the contractual terms and as and when
services are rendered.
b) Revenue from job work is recognised at the
point in time when control of the goods is
transferred to the customer, generally on
delivery of the goods.
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.
Sale of Electricity
Revenue from sale of power is recognised over time
for each unit of electricity delivered. The Company
has signed Power Purchase Agreement with
Customer.
f. Contract balances
Trade receivables
A receivable represents the Company's right to an
amount of consideration that is unconditional (i.e.,
only the passage of time is required before
payment of the consideration is due). Refer to
accounting policies of financial assets in section
(p) Financial instruments - initial recognition and
subsequent measurement.
Contract liabilities
A contract liability is the obligation to transfer
goods or services to a customer for which the
Company has received consideration (or an amount
of consideration is due) from the customer. If a
customer pays consideration before the Company
transfers goods or services to the customer, a
contract liability is recognised when the payment
is made or the payment is due (whichever is earlier).
Contract liabilities are recognised as revenue when
the Company performs under the contract.
g. Taxes
Current income tax
Tax expense comprises current tax expense and
deferred 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
considers whether it is probable that a taxation
authority will accept an uncertain tax treatment.
The Company reflects the effect of uncertainty for
each uncertain tax treatment by using either most
likely method or expected value method,
depending on which method predicts better
resolution of the treatment.
Deferred tax
Deferred tax is provided using the balance sheet
approach 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, 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 and does not
give rise to equal taxable and deductible
temporary differences;
- In respect of taxable temporary differences
associated with investments in subsidiaries,
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.
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.
The Company offsets deferred tax assets and
deferred tax liabilities if and only if it has a legally
enforceable right to set off current tax assets and
current tax liabilities and the deferred tax assets
and deferred tax liabilities relate to income taxes
levied by the same taxation authority on either the
same taxable entity which intends either to settle
current tax liabilities and assets on a net basis, or
to realise the assets and settle the liabilities
simultaneously, in each future period in which
significant amounts of deferred tax liabilities or
assets are expected to be settled or recovered.
Goods and Services Tax (GST) paid on
acquisition of assets or on incurring expenses
Expenses and assets are recognised net of the
amount of GST 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 of the expense item, as
applicable;
- When receivables and payables are stated with
the amount of tax included.
The net amount of tax recoverable from, or payable
to, the taxation authority is included as part of other
current and non-current assets/ liabilities in the
balance sheet.
h. Property, Plant and Equipment
All the property, 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 qualifying asset
if the recognition criteria are met. 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.
Capital work in progress is stated at cost, net of
accumulated impairment loss, if any.
Depreciation is calculated on a straight-line basis
over the estimated useful lives of the assets as
follows. 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:
• Building 15 to 60 years
• Furniture and fixture 8 to 10 years
• Plant and equipment 5 to 30 years
• Office equipment 3 to 5 years
• Motor Vehicles 8 to 10 years
• Leasehold improvements are depreciated over
the period of leases.
The Company, based on technical assessment
made by technical expert and management
estimate, depreciates certain items of building,
plant and equipment and furniture and fixtures
over estimated useful lives which are different from
the useful life prescribed in Schedule II to the
Companies Act, 2013. The management believes
that these estimated useful lives are realistic and
reflect fair approximation of the period over which
the assets are likely to be used.
Depreciation on addition to or on disposal of
Property, Plant and equipment is calculated on pro
rata basis. Addition, to Property, Plant and
equipment costing less than or equal to Rs. 5,000
are depreciated fully in the year of purchase.
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 of the
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.
i. 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, if any.
Amortisation of the finite intangible assets is
allocated on systematic basis over the best
estimate of their useful life and accordingly
softwares are amortised on straight line basis over
the period of six years or license period which ever
is lower.
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. The Company has no intangible
assets with an indefinite life.
j. Borrowing Cost
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 (qualifying
asset) 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.
k. 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.
The Company recognises lease liabilities to make
lease payments and right-of-use assets
representing the right to use the underlying assets.
(a) Right-of-use asset
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
adjusted for any remeasurement 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 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
(2.m) Impairment of non-financial assets.
(b) 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.
In 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 remeasured if there is a
modification, a change in the lease term, a
change in the lease payments or a change in
the assessment of an option to purchase the
underlying asset.
