2 Material accounting policies
a Statement of compliance
These Standalone annual financial statements of the
Company have been prepared in accordance with
Indian Accounting Standards (Ind AS) specified under
Section 133 of the Companies Act 2013 ('the Act')
read with Companies (Indian Accounting Standard)
Rules (as amended from time to time) and other
relevant provisions of the Act.
Accounting policies have been consistently applied
except where a newly issued Indian Accounting
Standard is initially adopted or a revision to an existing
Indian Accounting Standard requires a change in the
accounting policy hitherto in use.
b Functional and presentation currency
These Standalone financial statements are presented
in Indian Rupees (INR), which is also the Company's
functional currency. All amounts have been rounded-
off to the nearest lakhs, unless otherwise mentioned.
c Basis of Preparation
The Standalone financial statements have been
prepared on the historical cost convention and on an
accrual basis of accounting, except for the following
assets and liabilities which have been accounted as
follows:
(i) Defined benefit and other long-term employee
benefits where plan asset is measured at fair
value less present value of defined benefit
obligations.
(ii) Certain financial assets and liabilities that are
qualified to be measured at fair value, and
(iii) Assets classified as held for sale are measured
at the lower of carrying amount and fair value
less cost to sell.
d Use of estimates and management judgments
The preparation of Standalone financial statements
in conformity with Ind AS requires management
to make judgements, estimates and assumptions
that affect the application of accounting policies
and the reported amounts of assets and liabilities,
the disclosure of contingent liabilities and assets on
the date of the Standalone financial statements and
the reported amount of revenue and expenses for
the year. Accounting estimates could change from
period to period. Actual results may differ from these
estimates.
Estimates and underlying assumptions are reviewed
on an ongoing basis. Appropriate changes in
estimates are made as the Management becomes
aware of changes in circumstances surrounding
the estimates. Changes in estimates are reflected
in the standalone financial statements in the period
in which changes are made and, if material, their
effects are disclosed in the notes to the standalone
financial statements.
Assumptions and estimation uncertainties
The application of accounting policies that require critical
accounting estimates involving complex and subjective
judgments and the use of assumptions in these
standalone financial statements have been disclosed in
the following notes:
(i) Useful life of property, plant and equipment and
intangible assets - Note 3:
The useful life of the assets are determined in accordance
with Schedule II of the Companies Act, 2013. In cases,
where the useful life is different from that or is not
prescribed in Schedule II, it is 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.
(ii) Income taxes- Note 50:
In assessing the realisability of deferred tax assets, the
Management considers whether some portion or all of
the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods
in which the temporary differences become deductible.
The Management considers the scheduled reversals of
deferred income tax liabilities, projected future taxable
income and tax planning strategies in making this
assessment. Based on the level of historical taxable
income and projections for future taxable income over
the periods in which the deferred income tax assets are
deductible, the Management believes that the Company
will realize the benefits of those deductible differences.
The amount of the deferred tax assets considered
realizable, however, could be reduced in the near term
if estimates of future taxable income during the carry
forward period are reduced.
(iii) Provisions and contingencies- Note 20, 26 and 37 :
The recognition and measurement of other provisions are
based on the assessment of the probability of an outflow
of resources, and on past experience and circumstances
known at the reporting date. The actual outflow of
resources at a future date may therefore vary from the
figure estimated at end of each reporting period.
(iv) Post-retirement benefit plans- Note 43 :
The obligation arising from the defined benefit plan is
determined on the basis of actuarial assumptions which
include discount rate, trends in salary escalation and
vested future benefits and life expectancy. The discount
rate is determined with reference to market yields at
each financial year end on the government bonds.
(v) Impairment of financial assets- Note 5, 6, 10, 13, 14,
and 45 :
The impairment provisions for financial assets are based
on assumptions about risk of default and expected cash
loss rates. The Company uses judgement in making these
assumptions and selecting the inputs to the impairment
calculation, based on Company's past history, existing
market conditions as well as forward looking estimates
at the end of each reporting period.
(vi) Impairment of investments - Note 4 :
The impairment provisions for investments are based on
projections which inter alia include sales and earnings
before interest, depreciation and amoritzation and
tax. The Company uses judgement in making these
assumptions and selecting the inputs to the impairment
calculation, based on Company's past history, existing
market conditions as well as forward looking estimates
at the end of each reporting period.
