| 1 | MATERIAL ACCOUNTING POLICIES
The significant accounting policies applied by the Company
in the preparation of its standalone financial statements are
listed below. Such accounting policies have been applied
consistently to all the periods presented in these standalone
financial statements.
a Basis of preparation
(i) Compliance with Ind AS
These standalone financial statements comply
in all material aspects with Indian Accounting
Standards (Ind AS) notified under Section 133 of
the Companies Act, 2013 (the 'Act') [Companies
(Accounting Standards) Rules, 2015] and other
relevant provisions of the Act.
(ii) Basis of measurement
(a) Historical cost convention
The standalone financial statements have
been prepared on a historical cost basis,
except for the following:
- Derivative financial instruments - Fair
Value
- Non derivative financial instruments at
FVTPL - Fair Value
(b) Functional and presentation currency
Items included in the standalone financial
statements of the Company are measured
using the currency of the primary economic
environment in which the Company operates
('the functional currency'). The standalone
financial statements are presented in
Indian Rupee (Rs.), which is the Company's
functional and presentation currency.
(iii) Current versus non-current classification
All assets and liabilities have been classified
as current or non current as per the Company's
normal operating cycle and other criteria set out
in Schedule III to the Companies Act, 2013 and Ind
AS 1 - Presentation of financial statement based
on the nature of products / service and the time
between the acquisition of assets for processing
/ providing the services and their realisation in
cash and cash equivalents. The Company has
ascertained its operating cycle as 12 months for
the purpose of current, non current classification
of assets and liabilities.
Assets
An asset is classified as current when it satisfies
any of the following criteria:
(a) it is expected to be realised in, or is intended
for sale or consumption in, the Company's
normal operating cycle;
(b) it is held primarily for the purpose of being
traded;
(c) it is expected to be realised within 12 months
after the reporting date; or
(d) it is cash or cash equivalent unless it is
restricted from being exchanged or used to
settle a liability for at least 12 months after
the reporting date.
Current assets include the current portion of non¬
current financial assets.
All other assets are classified as non-current.
Liabilities
A liability is classified as current when it satisfies
any of the following criteria:
(a) it is expected to be settled in the Company's
normal operating cycle;
(b) it is held primarily for the purpose of being
traded;
(c) it is due to be settled within 12 months after
the reporting date; or
(d) the Company does not have an unconditional
right to defer settlement of the liability for
at least 12 months after the reporting date.
Terms of a liability that could, at the option of
the counterparty, result in its settlement by
the issue of equity instruments do not affect
its classification.
Current liabilities include current portion of
non-current financial liabilities.
All other liabilities are classified as non¬
current.
Deferred tax assets and liabilities are
classified as non-current assets and
liabilities.
b Revenue Recognition
The Company has applied Ind AS 115, Revenue from
Contracts with Customers, which establishes a
comprehensive framework for determining whether,
how much and when revenue is to be recognised.
Revenue is recognised upon transfer of control of
promised products or services to customers in an
amount that reflects the consideration which the
Company expects to receive in exchange for those
products or services.
- Revenue from the sale of products is recognised
at the point in time when control is transferred
to the customer. Revenue is measured based on
the transaction price, which is the consideration,
adjusted for volume discounts, price concessions
and incentives, if any, as specified in the contract
with the customer. Revenue also excludes taxes
collected from customers.
Use of significant judgements in revenue recognition :
- The Company exercises judgement in determining
whether the performance obligation is satisfied
at a point in time or over a period of time. The
Company considers indicators such as how
customer consumes benefits as services are
rendered, transfer of significant risks and rewards
to the customer, acceptance of delivery by the
customer, etc. Judgement is also required to
determine the transaction price for the contract.
The transaction price could be either a fixed
amount of customer consideration or variable
consideration with elements such as volume
discounts, price concessions and incentives.
Interest income
Interest income is accrued on a time proportion basis,
by reference to the principal outstanding and the
effective interest rate applicable.
