5 MATERIAL ACCOUNTING POLICIES
INFORMATION
5.1 Investment in subsidiaries, joint ventures and
associates
Investments in subsidiaries, joint ventures and
associates are recognised at cost less any
impairment loss and are not adjusted to fair value.
The cost of investment represents the amount
paid for the acquisition of the said investment. The
Company assesses carrying value of investments
annually, or more frequently if there are any
indications of impairment on such investments. If
the carrying amount of an investment exceeds its
estimated recoverable amount, the impairment loss
is recognised in the Statement of Profit and Loss.
5.2 Property, plant and equipment
Property, plant and equipment is stated at
acquisition cost net of accumulated depreciation
and accumulated impairment losses, if any. Cost
of acquisition or construction of property, plant and
equipment comprises its purchase price including
import duties and non-refundable purchase taxes
and any directly attributable cost of bringing the
item to its working condition for its intended use and
after deducting trade discounts and rebates.
Subsequent costs are included in the asset's
carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future
economic benefits associated with the item will flow
to the Company and the cost of the item can be
measured reliably. All other repairs and maintenance
cost are charged to the statement of profit and loss
during the period in which they are incurred.
Gains or losses arising on retirement or disposal of
property, plant and equipment are recognised in the
statement of profit and loss.
Property, plant and equipment which are not ready
for intended use as on the date of Balance Sheet are
disclosed as "Capital work-in-progress". Advances
paid towards the acquisition of property, plant and
equipment outstanding at each balance sheet date
is classified as capital advances under "Other Non¬
Current Assets".
Depreciation and useful life
Depreciation is recognised so as to write off the cost
of assets (other than freehold land and properties
under construction) less their residual values over
their useful lives, using straight-line method as per
the useful life as mentioned in Schedule II to the
Companies Act, 2013 except in respect of following
categories of assets, in whose case the life of the
assets has been assessed as under based on
technical advice, taking into account the nature
of the asset, the estimated usage of the asset, the
operating conditions of the asset, past history of
replacement, anticipated technological changes,
manufacturers warranties and maintenance
support, etc.
Freehold land is not depreciated
The Company conducts an annual review of the
residual value, useful lives, and depreciation method
of its assets. If there are differences between the
current expectations and previous estimates, the
change is accounted for as a prospective change in
accounting estimate.
Major overhaul costs are depreciated over the
estimated life of the economic benefit derived from
the overhaul. If the next overhaul is undertaken earlier
than the previously estimated life of the economic
benefit, the carrying amount of the remaining
previous overhaul cost is charged to the Statement
of Profit and Loss.
I f an asset's carrying amount exceeds its estimated
recoverable amount, the carrying amount is
immediately written down to its recoverable amount.
Derecognition
The Company derecognises property, plant and
equipment when it is disposed of or when there
are no future economic benefits expected from
its continued use. The gain or loss resulting from
the disposal or retirement of a property, plant, and
equipment item is calculated as the difference
between the sales proceeds and the carrying
amount of the asset. This gain or loss is recognised
in the Statement of Profit and Loss.
Capital Work in Progress:
Capital work-in-progress is recorded at its cost,
which encompasses expenses incurred during
the construction period. This cost also includes
interest on the amount borrowed for the acquisition
of qualifying assets and other expenses related
to project implementation, to the extent that
these expenses pertain to the period before the
commencement of commercial production.
5.3 Other intangible assets
Other intangible assets with finite useful lives that
are acquired separately are carried at cost less
accumulated amortisation and accumulated
impairment losses. Amortisation is recognised on a
straight-line basis over their estimated useful lives.
The estimated useful life and amortisation method
are reviewed annually, and any changes in estimates
are applied prospectively. Intangible assets with
indefinite useful lives that are acquired separately
are carried at cost less accumulated impairment
losses.
The useful lives of intangible assets are assessed as
either finite or indefinite.
Useful life and amortisation
Amortisation is recognised in a straight-line manner
over the useful lives of the assets, starting from the
date of capitalisation. The useful lives of the assets
are determined as follows:
The estimated useful life of intangible assets is
reviewed at the end of each reporting period,
and any changes in estimate are accounted for
prospectively.
Derecognition
Other intangible assets are derecognised on disposal,
or when no future economic benefits are expected
from use or disposal. Gains or losses arising from
derecognition of an intangible asset are determined
as the difference between the net disposal proceeds
and the carrying amount.
5.4 Impairment of property, plant and equipment
and other intangible assets
At the end of each reporting year, the Company
assesses whether there are any indications of
impairment for its property, plant and equipment
and other intangible assets. If there is any indication,
the Company estimates the recoverable amount
of the asset to determine the extent of impairment
loss, if any. If it is not possible to estimate the
recoverable amount of an individual asset, the
Company estimates the recoverable amount of the
cash-generating unit to which the asset belongs.
Corporate assets are allocated to individual cash¬
generating units if a reasonable and consistent
allocation basis can be identified.
Other intangible assets with indefinite useful lives
and other intangible assets not yet available for
use are tested for impairment at least annually, as
well as when there is an indication of impairment.
The recoverable amount is determined based on
the higher of fair value less costs to sell and value
in use. Value in use is assessed by discounting the
estimated future cash flows to their present value
using a pre-tax discount rate that reflects market
assessments of the time value of money and asset-
specific risks.
If the recoverable amount of an asset or cash¬
generating unit is lower than its carrying amount,
the carrying amount is reduced to the recoverable
amount, and an impairment loss is recognised
immediately in the Statement of Profit and Loss.
5.5 Inventories
I nventories are valued at the lower of the cost (net
of eligible input tax credits) and net realisable
value (except waste and scrap which are valued at
estimated net realisable value).