(vii) Leases- Note 40:
Ind AS 116 requires lessees to determine the lease
term as the non-cancellable period of a lease adjusted
with any option to extend or terminate the lease, if the
use of such option is reasonably certain. The Company
makes an assessment on the expected lease term on
a lease-by-lease basis and thereby assesses whether
it is reasonably certain that any options to extend or
terminate the contract will be exercised. In evaluating
the lease term, the Company considers factors such
as any significant leasehold improvements undertaken
over the lease term, costs relating to the termination
of the lease and the importance of the underlying
asset to Company's operations taking into account the
location of the underlying asset and the availability of
suitable alternatives. The lease term in future periods
is reassessed to ensure that the lease term reflects
the current economic circumstances. After considering
current and future economic conditions, the Company
has concluded that no changes are required to lease
period relating to the existing lease contracts.
e Measurement of fair values
Certain accounting policies and disclosures of the Company
requires use of valuation techniques in measuring the
fair value of some of the company's financial assets and
liabilities where active market quotes are not available. In
applying the valuation techniques, management makes
maximum use of market inputs and uses estimates
and assumptions that are, as far as possible, consistent
with observable data that market participants would use
in pricing the instrument. Where applicable data is not
observable, management uses its best estimate about
the assumptions that market participants would make.
These estimates may vary from the actual prices that
would be achieved in an arm's length transaction at the
reporting date. The measurement of fair values, for both
financial and non financial assets and liabilities.
The Company has an established control framework with
respect to the measurement of fair values. The valuation
team regularly reviews significant unobservable inputs
and valuation adjustments.
Fair values are categorised into different levels in a fair
value hierarchy based on the inputs used in the valuation
techniques as follows:
- Level 1: quoted prices (unadjusted) in active markets
for identical assets or liabilities.
- Level 2: inputs other than quoted prices included in
Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived
from prices).
- Level 3: inputs for the asset or liability that are not
based on observable market data (unobservable
inputs).
When measuring the fair value of an asset or a liability,
the Company uses observable market data as far as
possible. If the inputs used to measure the fair value
of an asset or a liability fall into different levels of the
fair value hierarchy, then the fair value measurement is
categorised in its entirety in the same level of the fair
value hierarchy as the lowest level input that is significant
to the entire measurement.
The Company recognizes transfers between levels of
the fair value hierarchy at the end of the reporting period
during which the change has occurred.
Further information about the assumptions made in
measuring fair values is included in Note 44: Financial
instruments.
f Property, plant and equipment
Items of property, plant and equipment are measured
at cost less accumulated depreciation (which includes
capitalised borrowing costs, if any) and accumulated
impairment losses, if any.
Cost of an item of property, plant and equipment
comprises its purchase price, including import duties and
non-refundable purchase taxes, after deducting trade
discounts and rebates, any directly attributable costs of
bringing an asset to working condition for its intended
use and estimated cost of dismantling and removing the
item and restoring the site on which it is located. Costs
directly attributable to acquisition are capitalized until
the property, plant and equipment are ready for use, as
intended by management.
The cost of a self-constructed item of property, plant and
equipment comprises the cost of materials, direct labour
and any other costs directly attributable to bringing the
item to its intended working condition and estimated
costs of dismantling, removing and restoring the site on
which it is located, wherever applicable.
Subsequent expenditures relating to property, plant and
equipment is capitalized only when it is probable that
future economic benefits associated with these will flow
to the Company and the cost of the item can be measured
reliably. Repairs and maintenance costs are recognized in
the Statement of Profit and Loss when incurred. The cost
and related accumulated depreciation are eliminated from
the financial statements upon sale or retirement of the
asset and the resultant gains or losses are recognized in
the Statement of Profit and Loss. Assets to be disposed
off are reported at the lower of the carrying value or the
fair value less cost to sell.
If significant parts of an item of property, plant and
equipment have different useful lives, then they are
accounted for as separate items (major components) of
property, plant and equipment.