Dividend income
Dividend income from investments is recognised when
the shareholder's rights to receive payment have been
established.
c Impairment of Non-financial Assets
Assets are tested for impairment whenever events or
changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss
is recognised for the amount by which the asset's
carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset's fair
value less costs of disposal and value in use. For the
purposes of assessing impairment, assets are grouped
at the lowest levels for which there are separately
identifiable cash inflows which are largely independent
of the cash inflows from other assets or group of
assets (cash-generating units).
d Inventories
Physical inventory (Carvaan): Inventories are valued
at lower of cost and net realisable value. The cost is
determined on weighted average basis, and includes,
where applicable, appropriate share of overheads,
the same is charged off on sale of goods. The costs
of purchase of inventories comprise the purchase
price, import duties and other taxes (other than those
subsequently recoverable by the entity from the taxing
authorities), and transport, handling and other costs
directly attributable to the acquisition of finished
goods. Provision is made for obsolete / slow moving /
defective stocks, where necessary.
e Investment in Subsidiaries
Investments in subsidiaries are carried at cost less
provision for impairment, if any. Investments in
subsidiaries are tested for impairment whenever events
or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is
recognised for the amount by which the carrying amount
of investments exceeds its recoverable amount.
f Investments (other than investments in subsidiaries)
and other financial instruments
(i) Classification
The Company classifies its financial assets in the
following measurement categories:
- those to be measured subsequently at fair
value (either through other comprehensive
income or through profit or loss), and
- those to be measured at amortised cost.
The classification depends on the Company’s
business model for managing the financial
assets and the contractual terms of the cash
flows.
For assets measured at fair value, gains
and losses will either be recorded in profit
or loss or other comprehensive income.
For investments in equity instruments, this
will depend on whether the Company has
made an irrevocable election at the time of
initial recognition to account for the equity
investment at fair value through other
comprehensive income.
(ii) Measurement
At initial recognition, the Company 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 that are directly
attributable to the acquisition of the financial
asset. Transaction costs of financial assets
carried at fair value through profit or loss are
expensed in profit or loss.
Financial assets with embedded derivatives are
considered in their entirety when determining
whether their cash flows are solely payment of
principal and interest.
Equity Instruments : The Company subsequently
measures all equity investments at fair value.
Where the Company’s management has elected
to present fair value gains and losses on equity
investments in other comprehensive income,
there is no subsequent reclassification of fair
value gains and losses to profit or loss. Changes
in the fair value of financial assets at fair value
through profit or loss are recognised in 'Other
Income’ in the Statement of Profit and Loss.
Assets that are held for collection of contractual
cash flows where those cash flows represent
solely payments of principal and interest are
measured at amortised cost. Interest income
from these financial assets is included in finance
income using the effective interest rate method.
(iii) Impairment of Financial Assets
The Company assesses on a forward looking
basis the expected credit losses associated with
its assets which are not fair valued through profit
or loss. The impairment methodology applied
depends on whether there has been a significant
increase in credit risk. Note 21 details how the
Company determines whether there has been a
significant increase in credit risk.
For trade receivables only, the Company applies
the simplified approach permitted by Ind AS
109,’Financial Instruments’, which requires
expected lifetime losses to be recognised from
initial recognition of the receivables.
(iv) Derecognition of Financial Assets
A financial asset is derecognised only when
- the Company has transferred the rights to
receive cash flows from the financial asset or
- retains the contractual rights to receive
the cash flows of the financial asset, but
assumes a contractual obligation to pay the
cash flows to one or more recipients.
Where the entity has transferred an asset, the
Company evaluates whether it has transferred
substantially all risks and rewards of ownership
of the financial asset. In such cases, the financial
asset is derecognised. Where the entity has not
transferred substantially all risks and rewards
of ownership of the financial asset, the financial
asset is not derecognised.
Where the entity has neither transferred a
financial asset nor retains substantially all
risks and rewards of ownership of the financial
asset, the financial asset is derecognised if the
Company has not retained control of the financial
asset. Where the Company retains control
of the financial asset, the asset is continued
to be recognised to the extent of continuing
involvement in the financial asset.
(v) Financial liabilities: Classification, subsequent
measurement and gains and losses
Financial liabilities are classified as measured at
amortised cost or FVTPL.
(vi) Financial liabilities through fair value through
profit or loss (FVTPL)
A financial liability is classified as at FVTPL if it is
classified as held-for-trading, or it is a derivative
or it is designated as such on initial recognition.
Financial liabilities at FVTPL are measured at fair
value and net gains and losses, including any
interest expense, are recognised in Statement
of Profit and Loss. 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.
(vii) Financial liabilities at amortised cost
Other financial liabilities are subsequently
measured at amortised cost using the effective
interest method. Interest expense and foreign
exchange gains and losses are recognised in
Statement of Profit and Loss.
Any gain or loss on derecognition is also
recognised in Statement of Profit and Loss.