Raw materials, stores and spare parts, and packing
materials are considered to be realisable at cost,
if the finished products, in which they will be used,
are expected to be sold at or above cost. The cost is
computed using the 'First In First Out' method ('FIFO').
Cost includes expenditure incurred for acquiring
inventories like purchase price, import duties, taxes
(net of tax credit) and other costs incurred in
bringing the inventories to their present location and
condition.
Cost of finished goods and work in progress includes
cost of direct materials and labour and a proportion
of manufacturing overheads based on the normal
operating capacity but excluding borrowing costs
incurred in bringing the inventories to their present
location and condition. The cost of finished goods
and work-in-progress is computed on FIFO 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.
5.6 Government grants
Government Grants are recognised when there is a
reasonable assurance that the same will be received
and all attached conditions will be complied with.
When the grant relates to an expense item, it is
recognised in the Statement of Profit and Loss by
way of a deduction from the related expense on a
systematic basis over the periods that the related
costs, for which it is intended to compensate, are
expensed.
Government grants whose primary condition is
that the Company should purchase, construct or
otherwise acquire non-current assets (including
property, plant and equipment) are recognised as
deferred income in the standalone statement of
financial position and transferred to profit or loss on
a systematic and rational basis over the useful lives
of the related assets.
5.7 Revenue recognition
Revenue from contracts with customers is recognised
at an amount that reflects the consideration to which
the Company expects to be entitled in exchange for
those goods or services.
Revenue towards satisfaction of a performance
obligation is measured at the amount of transaction
price (net of variable consideration) allocated to
that performance obligation. The transaction price of
goods sold and services rendered is net of variable
consideration on account of discounts or incentives
offered by the Company as part of the contract. This
variable consideration is estimated based on the
expected value of outflow. Revenue (net of variable
consideration) is recognised only to the extent that it
is highly probable that the amount will not be subject
to significant reversal when uncertainty relating to its
recognition is resolved.
Sale of products:
Revenue from the sale of products (including
Electronic Manufacturing Services rendered on a
principal basis whereby the Company procures raw
materials, manufactures the finished product and
sells it to the customer) is recognised when control
of the goods has been transferred to the customer.
The performance obligation in case of sale of
product is satisfied at a point in time, i.e., when the
material is shipped to the customer or on delivery to
the customer, as specified in the contract.
Warranty obligations, return rights, volume rebates,
cash discounts and similar variable consideration
are estimated at contract inception and treated
as a reduction of the transaction price; expected
warranty outflows are recognised as a provision.
Sale of services
Revenue from rendering services is recognised over
time in the accounting period in which the services
are rendered and the Company has an enforceable
right to payment for services.
5.8 Leases
The Company assesses whether a contract contains
a lease, at the inception of the contract. 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 the use of identified asset;
- the Company has substantially all of the
economic benefits from the use of the asset
through the period of lease and;
- the Company has the right to direct the use of
the asset.
As a lessee
i. Right-of-use assets
The Company recognises right-of-use assets at
the commencement date of the lease (i.e., the
date the underlying asset is available for use).
Right-of-use assets are measured at cost, less
any accumulated depreciation and impairment
losses, and adjusted for any 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:
- Buildings - 05 to 30 years
- Land- 99 years
The right-of-use assets are also subject to
impairment.
ii. Lease liabilities
At the commencement date of the lease, the
Company recognises lease liabilities measured
at the present value of lease payments to be
made over the lease term. The lease payments
include fixed payments 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
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. 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 (e.g., changes
to future payments resulting from a change in
an index or rate used to determine such lease
payments) or a change in the assessment of an
option to purchase the underlying asset.
iii. Short-term leases and leases of low-value
assets
The Company applies the short-term lease
recognition exemption to its short-term leases
of building and 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 building and machinery
and 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.
5.9 Income taxes
The income tax expense or credit 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 and to unused
tax losses.
Current tax
Current tax is based on taxable profit for the year. The
Company's current tax is calculated using tax rates
and laws that have been enacted or substantively
enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences
between the carrying amounts of assets and liabilities
in the Financial Statements and the corresponding
tax bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognised for all
taxable temporary differences. Deferred tax assets
are generally recognised for all deductible temporary
differences to the extent that it is probable that
taxable profits will be available against which those
deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is
reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of
the deferred tax asset to be utilised. Unrecognised
deferred tax assets are re-assessed at each
reporting date and are recognised to the extent that
it has become probable that future taxable profits
will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at
the tax rates that are expected to apply in the year
when the asset is realised or the liability is settled,
based on tax rates (and tax laws) that have been
enacted or substantively enacted at the reporting
date.
Deferred tax relating to items recognised outside
profit or loss is recognised outside profit or loss
(either in other comprehensive income or in equity).
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 tax 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.
5.10 Borrowing cost
Borrowing cost includes interest expense,
amortisation of discounts, hedge related cost
incurred in connection with foreign currency
borrowings, ancillary costs incurred in connection
with borrowing of funds and exchange difference,
arising from foreign currency borrowings to the
extent they are regarded as an adjustment to the
interest cost.
Borrowing costs, that are attributable to the
acquisition or construction or production of a
qualifying asset, are capitalised as part of the cost
of such asset till such time the asset is ready for
its intended use. A qualifying asset is an asset that
necessarily takes a substantial period of time to get
ready for its intended use.
All other borrowing costs are recognised as an
expense in the period in which they are incurred.
Investment income earned on the temporary
investment of specific borrowings pending their
expenditure on qualifying assets is deducted from
the borrowing costs eligible for capitalisation.
|