Borrowing cost directly attributable to acquisition of
property, plant and equipment which take substantial
period of time to get ready for its intended use are
capitalized to the extent they relate to the period till such
assets are ready to be put to use.
Depreciation methods, estimated useful lives and
residual value
Depreciation is provided on a Straight Line Method
('SLM') over estimated useful life of the property, plant
and equipment less their estimated residual value as
defined by the Management. Depreciation for assets
purchased / sold during the year is proportionately
charged.
* The Management believes that the useful lives as given
above best represent the period over which management
expects to use these assets based on an internal
assessment and technical evaluation where necessary.
Hence, the useful lives for these assets is different from
the useful lives as prescribed under Part C of Schedule II
of the Companies Act ,2013.
The assets residual value and useful lives are reviewed,
and adjusted if appropriate, at the end of each reporting
period. An asset's carrying amount is written down
immediately to its recoverable amount if the asset's
carrying amount is greater than its estimated recoverable
amount.
Derecognition of property, plant and equipment
An item of property, plant and equipment is derecognised
upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset.
Any gain or loss arising on the disposal or retirement of
an item of property, plant and equipment is determined
as the difference between the sales proceeds and
the carrying amount of the asset and is recognised in
the Statement of Profit and Loss. Gains and losses on
disposal are determined by comparing proceeds with
carrying amount. These are included in profit or loss
within other gains / losses.
Advance paid towards the acquisition of property, plant
and equipment outstanding at each balance sheet
date classified as capital advances under other non
current assets and the cost of the assets not put to use
before such date are disclosed under Capital work in
progress.
g Intangible assets
Acquired intangible assets
Intangible assets that are acquired by the Company,
which have finite useful lives, are measured initially at
cost. After initial recognition, an intangible asset is carried
at its cost less any accumulated amortization and any
accumulated impairment loss.
Internally generated intangible assets
Expenditure on research activities, undertaken with the
prospect of gaining new scientific or technical knowledge
and understanding, is recognized in Statement of Profit
and Loss as incurred.
An internally -generated intangible asset arising from
development (or from the development phase of an
internal project) is recognised if, and only if, all of the
following have been demonstrated:
- the technical feasibility of completing the intangible
asset so that it will be available for use or
sale;
- the intention to complete the intangible asset and
use or sell it;
- the ability to use or sell the intangible asset;
- how the intangible asset will generate probable
future economic benefits;
- the availability of adequate technical, financial and
other resources to complete the development and to
use or sell the intangible asset; and
- the ability to measure reliably the expenditure
attributable to the intangible asset during its
development.
The amount initially recognised for internally-generated
intangible assets is the sum of the expenditure
incurred from the date when the intangible asset first
meets the recognition criteria listed above. Where no
internally-generated intangible asset can be recognised,
development expenditure is recognised in the
Statement of Profit and Loss in the period in which it is
incurred.
Subsequent to initial recognition, internally-generated
intangible assets are reported at cost less accumulated
amortisation and accumulated impairment losses, on
the same basis as intangible assets that are acquired
separately.
Subsequent measurement
Subsequent expenditure is capitalized only when it
increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditure,
including on internally generated software is recognized
in profit and loss as and when incurred.
Amortisation
The Company amortizes intangible assets with a finite
useful life using the straight-line method over the
estimated useful lives.
The assets residual value and useful lives are reviewed,
and adjusted if appropriate, at the end of each reporting
period.
h Impairment
(i) Financial assets
The Company assesses on a forward looking basis
the expected credit losses associated with its
assets carried at amortised cost and FVOCI debt
instruments. The impairment methodology applied
depends on whether there has been a significant
increase in credit risk.
In accordance with Ind AS 109, the Company applies
expected credit loss (ECL) model for measurement
and recognition of impairment loss. The Company
follows 'simplified approach' for recognition of
impairment loss on trade receivables. The application
of simplified approach does not require the Company
to track changes in credit risk. Rather, it recognizes
impairment loss allowance based on lifetime ECLs at
each reporting date, right from initial recognition.
