2. Summary of material accounting policies
2.1 Basis of preparation
The standalone financial statements comprise of the standalone balance sheet as at March 31, 2024, standalone statement of profit and loss (including other comprehensive income), standalone statement of cash flows and standalone changes in equity for year ended March 31, 2024 and notes to the standalone financial statements including material accounting policies and other explanatory information (hereinafter collectively referred to as ‘standalone financial statements’). The standalone financial statements have been prepared in accordance with the provisions of the Companies Act, 2013 (the ‘Act’) and the Indian Accounting Standards (’Ind AS’) prescribed under section 133 of the Act read with Companies (Indian Accounting Standards) Rules, 2015, as amended and other relevant provisions of the Act. All amounts included in the standalone financial statements are reported in Indian Rupees (‘INR’) in Crore, unless otherwise stated.
The standalone financial statements were approved and were authorised for issue in accordance with a resolution of the Board of Directors on May 10, 2024.
2.2 Basis of measurement
The standalone financial statements have been prepared on going concern basis using accrual method of accounting and historical cost convention, except for:
(i) certain financial assets and financial liabilities that are measured at fair value or amortised cost in accordance with Ind AS.
(All amounts in ^ Crore, unless otherwise stated)
(ii) defined benefit plans - plan assets measured at fair value.
2.3 Functional and presentation currency
The standalone financial statements are presented in INR which is the Company’s functional currency.
Amounts in the standalone financial statements are presented in INR in Crore rounded off to two decimal places as permitted by Schedule III to the Act, unless otherwise stated.
2.4 Current or non-current classification
The Company presents assets and liabilities in the standalone balance sheet based on current/ non-current classification.
An asset is classified as current when it is:
a. Expected to be realised or intended to be sold or consumed in normal operating cycle
b. Held primarily for the purpose of trading
c. Expected to be realised within twelve months after the reporting period, or
d. Cash or cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period All other assets are classified as non - current.
A liability is classified as current when it is:
a. Expected to be settled in normal operating cycle
b. Held primarily for the purpose of trading
c. Due to be settled within twelve months after the reporting period, or
d. There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non - current assets and liabilities.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle.
2.5 Critical accounting judgements, estimates and assumptions
The preparation of standalone financial statements in conformity with Ind AS requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenue, expenses, current assets, non-current assets, current liabilities, non-current liabilities and disclosure of the contingent liabilities at the end of each reporting period. Although these estimates are based on management’s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying value of assets or liabilities in future periods. These estimates are reviewed regularly and any change in estimates are adjusted prospectively.
In the process of applying the Company’s accounting policies, management has made the following estimates, assumptions and judgements, which have significant effect on the amounts recognised in the standalone financial statements:
Judgements
Government grant/ subsidy
The Company was entitled to receive Industrial Promotion Subsidy under the Package Scheme of Incentives, for the period from April 1, 2011 to March 31,2023. The aforesaid subsidy is in relation to investment in property, plant and equipment at Ratnagiri plant. Accordingly, the same has been classified as grant related to assets and the Company recognises the revenue from grant over the remaining useful life of the property, plant and equipment, from the date on which the Company is entitled to receive such grants.
Estimates
Defined benefit plan
The cost of defined benefit gratuity plan and present value of such obligation are determined using actuarial valuation. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and attrition rate. Due to the long-term nature of the plan, such estimates are subject to significant uncertainty. All assumption are reviewed at each reporting date.
The most sensitive parameter is the discount rate. In determining the appropriate discount rate, management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation and extrapolated as needed along the yield curve to correspond with the expected term of the defined benefit obligation.
The mortality rate is based on publicly available mortality tables. Those mortality tables tend to change only at intervals in response to demographic changes. Future salary increases are mainly based on expected future inflation rates for the country.
Property, plant and equipment and intangible assets:
The determination of depreciation and amortisation charge depends on the useful lives for which judgements and estimations are required. The residual values, useful lives, and method of depreciation of property, plant and equipment and intangible assets are reviewed at each financial year end and adjusted prospectively, if appropriate.
Claims, provisions and contingent liabilities:
The Company has ongoing litigations with various regulatory authorities and third parties. Where an outflow of funds is believed to be probable and a reliable estimate of the outcome of the dispute can be made based on management’s assessment of specific circumstances of each dispute and relevant external advice, management provides for its best estimate of the liability. Such accruals are by nature complex and can take number of years to resolve and can involve estimation uncertainty. Information about such litigations is provided in notes to the standalone financial statements.