(c) Short-term leases and leases of low-value
assets
The Company applies the short-term lease
recognition exemption to its short-term leases
of machinery and equipment (i.e., those leases
that have a lease term of 12 months or less
from the commencement date and do not
contain a purchase option). It also applies the
lease of low-value assets recognition
exemption to leases of office equipment that
are considered to be low value. Lease
payments on short-term leases and leases of
low-value assets are recognised as expense on
a straight-line basis over the lease term.
m. 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.
n. Events after the reporting period
If the Company receives information after the
reporting period, but prior to the date of approved
for issue, about conditions that existed at the end
of the reporting period, it will assess whether the
information affects the amounts that it recognises
in its separate financial statements. The Company
will adjust the amounts recognised in its financial
statements to reflect any adjusting events after the
reporting period and update the disclosures that
relate to those conditions in light of the new
information. For non-adjusting events after the
reporting period, the Company will not change the
amounts recognised in its separate financial
statements but will disclose the nature of the non¬
adjusting event and an estimate of its financial
effect, or a statement that such an estimate cannot
be made, if applicable.
o. Retirement and other employee benefits
(i) 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. 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.
(ii) Gratuity is a defined benefit plan and provision is
being made on the basis of actuarial valuation
carried out by an independent actuary at the year
end using projected unit credit method, and is
contributed to the Gratuity fund managed by the
Life Insurance Corporation of India.
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.
Past service costs are recognised in profit or loss
on the earlier of:
• The date of the plan amendment or
curtailment, and
• The date that the Company recognises related
restructuring costs
Net interest is calculated by applying the discount
rate to the net defined benefit liability or asset.
The Company recognises the following changes in
the net defined benefit obligation as an expense
in the statement of profit and loss:
• Service costs comprising current service costs,
past-service costs, gains and losses on
curtailments and non-routine settlements; and
• Net interest expense or income
Compensated Absences
Accumulated leave which is expected to be utilized
within the next 12 months, is treated as short-term
employee benefit. The Company measures the
expected cost of such absences as the additional
amount that it expects to pay as a result of the
unused entitlement that has accumulated at the
reporting date.
The Company treats accumulated leave expected
to be carried forward beyond twelve months, as
long-term employee benefit for measurement
purposes. Such long-term compensated absences
are provided for based on the actuarial valuation
using the projected unit credit method at the year-
end. Actuarial gains/losses are immediately taken
to statement of Profit and Loss in the period in
which they occur. The Company presents the entire
leave as a current liability in the balance sheet, since
it does not have an unconditional right to defer its
settlement for 12 months after the reporting date.
p. Financial instruments
A financial instrument is any contract that gives
rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition,
and subsequently measured at amortised cost, fair
value through other comprehensive income (OCI),
and fair value through profit or loss.
The classification of financial assets at initial
recognition depends on the financial asset's
contractual cash flow characteristics and the
Company's business model for managing them.
With the exception of trade receivables that do
not contain a significant financing component or
for which the Company has applied the practical
expedient, the Company initially measures a
financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or
loss, transaction costs. Trade receivables that do
not contain a significant financing component or
for which the Company has applied the practical
expedient are measured at the transaction price
determined under Ind AS 115. Refer to the
accounting policies in section (e) Revenue from
contracts with customers.
Subsequent measurement
For purposes of subsequent measurement,
financial assets are classified in two categories:
• Financial assets at amortised cost (debt
instruments)
• Financial assets at fair value through profit or
loss
Financial assets at amortised cost (debt
instruments)
A 'debt instrument' is measured at the 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.
This category is the most relevant to the Company.
After initial measurement, such financial assets are
subsequently measured at amortised cost using the
effective interest rate (EIR) method and are subject
to impairment as per the accounting policy
applicable to 'Impairment of financial assets.'
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 other income in the
profit or loss. The losses arising from impairment
are recognised in the profit or loss. The Company's
financial assets at amortised cost includes trade
receivables, loan and investments and fixed
deposits under current and non-current financial
assets. For more information on financial assets,
refer Note 6.