For recognition of impairment loss on financial assets
and risk exposure, the Company determines that
whether there has been a significant increase in the
credit risk since initial recognition. If credit risk has
not increased significantly, 12-month ECL is used to
provide for impairment loss. However, if credit risk
has increased significantly, lifetime ECL is used. If in
subsequent period, credit quality of the instrument
improves such that there is no longer a significant
increase in credit risk since initial recognition, then
the entity reverts to recognizing impairment loss
allowance based on 12 month ECL.
(ii) Non-financial assetsIntangible assets and property, plant and
equipment
Intangible assets and property, plant and equipment
are evaluated for recoverability whenever events or
changes in circumstances indicate that their carrying
amounts may not be recoverable. For the purpose of
impairment testing, the recoverable amount (i.e. the
higher of the fair value less cost to sell and the value-
in-use) is determined on an individual asset basis
unless the asset does not generate cash flows that
are largely independent of those from other assets.
In such cases, the recoverable amount is determined
for the Cash Generated Unit (CGU) to which the
asset belongs.
If such assets are considered to be impaired, the
impairment to be recognized in the Statement of
Profit and Loss is measured by the amount by
which the carrying value of the assets exceeds
the estimated recoverable amount of the asset. An
impairment loss is reversed in the Statement of Profit
and Loss if there has been a change in the estimates
used to determine the recoverable amount.
The carrying amount of the asset is increased to
its revised recoverable amount, provided that this
amount does not exceed the carrying amount that
would have been determined (net of any accumulated
amortization or depreciation) had no impairment loss
been recognized for the asset in prior years.
Leases
(i) The Company as a lessee :
The Company's lease asset classes primarily consist
of leases for land, buildings and plant and machinery.
The Company assesses whether a contract contains
a lease, at inception of a 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 :
(i) the contract involves the use of an identified
asset
(ii) the Company has substantially all of the
economic benefits from use of the asset through
the period of the lease and
(iii) the Company has the right to direct the use of
the asset.
At the date of commencement of the lease, the
Company recognizes a right-of-use (ROU) asset
and a corresponding lease liability for all lease
arrangements in which it is a lessee, except for
leases with a term of 12 months or less (short-term
leases) and low value leases. For these short-term
and low-value leases, the Company recognizes
the lease payments as an operating expense on a
straight-line basis over the term of the lease.
Certain lease arrangements includes the options to
extend or terminate the lease before the end of the
lease term. ROU assets and lease liabilities includes
these options when it is reasonably certain that they
will be exercised.
The ROU assets are initially recognized at cost,
which comprises the initial amount of the lease
liability adjusted for any lease payments made at or
prior to the commencement date of the lease plus
any initial direct costs less any lease incentives. They
are subsequently measured at cost less accumulated
depreciation and impairment losses.
ROU assets are depreciated from the commencement
date on a straight-line basis over the shorter of the
lease term and useful life of the underlying asset.
ROU assets are evaluated for recoverability whenever
events or changes in circumstances indicate that
their carrying amounts may not be recoverable. For
the purpose of impairment testing, the recoverable
amount (i.e. the higher of the fair value less cost to sell
and the value-in-use) is determined on an individual
asset basis unless the asset does not generate cash
flows that are largely independent of those from
other assets. In such cases, the recoverable amount
is determined for the Cash Generating Unit (CGU) to
which the asset belongs.
The lease liability is initially measured at amortized
cost at the present value of the future lease
payments. The lease payments are discounted using
the interest rate implicit in the lease or, if not readily
determinable, using the incremental borrowing rates
in the country of domicile of these leases. Lease
liabilities are remeasured with a corresponding
adjustment to the related ROU asset if the Company
changes its assessment of whether it will exercise
an extension or a termination option.
Lease liability and ROU assets have been separately
presented in the Balance Sheet and lease payments
have been classified as financing cash flows.
Short-term leases and leases of low-value assets:
The Company has elected not to recognise right-
of use assets and lease liabilities for leases of low
value assets and short-term leases. The Company
recognises the lease payments associated with
these leases as an expense on a straight-line basis
over the lease term.
(ii) The Company as a lessor
Leases for which the Company is a lessor is classified
as a finance or operating lease. Whenever the terms
of the lease transfer substantially all the risks and
rewards of ownership to the lessee, the contract
is classified as a finance lease. All other leases are
classified as operating leases.
