2. Material accounting policies
This note provides a list of the material accounting policies adopted in the preparation of these standalone financial
statements. These policies have been consistently applied to all the years presented, unless otherwise stated.
2.1.Statement of compliance and basis of preparation
The standalone financial statements of the Company have been prepared in accordance with Indian Accounting
Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended
from time to time) and presentation requirements of Division II of Schedule III to the Companies Act, 2013
(as amended from time to time) (Ind AS compliant Schedule III), as applicable to the standalone financial
statements.
The standalone financial statements have been prepared on a historical cost basis, except for the following
assets and liabilities which have been measured at fair value or revalued amount:
• Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial
instruments);
• Assets held for sale-measured at lower of carrying value and fair value less cost to sell
The accounting policies and related notes further describe the specific measurements applied for each of the
assets and liabilities.
The standalone financial statements are presented in Indian Rupees ('Rs.') and all values are rounded to the
nearest lakhs (i.e. Rs. 00,000), except otherwise indicated.
The Company has prepared the standalone financial statements on the basis that it will continue to operate as
a going concern.
a) Current versus non-current classification
The Company segregates assets and liabilities into current and non-current categories for presentation
in the balance sheet after considering its normal operating cycle and other criteria set out in Ind AS 1,
"Presentation of Standalone financial statements". For this purpose, current assets and liabilities include
the current portion of non-current assets and liabilities respectively. Deferred tax assets and liabilities are
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.
b) Investments in subsidiaries, associates and joint ventures
A subsidiary is an entity that is controlled by another entity.
An associate is an entity over which the Company has significant influence. Significant influence is the
power to participate in the financial and operating policy decisions of the investee but is not control or joint
control over those policies.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement
have rights to the net assets of the joint venture.
The Company's investments in its subsidiaries, associates and joint ventures are accounted at cost less
impairment as per Ind AS 27.
Impairment of investments
The Company reviews its carrying value of investments carried at cost annually, or more frequently when
there is indication for impairment. If the recoverable amount is less than its carrying amount, the impairment
loss is recorded in the Statement of Profit and Loss.
When an impairment loss subsequently reverses, the carrying amount of the Investment is increased to
the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the
cost of the Investment. A reversal of an impairment loss is recognised immediately in Statement of Profit
or Loss.
c) Investment in Compound Financial Instruments issued by subsidiary
Company considers issuance of non-market rate redeemable preference shares by subsidiary as compound
instrument comprising a loan with market terms and a capital injection and hence treat the difference
between the cash paid and fair value on initial recognition as an addition to the investment in the subsidiary
and presented separately as 'Equity component of Zero Coupon Redeemable Preference Shares' under
'Non-Current Investments'.
d) Segment reporting:
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief
Operating Decision Maker ("CODM") of the Company. The CODM, who is responsible for allocating resources
and assessing performance of the operating segments, has been identified as the Chairman and Managing
Director of the Company. The Company is principally engaged in a single segment viz. Inter-Modal Container
Logistics, based on the nature of services, risks, returns and the internal business reporting system.
e) Foreign currency
The standalone financial statements are presented in Indian Rupee (Rs.), which is the Company's functional
currency.
i. Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at their respective functional
currency spot rates at the date the transaction first qualifies for recognition. However, for practical reasons,
the Company uses an average rate if the average approximates the actual rate at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency
spot rates of exchange at the reporting date.
Exchange differences arising on settlement or translation of monetary items are recognised in 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 (i.e., translation differences on items
whose fair value gain or loss is recognised in Other Comprehensive Income (OCI) or profit or loss are also
recognised in OCI or profit or loss, respectively).
In determining the spot exchange rate to use on initial recognition of the related asset, expense or income
(or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance
consideration, the date of the transaction is the date on which the Company initially recognises the non¬
monetary asset or non-monetary liability arising from the advance consideration. If there are multiple
payments or receipts in advance, the Company determines the transaction date for each payment or receipt
of advance consideration.
f) Fair value measurement
The Company measures financial instruments at fair value at each balance sheet date. Fair value is the
price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability takes place either:
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would
use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to
generate economic benefits by using the asset in its highest and best use or by selling it to another market
participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximising the use of relevant observable inputs and minimising
the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the standalone financial statements
are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is
significant to the fair value measurement as a whole:
• Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
• Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable
• Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable
For assets and liabilities that are recognised in the standalone financial statements on a recurring basis,
the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing
categorisation (based on the lowest level input that is significant to the fair value measurement as a whole)
at the end of each reporting period.
The Company determines the policies and procedures for both recurring fair value measurement unquoted
financial assets measured at fair value, and for non-recurring measurement, such as assets held for sale.
External valuers are involved for valuation of significant assets, such as properties and unquoted financial
assets, and significant liabilities, such as contingent consideration. Involvement of external valuers is
decided upon annually by the Company after discussion with the Company's Audit Committee. Selection
criteria include market knowledge, reputation, independence and whether professional standards are
maintained. The Company decides, after discussions with the Company's external valuers, which valuation
techniques and inputs to use for each case.