Financial assets at fair value through profit or
loss
Financial assets in this category are those that are
held for trading and have been either designated
by management upon initial recognition or are
mandatorily required to be measured at fair value
under Ind AS 109 i.e. they do not meet the criteria
for classification as measured at amortised cost or
FVOCI. Management only designates an instrument
at FVTPL upon initial recognition, if the designation
eliminates, or significantly reduces, the inconsistent
treatment that would otherwise arise from
measuring the assets or liabilities or recognising
gains or losses on them on a different basis. Such
designation is determined on an instrument-by¬
instrument basis. For the Company, this category
includes derivative instruments which the Company
had not irrevocably elected to classify at fair value
through OCI. The Company has not designated any
financial assets at FVTPL.
Financial assets at fair value through profit or loss
are carried in the balance sheet at fair value with
net changes in fair value recognised in the
statement of profit and loss.
Interest earned on instruments designated at FVTPL
is accrued in interest income, using the EIR, taking
into account any discount/ premium and qualifying
transaction costs being an integral part of
instrument. Interest earned on assets mandatorily
required to be measured at FVTPL is recorded using
the contractual interest rate. Dividend income on
listed equity investments are recognised in the
statement of profit and loss as other income when
the right of payment has been established.
Derecognition
A financial asset (or, where applicable, a part of a
financial asset or part of a Company of similar
financial assets) is primarily derecognised (i.e.
removed from the Company's balance sheet) 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'
arrangements 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
Further disclosures relating to impairment of
financial assets are also provided in the following
notes:
- Disclosures for significant assumptions - see
Note 29
- Trade receivables - see Note 6 (A)
The Company recognises an allowance for
expected credit losses (ECLs) for all debt
instruments not held at fair value through profit
or loss. ECLs are based on the difference between
the contractual cash flows due in accordance with
the contract and all the cash flows that the
Company expects to receive, discounted at an
approximation of the original effective interest rate.
The expected cash flows will include cash flows
from the sale of collateral held or other credit
enhancements that are integral to the contractual
terms.
ECLs are recognised in two stages. For credit
exposures for which there has not been a significant
increase in credit risk since initial recognition, ECLs
are provided for credit losses that result from
default events that are possible within the next 12-
months (a 12-month ECL). For those credit
exposures for which there has been a significant
increase in credit risk since initial recognition, a loss
allowance is required for credit losses expected
over the remaining life of the exposure, irrespective
of the timing of the default (a lifetime ECL).
For trade receivables, the Company applies a
simplified approach in calculating ECLs. Therefore,
the Company does not track changes in credit risk,
but instead recognises a loss allowance based on
lifetime ECLs at each reporting date. The Company
has established a provision matrix that is based on
its historical credit loss experience, adjusted for
forward-looking factors specific to the debtors and
the economic environment.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial
recognition, as financial liabilities at fair value
through profit or loss, loans and borrowings, trade
and other financial liabilities. All financial liabilities
are recognised initially at fair value and, in the case
of borrowings and other financial liabilities, net of
directly attributable transaction costs. The
Company's financial liabilities include trade and
other financial liabilities and borrowings including
cash credit.
Subsequent measurement
For purposes of subsequent measurement,
financial liabilities are classified in two categories:
- Financial liabilities at fair value through profit
or loss
- Financial liabilities at amortised cost
(Borrowings, trade payables and other financial
liabilities)
Financial liabilities at fair value through profit
or loss
Financial liabilities at fair value through profit or
loss 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 statement of profit and loss.
Financial liabilities designated upon initial
recognition at fair value through profit or loss are
designated as such at the initial date of recognition,
and only if the criteria in Ind AS 109 are satisfied.
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 P&L. 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 Statement
of profit and loss.
Financial liabilities at amortised cost
(Borrowings, trade payables and other financial
liabilities)
This is the category most relevant to the Company.
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.
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.
This category generally applies to borrowings,
trade payables and other financial liabilities. For
more information refer Note 11, 18 and 12.
Derecognition
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.
q. Derivative financial instruments
The Company uses derivative financial instruments,
such as forward currency contracts to hedge its
foreign currency risks respectively. Such derivative
financial instruments are initially recognised at fair
value on the date on which a derivative contract is
entered into and are subsequently re-measured at
fair value. Derivatives are carried as financial assets
when the fair value is positive and as financial
liabilities when the fair value is negative.
Any gains or losses arising from changes in the
fair value of derivatives are taken directly to profit
or loss.
r. 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.
The Company's management determines the
policies and procedures for recurring fair value
measurement, such as derivative instruments and
unquoted financial assets measured at fair value.
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.
The management 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.
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