For trade and other payables maturing within one
year from the balance sheet date, the carrying
amounts approximates fair value due to the short
maturity of these instruments.
(viii) Fair Value of Financial Instruments
In determining the fair value of financial
instruments, the Company uses a variety of
methods and assumptions that are based on
market conditions and risks existing at each
reporting date. The methods used to determine
fair value include discounted cash flow analysis
and available quoted market prices. All methods
of assessing fair value result in general
approximation of value, and such value may never
actually be realised.
g Offsetting Financial Instruments
Financial assets and liabilities are offset and the net
amount is reported in the Balance Sheet where there
is a legally enforceable right to offset the recognised
amounts and there is an intention to settle on a
net basis or realise the asset and settle the liability
simultaneously. The legally enforceable right must not
be contingent on future events and must be enforceable
in the normal course of business and in the event of
default, insolvency or bankruptcy of the Company or
the counterparty.
h Trade Receivables
Trade receivables are amounts due from customers
for goods sold or services rendered in the ordinary
course of business. trade receivables, shall be initially
measured at their transaction price unless those
contain a significant financing component determined.
i Cash and Cash Equivalents
For the purpose of presentation in the Cash Flow
Statement, 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 to an insignificant risk of changes in value.
j Trade and Other Payables
These amounts represent liabilities for goods and
services provided to the Company prior to the end
of financial year which are unpaid. Trade and other
payables are presented as current liabilities unless
payment is not due within 12 months after the reporting
period. They are recognised initially at their fair value
and subsequently measured at amortised cost using
the effective interest method.
k Employee Benefits
(i) Short-term Employee Benefits
Liabilities for short-term employee benefits that
are expected to be settled wholly within 12 months
after the end of the period in which the employees
render the related service are recognised in
respect of employees’ services up to the end of the
reporting period and are measured at the amounts
expected to be paid when the liabilities are settled.
The liabilities are presented as 'Employee Benefits
Payable’ within 'Other Current Liabilities’ in the
Balance Sheet.
(ii) Other Long-term Employee Benefits
The liabilities for leave are not expected to be
settled wholly within 12 months after the end
of the period in which the employees render the
related service. They are therefore measured
annually by actuaries as the present value of
expected future benefits in respect of services
provided by employees up to the end of the
reporting period using the projected unit credit
method. The benefits are discounted using the
market yields at the end of the reporting period
that have terms approximating to the terms of the
related obligation. Remeasurements as a result of
experience adjustments and changes in actuarial
assumptions are recognised in profit or loss.
(iii) Post-employment Benefits
Defined Contribution Plans
Contributions under Defined Contribution Plans
payable in keeping with the related schemes are
recognised as expenses for the period in which
the employee has rendered the service.
l Income Tax
The income tax expense for the period is the tax
payable on the current period’s taxable income based
on the applicable income tax rate adjusted by changes
in deferred tax assets and liabilities attributable to
temporary differences, unused tax credits and to
unused tax losses, as applicable.
The current tax charge is calculated on the basis of
the tax laws enacted or substantively enacted at the
end of the reporting period. Management periodically
evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject
to interpretation. It establishes provisions where
appropriate on the basis of amounts expected to be
paid to the tax authorities.
Deferred tax is provided in full, using the liability
method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying
amounts in the standalone financial statements.
However, deferred tax is not accounted for if it arises
from initial recognition of an asset or liability in a
transaction other than a business combination that at
the time of the transaction affects neither accounting
profit nor taxable profit (tax loss). Deferred income
tax is determined using tax rates (and laws) that have
been enacted or substantially enacted by the end of the
reporting period and are expected to apply when the
related deferred tax asset is realised or the deferred tax
liability is settled.
Deferred tax assets are recognised for all deductible
temporary differences, carry forward of unused tax
credits and unused tax losses, if any, only if it is
probable that future taxable amounts will be available
to utilise those temporary differences, tax credits and
losses.
The carrying amount of deferred tax assets is reviewed
at each balance sheet date and reduced to the extent
that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset
to be utilised.
Deferred tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets
and liabilities and when the deferred tax balances relate
to the same taxation authority. Current tax assets
and liabilities are offset where the entity has a legally
enforceable right to offset and intends either to settle
on a net basis, or to realise the asset and settle the
liability simultaneously.
Current and deferred tax are recognised in profit
or loss, except to the extent that it relates to items
recognised in other comprehensive income or directly
in equity, if any. In this case, the tax is also recognised
in other comprehensive income or directly in equity,
respectively.
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