When the Company is an intermediate lessor, it
accounts for its interests in the head lease and the
sublease separately. The sublease is classified as a
finance or operating lease by reference to the ROU
asset arising from the head lease.
For operating leases, rental income is recognized
on a straight line basis over the term of the relevant
lease.
j Inventories
Inventories are valued at the lower of cost and net
realisable value. Cost of inventories comprises purchase
price, costs of conversion and other costs incurred in
bringing the inventories to their present location and
condition. In determining the cost, weighted average
cost is used. Net realizable value is the estimated
selling price in the ordinary course of business, less
estimated costs to sell. The comparison of cost and
net realizable value is made on an item-by-item basis.
Inventories are stated net of write down or allowances on
account of obsolescence, damage or slow moving items.
The method of determination of cost is as follows:
- Raw materials and components - on a weighted
average basis
- Stores and spares - on a weighted average basis
- Work-in-progress - includes costs of conversion
- Finished goods - includes costs of conversion
- Goods in transit - at purchase cost
The net realizable value of work-in-progress is determined
with reference to the net realizable value of related
finished goods. Raw materials and other supplies held
for use in production of inventories are not written
down below cost except in cases where material prices
have declined, and it is estimated that the cost of the
finished products will exceed their net realizable value.
Fixed production overheads are allocated on the basis of
normal capacity of production facilities. The provision for
inventory obsolescence is assessed periodically and is
provided as considered necessary.
k Revenue recognition
Revenue is recognised upon transfer of control of promised
goods or services to customers and is measured based
on the consideration to which the Company expects to
be entitled to in a contract with a customer and excludes
trade discounts, volume rebates and amounts collected
on behalf of government. For certain contracts that permit
the customer to return an item, revenue is recognised to
the extent that it is probable that a significant reversal in the
amount of cumulative revenue recognised will not occur
and is reassessed at the end of each reporting period.
Where the Company's contracts with customers
include promise to transfer multiple goods and services
to a customer, the Company assesses the goods/
services promised in a contract and identifies distinct
performance obligations in the contract. Identification of
distinct performance obligations is made to determine
the deliverables and the ability of the customer to benefit
independently from such deliverables.
The Company considers indicators such as how customer
consumes benefits as services are rendered or who
controls the asset as it is being created or existence of
enforceable right to payment for performance to date and
alternate use of' such goods, transfer of significant risks
and rewards to the customer, acceptance of delivery by
the customer, etc. to determine whether the performance
obligation is satisfied at a point in time or over a period of
time.
Revenue from customer contracts for design and
development of products/tools & jigs is recognized as
a performance obligation satisfied over time. Revenue
is recognized based on the stage of completion of the
contract. The management has assessed that the stage
of completion determined as the proportion of total
efforts expected to develop the product at the end of the
reporting period is an appropriate measure of progress
towards complete satisfaction of these performance
obligations under Ind AS 115. Payment for these services
is not due till the completion of the development and
therefore, a contract asset is recognized over the period
in which the development services are performed
representing the entity's right to consideration for the
services performed to date.
Export benefits are recognized in the Statement of Profit
and Loss account when the right to receive credit as per
the terms of the entitlement is established in respect of
exports made.
Service income including management fees is measured
based on transaction price and is recognized when an
unconditional right to receive such income is established
and on the performance of services.
Contract assets are recognised when there is excess
of revenue earned over billings on contracts. Contract
assets are classified as unbilled receivables (only act of
invoicing is pending) when there is unconditional right
to receive cash, and only passage of time is required,
as per contractual terms. Unearned revenue ("contract
liability") is recognised when there are billings in excess
of revenue.
l Other income
For all financial instruments measured at amortised cost,
interest income is recorded using the effective interest
rate (EIR), which 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 net carrying amount of
the financial asset. Interest income is included in other
income in the Statement of Profit and Loss.
Dividend income is recognised when the Company's right
to receive the payment is established, which is generally
when shareholders approve the dividend.
m Investments in subsidiaries
Investment in equity shares in subsidiaries is carried
at deemed cost less impairments if any in the financial
statements.
n Financial Instrumentsi) Financial assets1) Recognition and initial measurement
Trade receivables and debt securities are
initially recognized when they are originated. All
other financial assets and liabilities are initially
recognized when the Company becomes a party
to contractual provisions of the instrument.