Fair value measurement of financial instruments:
Some of the Company’s assets and liabilities are measured at fair value for financial reporting purposes. In estimating the fair value of an asset or a liability, the Company uses market-observable data to the extent it is available. Where Level 1 inputs i.e., market-observable inputs are not available, the Company engages third party valuers, where required, to perform the valuation.
Impairment of financial assets:
The impairment allowance 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 the Company’s past history, existing market conditions as well as forward-looking estimates at the end of each reporting period.
Deferred tax
Deferred tax assets are recognised for all deductible temporary differences including the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised.
2.6 Fair value measurements
The Company measures financial instruments, such as non-current and current investments, at fair value, at each balance sheet date.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. Quoted market prices, when available, are used as the measure of fair value. In cases where quoted market prices are not available, fair values are determined using present value estimates or other valuation techniques which maximise the use of relevant observable inputs and minimize the use of unobservable inputs, for example, the present value of estimated expected future cash flows using discount rates commensurate with the risks involved. Fair value estimation techniques normally incorporate assumptions that market participants would use in their estimates of values, future revenues, and future expenses, including assumptions about interest rates, default, prepayment and volatility. Because assumptions are inherently subjective in nature, the estimated fair values cannot be substantiated by comparison to independent market quotes and, in many cases, the estimated fair values would not necessarily be realised in an immediate sale or settlement of the instrument.
The financial instruments carried at fair value are categorized under the three levels of the Ind AS fair value hierarchy as follows:
Level 1: Quoted market prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. This level of the fair value hierarchy provides the most reliable evidence of fair value and is used to measure fair value whenever available.
Level 2: Inputs other than quoted prices included within 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). These inputs reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). These inputs are developed based on the best information available in the circumstances, which include the Company’s own data. The Company’s own data used to develop unobservable inputs is adjusted if information indicates that market participants would use different assumptions.
For assets and liabilities that are recognised in the standalone financial statements at fair value 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.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis ofthe nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.
2.7 Inventories
Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for, as follows:
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 sell.
2.8 Property, plant and equipment ('PPE’)
Items of property, plant and equipment are measured at cost of acquisition or construction less accumulated depreciation and/or accumulated impairment loss, if any. The cost of an item of property, plant and equipment comprises its purchase price, including import duties, and other non-refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition for its intended use; any trade discounts and rebates are deducted in arriving at the purchase price.
Capital work-in-progress comprises cost of property, plant and equipment that are not yet installed and not ready for their intended use at the balance sheet date.
Advances paid towards the acquisition of property, plant and equipment outstanding at each reporting date are disclosed as capital advances under ‘Other non-current assets’.
Subsequent costs
The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company, and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in the standalone statement of profit and loss as incurred.
Disposal
An item of property, plant and equipment is derecognised upon disposal or when no future benefits are expected from its use. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised on net basis within other income/ other expenses in the standalone statement of profit and loss.
Depreciation
Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value. Depreciation is recognised in the standalone statement of profit and loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment as prescribed in Schedule II of the Act or technical evaluation, which are as follows:
In the case of Captive Power Plant, the management, based on a technical evaluation, has estimated the life of asset to be 25 years which is lower than the life prescribed in Schedule II. Also, in case of moulds and water works, management has estimated a lower life than prescribed in Schedule - II based on technical evaluation.
The management undertakes a review of the residual values, useful lives and methods of depreciation of property, plant and equipment at the end of each reporting period and any adjustments to useful lives is accounted for prospectively as a change in accounting estimate.
2.9 Intangible assets and amortisation Recognition and measurement
Intangible assets are recognised when the asset is identifiable, is within the control of the Company, it is probable that the future economic benefits that are attributable to the asset will flow to the Company and cost of the asset can be reliably measured.
Intangible assets acquired by the Company that have finite useful lives are measured at cost less accumulated amortisation and any accumulated impairment losses.
Subsequent measurement
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates.
Amortisation
Amortisation is calculated over the cost of the asset, or other amount substituted for cost, less its residual value.
Intangible assets developed or acquired with finite useful life are amortized on straight line basis over the useful life as specified below:
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.