A financial asset or liability is initially measured
at fair value plus transaction cost that are directly
attributable to its acquisition or issue.
2) Classification and subsequent measurement
Financial assets
On initial recognition, a financial instrument is
classified and measured at
- amortised cost
- fair value through other comprehensive income
(FVOCI) - debt instruments;
- fair value through other comprehensive income
(FVOCI) - equity investments; or
- fair value through profit and loss (FVTPL)
Financial assets are not classified subsequent
to their initial recognition, except if and in the
period the Company changes its business model
for managing financial assets.
A financial asset is measured at amortised cost if
it meets both the following conditions and is not
designated as at FVTPL:
- the asset is held within a business model whose
objective is to hold assets to collect contractual
cash flows; and
- the contractual terms of the financial assets give
rise on a specified date to cash flows that are
solely payments of principal and interest on the
principal amounts outstanding.
A debt investment is measured at FVOCI if it
meets both of the following conditions and is not
designated as at FVTPL:
- the asset is held within a business model
whose objective is achieved by both collecting
contractual cash flow and selling financial assets;
and
- the contractual terms of the financial assets give
rise on a specified date to cash flows that are
solely payments of principal and interest on the
principal amounts outstanding.
On initial recognition of an equity investment that is
not held for trading, the Company may irrevocably
elect to present subsequent changes in the
investment's fair value in OCI (designated as FVOCI-
equity investment). This election is made on an
investment-to-investment basis.
All financial assets not classified as amortised cost
or FVOCI as described above are measured at
FVTPL. This includes all derivative financial assets.
On initial recognition, the Company may irrevocably
designate a financial asset that otherwise meets
the requirements to be measured at amortised cost
or at FVOCI as at FVTPL, if doing so eliminates or
significantly reduces an accounting mistake that
would otherwise arise.
Financial assets: Subsequent measurement and
gains and losses
Financial assets, at FVTPL:
These assets are subsequently measured at fair
value. Net gains and losses, including any interest
or dividend income are recognized in profit or
loss.
Financial assets at amortised cost:
These assets are subsequently measured at
amortised cost using the effective interest method.
The amortised cost is reduced by impairment losses.
Interest income, foreign exchange gains and losses
and impairment are recognized in profit or loss. Any
gain or loss on derecognition is recognized in profit or
loss.
Debt investments at FVOCI:
These assets are subsequently measured at fair
value. Interest income under effective interest
method, foreign exchange gains and losses and
impairment are recognized in profit or loss. Other
net gains and losses are recognized in OCI. On
derecognition, gains and losses accumulated in OCI
are reclassified to profit or loss.
Equity investments at FVOCI:
These assets are subsequently measured at fair
value. Dividends are recognized as income in profit
or loss unless the dividend clearly represents a
recovery of part of the cost of the investment. Other
net gains and losses are recognized in OCI and are
not reclassified to profit or loss.
3) Derecognition of financial assets
A financial asset is derecognized only when:
- the Company has transferred the rights to receive
cash flows from financial asset or
- retains the contractual rights to receive the cash
flows from financial asset but assumed a contractual
obligation to pay the cash flows to one or more
recipients.
Where the Company 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 derecognized. Where the entity has not
transferred substantially all risks and rewards of
ownership of the financial asset, the financial asset
is not derecognized.
Where the Company has neither transferred a
financial asset nor retains substantially all risks and
rewards of ownership of the financial asset, the
financial asset is derecognized 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 recognized to the extent of
continuing involvement in the financial asset.
ii) Financial liability
1) Initial recognition and measurement
Financial liabilities are classified, at initial recognition,
as financial liabilities at fair value through profit
or loss or amortised cost. All financial liabilities
are recognized initially at fair value and, in case of
loans and borrowings and payables, net of directly
attributable transaction costs.
2) Subsequent measurement
The measurement of financial liabilities depends on
their classification, as described below:
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.
Gains or losses on liabilities held for trading are
recognized in the profit or 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/ losses are not
subsequently transferred to Statement of Profit
and Loss. However, the Company may transfer
the cumulative gain or loss within equity. All other
changes in fair value of such liability are recognized
in the statement of profit or loss. The Company has
not designated any financial liability as at fair value
through profit or loss .