2.10 Revenue recognition
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer based on delivery terms i.e. when the customer is able to direct the use of the transferred goods or rendering of services and obtains substantially all of the remaining benefits at an amount that reflects the consideration entitled in exchange for those goods or services. The Company is generally the principal as it typically controls the goods or services before transferring them to the customer. A receivable is recognised by the
Company when the control is transferred as this is the case of point in time recognition where consideration is unconditional because only the passage of time is required. No significant element of financing is deemed present as the sales are either made with a nil credit term or with a credit period of up to 60 days. The management has ascertained that the credit period is as per normal industry practices and is not intended to finance the customers.
The specific recognition criteria described below must also be met before revenue is recognised.
Sale of goods
Revenue from sale of goods is recognised when the significant control of the goods have passed to the buyer, usually when goods are dispatched or on delivery, as per the terms of sale. Revenue towards satisfaction of 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 is net of variable consideration on account of various discounts and schemes offered by the Company as part of the contract.
Interest income
For all financial instruments measured at amortised cost, interest income is recorded using the effective interest rate (EIR). The EIR is the rate that exactly discounts the estimated future cash 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 finance income in the statement of profit or loss.
The Company presents interest income on financial assets at fair value through profit or Loss separately from fair value changes on such financials assets.
Dividends
Revenue is recognised when the Company’s right to receive the payment is established, which is in the year when shareholders approve the dividend.
’.11 Foreign currency transactions:
Items included in the standalone financial statements are measured using the currency of the primary economic environment in which the
Company operates (functional currency). The standalone financial statements are presented in INR, which is also the Company’s functional and presentation currency.
Transactions and balances
Transactions in foreign currencies are recorded at functional currency spot rates at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Exchange differences arising on settlement or translation of monetary items are recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item
2.12 Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all the attached conditions will be complied with. When the grant relates to an item of expense, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.
When loans or similar assistance are provided by government or related institutions with an interest rate below the current applicable market rate, the effect of this favorable interest is regarded as a government grant.
2.13 Taxes
Tax comprises current and deferred tax. Income-tax expense is recognised in the standalone statement of profit and loss except to the extent it relates to items directly recognised in equity or in OCI. 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 under the Income-tax Act, 1961 adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. In which case, the tax is also recognised in other comprehensive income or equity.
Current income-tax
Current income-tax assets and liabilities are measured at the amounts expected to be recovered from or paid to the taxation authorities; on the basis of the taxable profits computed for the current accounting period in accordance with Income-tax Act, 1961. The tax rates and tax laws used to compute the amount are those that are enacted at the reporting date. 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.
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.
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. Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax
asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
2.14 Leases
Lease is a contract that provides to the customer (lessee) the right to use an asset for a period of time in exchange for consideration.
A lessee is required to recognise assets and liabilities for all leases with a term that is greater than twelve months, unless the underlying asset is of low value, and to recognise depreciation of leased assets separately from interest on lease liabilities in the standalone statement of profit and loss.
Initial measurement Right-of-use assets
At the commencement date, the Company measures the right-of-use assets at cost. The cost of the right-of-use assets comprise:
• the amount of the initial measurement of the lease liability
• any lease payments made at or before the commencement date, less any lease incentives received;
• any initial direct costs incurred by the lessee; and
• an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. The lessee incurs the obligation for those costs either at the commencement date or as a consequence of having used the underlying asset during a particular period.
Lease liabilities
At the commencement date, the Company measures the lease liabilities at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liabilities comprise the following payments:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
• amounts expected to be payable by the Company under residual value guarantees;
• the exercise price of a purchase option if the Company is reasonably certain to exercise that option; and
• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.
Subsequent measurement Right-of-use assets
Subsequently the Company measures the right-of-use assets at cost less any accumulated depreciation and any accumulated impairment losses.
Lease liabilities
Subsequently the Company measures the lease liabilities by:
• i ncreasing the carrying amount to reflect interest on the lease liability at the interest rate implicit in the lease, if that rate can be readily determined or the Company’s incremental borrowing rate.
• reducing the carrying amount to reflect the lease payments made; and
• re-measuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised insubstance fixed lease payments.
Lease liabilities and right-of-use assets have been separately presented in the standalone balance sheet and lease payments have been classified as financing cash flows.
2.15 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.
2.15.1 Financial assets
Initial recognition and measurement
Financial assets are recognised initially at fair value plus, in the case of financial assets not classified as fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
Financial assets are recognised in the standalone balance sheet when the Company becomes a party to the contractual provisions of the instrument. A regular way purchase or sale of financial assets shall be recognised using trade date or settlement date accounting.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three categories:
a) At amortised cost
b) At fair value through other comprehensive income (‘FVOCI’)
c) At fair value through profit or loss (‘FVTPL’)
(a) Financial assets classified as measured at amortised cost
A financial asset shall be measured at amortised cost if both of the following conditions are met:
• the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and
• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (‘EIR’) method, less impairment. 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 method. The EIR amortisation is included in finance expense/ other income in the standalone statement of profit and loss. The losses arising from impairment are recognised in the standalone statement of profit and loss.
This category generally applies to trade receivables, loans, certain
investments, security and other deposits, and other financial assets held by the Company.
(b) Financial assets classified as
measured at FVOCI
A financial asset shall be measured at fair value through OCIif both of the following conditions are met:
• the financial asset is held
within a business model whose
objective is achieved by both collecting contractual cash flows and selling financial assets and
• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
After initial measurement, such financial assets, until they are derecognised or reclassified, are subsequently measured at fair value with unrealised gains or losses recognised in OCI except for interest income, impairment gains or losses and foreign exchange gains and losses which are recognised in the standalone statement of profit and loss.
On de-recognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from equity to standalone statement of profit and loss.
(c) Financial assets classified as measured at FVTPL A Financial asset is to be measured at FVTPL, unless it is measured at amortised cost or at FVOCI. The Company classifies all equity or puttable financial instruments held for trading as measured at FVTPL. Such instruments are measured at fair value at initial recognition as well as at each reporting date. The fair value changes are recognised in the standalone statement of profit and loss. Further, the Company may make an irrevocable election to designate a financial asset as FVTPL, at initial recognition, to reduce or eliminate a measurement or recognition inconsistency.
De-recognition
The Company derecognises a financial asset when the contractual rights to the cash flows from the
financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the company neither transfers nor retain substantially all of the risks and rewards of ownership and it does not retain control of the financial asset
Impairment of financial assets
The Company applies expected credit loss (‘ECL’) model for measurement and recognition of impairment loss on the following financial assets and credit risk exposure:
• Financial assets measured at amortised cost
• Financial assets measured at FVOCI, except investments in equity instruments designated as such by the Company.
• Trade receivables
The Company follows ‘simplified approach’ for recognition of impairment loss allowance on trade receivables. For recognition of impairment loss on other 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, twelve-month ECL is used to provide for impairment loss. However, if credit risk has increased significantly, lifetime ECL is used.
Reclassification of financial assets
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for
managing those assets. Changes to the business model are expected to be infrequent. The Company’s senior management determines change in the business model as a result of external or internal changes which are significant to the Company’s operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or interest.
2.15.2 Financial liabilities
Initial recognition and measurement
Financial liabilities are recognised initially at fair value net of, in the case of financial liabilities not classified as measured at FVTPL, transaction costs that are attributable to the issue of the financial liability. Financial liabilities are recognised in the standalone balance sheet when the Company becomes a party to the contractual provisions of the instrument.
(a) Financial liabilities classified as measured at FVTPL
Financial liabilities classified as measured at FVTPL include financial liabilities held for trading and financial liabilities designated as such upon initial recognition. 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 standalone statement of profit and loss. Financial liabilities designated as such upon initial recognition at the initial date of recognition, if the criteria in Ind AS 109, ‘Financial Instruments’ are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risks are recognised in OCI. These gains/ losses are not subsequently transferred to the standalone 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 liabilities are recognised in the standalone statement of profit and loss.
The Company has not designated any financial liability measured at FVTPL.
(b) Financial liabilities classified as measured at amortised cost
This is the most relevant category to the Company. The Company generally classifies interest bearing borrowings as financial liabilities carried at amortised cost. After initial recognition, these instruments are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the standalone statement of profit and 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 standalone statement of profit and loss.
De-recognition
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 standalone statement of profit and loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the standalone balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
2.16 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 CGU’s fair value less costs of disposal and its value in use. It is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where 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.
2.17 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, balances with banks and short-term deposits with a maturity of three months or less, which are subject to an insignificant risk of changes in value.
Cash equivalents are short term, highly liquid investments that are readily convertible into known amounts of cash and are subject to an insignificant risk of changes in value.
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