Amortised cost
After initial recognition, interest-bearing loans
and borrowings are subsequently measured at
amortised cost using the Effective Interest Rate
("EIR") method. Gains and losses are recognized in
profit or loss when the liabilities are derecognized
as well as through the EIR amortization 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
amortization is included as finance costs in the
Statement of Profit and Loss.
Financial guarantee contracts
Financial guarantee contracts issued by the Company
are those contracts that require a payment to be
made to reimburse the holder for a loss it incurs
because the specified party fails to make a payment
when due in accordance with the terms of a debt
instrument.
Financial guarantee contracts are recognized initially
as a liability at fair value, adjusted for transaction
costs that are directly attributable to the issuance of
the guarantee. Subsequently, the liability is measured
at the higher of the amount of loss allowance
determined as per impairment requirements of Ind
AS 109 and the amount recognized less cumulative
amortization.
Derecognition
A financial liability is derecognized 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
recognized in the Statement of profit and loss.
Offsetting
Financial assets and financial liabilities are offset
and the net amount reported in the balance sheet if
there is a currently enforceable legal right to offset
the recognized amounts and there is an intention to
settle on a net basis, to realize the assets and settle
the liabilities simultaneously.
o Employee benefits
(i) Defined benefit plans
The Company's gratuity plan is a defined benefit
plan. The present value of gratuity obligation under
such defined benefit plans is determined based on
actuarial valuations carried out by an independent
actuary using the Projected Unit Credit Method,
which recognizes each period of service as giving rise
to additional unit of employee benefit entitlement
and measure each unit separately to build up the final
obligation. The obligation is measured at the present
value of estimated future cash flows. The discount
rates used for determining the present value of
obligation under defined benefit plans, is based
on the market yields on Government securities as
at the balance sheet date, having maturity periods
approximating to the terms of related obligations.
Actuarial gains or losses are recognized in other
comprehensive income. Further, the profit or loss
does not include an expected return on plan assets.
Instead net interest recognized in profit or loss is
calculated by applying the discount rate used to
measure the defined benefit obligation to the net
defined benefit liability or asset. The actual return
on plan assets above or below the discount rate is
recognized as part of remeasurement of net defined
liability or asset through other comprehensive
income. Remeasurements comprising actuarial
gains or losses and return on plan assets (excluding
amounts included in net interest on the net defined
benefit liability) are not reclassified to profit or loss in
subsequent periods.
The Company's gratuity scheme is administered
through Life Insurance Corporation of India and the
provision for the same is determined on the basis
of actuarial valuation carried out by an independent
actuary. Provision is made for the shortfall, if any,
between the amounts required to be contributed to
meet the accrued liability for gratuity as determined
by actuarial valuation and the available corpus of the
funds.
(ii) Short term employee benefits
All employee benefits falling due wholly within
twelve months of rendering the services are
classified as short-term employee benefits, which
include benefits like salaries, wages, short-term
compensated absences and performance incentives
and are recognised as expenses in the period in
which the employee renders the related service.
Short term employee benefits are measured on
an undiscounted basis and are expensed as the
related service is provided. A liability is recognized
for the amount expected to be paid e.g. short term
performance incentive, if the Company has a present
legal or constructive obligation to pay this amount as
a result of past services provided by the employee
and the amount of obligation can be estimated
reliably.
When the benefits of a plan are changed or
when a plan is curtailed, the resulting change in
benefit that relates to past service ('past service
cost' or 'past service gain') or the gain or loss on
curtailment is recognized immediately in profit or
loss. The Company recognizes gains and losses on
the settlement of a defined benefit plan when the
settlement occurs.
(iii) Compensated absences
The employees of the Company are entitled to
compensated absence. The employees can carry¬
forward a portion of the unutilized accumulating
compensated absence and utilize it in future
periods. The Company records an obligation for
compensated absences in the period in which the
employee renders the services that increases this
entitlement. The obligation is measured on the
basis of an independent actuarial valuation using
the Projected Unit method as at the reporting date.
Actuarial gains / losses are immediately taken to the
Standalone Statement of Profit and Loss and Other
comprehensive income.
(iv) Defined contribution plan
A defined contribution plan is a post-employment
benefit plan under which an entity pays specified
contributions to a separate entity and has no obligation
to pay any further amounts. The Company makes
specified monthly contributions towards employee
Provident Fund to Government administered
Provident Fund Scheme which is a defined
contribution plan. The Company's contribution is
recognized as an expense in the Statement of Profit
and Loss during the period in which the employee
renders the related service.
(v) Termination benefits
Termination benefits are expensed at the earlier of
when the Company can no longer withdraw the offer
of those benefits and when the Company recognizes
cost of restructuring. If the benefits are not expected
to be settled wholly within 12 months of reporting
date, then they are discounted.
p Foreign currency transactions and balances
Foreign currency are translated into the functional currency
using the exchange rates at the dates of the transactions.
Foreign currency denominated monetary assets and
liabilities are translated into relevant functional currency
at exchange rates in effect at the balance sheet date.
Foreign exchange gains and losses resulting from
the settlement of such transactions and from
the translation of monetary assets and liabilities
denominated in foreign currencies at year end
exchange rates are recognized in profit or loss.
Non-monetary assets and non-monetary liabilities
denominated in foreign currency and measured at fair
value are translated at the exchange rate prevalent at the
date when the fair value was determined. Non-monetary
assets and non-monetary liabilities denominated in a
foreign currency and measured at historical cost are
translated at the exchange rate prevalent at the date
of transaction. Translation differences on assets and
liabilities carried at fair value are reported as part of the
fair value gain or loss and are recognized in profit and loss,
except exchange differences arising from the translation
of the following items which are recognized in OCI:
- equity investments at fair value through OCI (FVOCI)
- a financial liability designated as a hedge of the net
investment in a foreign operation to the extent that
the hedge is effective; and
- qualifying cash flow hedges to the extent that the
hedges are effective.
q Taxes
Income tax expense comprises current and deferred
income tax. Income tax expense is recognized in net
profit in the Statement of Profit and Loss except to the
extent it relates to items recognized directly in equity,
in which case it is recognized in other comprehensive
income.
Current income tax for current and prior periods is
recognized at the amount expected to be paid or
recovered from the tax authorities, using the tax rates and
tax laws that have been enacted or substantively enacted
by the balance sheet date. Deferred income tax assets
and liabilities are recognized for all temporary differences
arising between the tax bases of assets and liabilities
and their carrying amounts in the financial statements
except for the cases mentioned below:
Deferred income tax assets and liabilities are measured
using tax rates and tax laws that have been enacted or
substantively by the balance sheet date and are expected
to apply to taxable income in the years in which those
temporary differences are expected to be recovered or
settled. The effect of changes in tax rates on deferred
income tax assets and liabilities is recognized as income
or expense in the period that includes the enactment or
substantive enactment date.
Deferred tax is not recognized for:
- temporary differences arising on the initial
recognition of assets and liabilities in a transaction
that is not a business combination and that affects
neither accounting nor taxable profits or loss at the
time of the transaction;
- temporary investments related to investment in
subsidiaries, associates and joint arrangements to
the extent that the Company is able to control the
timing of reversal of the temporary differences
and it is probable that they will not reverse in the
foreseeable future; and
- taxable temporary difference arising on the initial
recognition of goodwill.
Deferred tax assets are recognised to the extent that
it is probable that future taxable profits will be available
against which they can be used. The existence of unused
tax losses is strong evidence that future taxable profit
may not be available. Therefore, in case of history of
recent losses, the Company recognizes a deferred tax
asset only to the extent that it has sufficient taxable
temporary differences or there is convincing other
evidence that sufficient taxable profits will be available
against which such deferred tax can be realized. Deferred
tax assets, unrecognized or recognised, are reviewed at
each reporting date and are recognised / reduced to the
extent that it is probable / no longer probable respectively
that the related tax benefit will be realized.
The Company offsets, the current tax assets and
liabilities (on a year on year basis) and deferred tax assets
and liabilities, where it has a legally enforceable right and
where it intends to settle such assets and liabilities on a
net basis.
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