At each reporting date, the Company analyses the movements in the values of assets and liabilities which
are required to be remeasured or re-assessed as per the Company's accounting policies. For this analysis,
the Company verifies the major inputs applied in the latest valuation by agreeing the information in the
valuation computation to contracts and other relevant documents.
The Company also compares the change in the fair value of each asset and liability with relevant external
sources to determine whether the change is reasonable.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities
on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value
hierarchy as explained above. This note summarises accounting policy for fair value. Other fair value related
disclosures are given in the relevant notes.
• Disclosures for valuation methods, significant estimates and assumptions (note 23)
• Quantitative disclosures of fair value measurement hierarchy (note 23)
• Financial instruments (including those carried at amortised cost) (note 23)
g) Revenue from contract with customer
Revenue from contracts with customers is recognised when control of the services are transferred to the
customer at an amount that reflects the consideration to which the Company expects to be entitled in
exchange for those services. The Company has generally concluded that it is the principal in its revenue
arrangements because it typically controls the services before transferring them to the customer. Revenue
excludes amounts collected on behalf of third parties.
The disclosures of significant accounting judgements, estimates and assumptions relating to revenue from
contracts with customers are provided in note 2.4.
Performance obligation
At contract inception, the Company assess the services agreed in contracts with customers and identifies
relevant primary performance obligations to provide distinct services to the customers as below:
Rendering of services :
(i) Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed
as revenue are net of returns, trade allowances, rebates, goods and service tax and amounts collected
on behalf of third parties.
(ii) The Company recognises revenue when the amount of revenue can be reliably measured, and it is
probable that future economic benefit will flow to the entity and specific criteria have been met for
each of the Company activities as described below. The Company bases its estimates on historical
results, taking into consideration the type of customer, the type of transaction and the specifics of each
arrangement.
(iii) Revenue from transportation services (rail and road) is recognized for the performance obligations
with reference to the throughput handled as they are satisfied over the transit period. The service
performance period for these services may vary based on the method of transport. The service period
for these services is usually for a short duration. Hence, revenue from these services is recognised over
the service period as the Company perform the primary obligation of transportation of goods.
(iv) The Company also provide certain ancillary logistics services, such as container's storage and
handling, income from which is recognised on proportionate completion of the movement and delivery
of container's to the party/designated place.
(v) Income from ground rent is recognised for the period the container is lying in the Inland Container
Depots and Container Freight Station. However, in case of long standing containers, the income from
ground rent is not accrued for a period beyond 60 days as on the basis of past history the collectability
is not reasonably assured.
(vi) Income from auction sales is recognised when the Company auctions long-standing cargo that has
not been cleared by customs. Revenue and expenses for auction sales are recognised when auction
is completed after obtaining necessary approvals from appropriate authorities. Auction sales include
recovery of the cost incurred in conducting auctions, accrued ground rent and handling charges relating
to long-standing cargo. Surplus, out of auctions, if any, after meeting all expenses and the actual
ground rent, is credited to a separate account 'Auction Surplus' and is shown under the head 'Contract
Liabilities'. Unclaimed Auction Surplus, if any, in excess of period specified under the Limitations Act is
written back as 'Income' in the following financial year.
Variable consideration
If the consideration in a contract includes a variable amount, the Company estimates the amount of
consideration to which it will be entitled in exchange for transferring the service to the customer. The
variable consideration is estimated at contract inception and constrained until it is highly probable that
a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the
associated uncertainty with the variable consideration is subsequently resolved. The Company recognizes
changes in the estimated amount of variable consideration in the period in which the change occurs. Some
contracts for the sale of service provide customers with volume rebates and pricing incentives, which give
rise to variable consideration.
The Company provides retrospective volume rebates and pricing incentives to certain customers once
the number of cargo imported/ handled during the period exceeds a threshold specified in the contract.
Rebates are offset against amounts payable by the customer. To estimate the variable consideration for the
expected future rebates, the Company applies the most likely amount method for contracts with a single¬
volume threshold and the expected value method for contracts with more than one volume threshold.
The selected method that best predicts the amount of variable consideration is primarily driven by the
number of volume thresholds contained in the contract. The Company then applies the requirements on
constraining estimates of variable consideration and recognises a refund liability for the expected future
rebates.
Contract balances
Trade receivables
A receivable is recognised if an amount of consideration that is unconditional (i.e., only the passage of time
is required before payment of the consideration is due). Refer to accounting policies of financial assets in
section financial instruments - initial recognition and subsequent measurement.
Contract assets
A contract asset is initially recognised for revenue earned from services because the receipt of consideration
is conditional on successful completion of the service. Upon completion of the services and acceptance by
the customer, the amount recognised as contract assets is reclassified to trade receivables.
Contract assets are subject to impairment assessment. Refer to accounting policies on impairment of
financial assets and contract assets.
Contract liabilities
A contract liability is the obligation to transfer services to a customer for which the Company has received
consideration (or an amount of consideration is due) from the customer. If a customer pays consideration
before the Company transfers services to the customer, a contract liability is recognised when the payment
is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the
Company performs under the contract.
Refund liabilities
A refund liability is recognised for the obligation to refund some or all of the consideration received (or
receivable) from the customer. The Company's refund liabilities arise from customers' right of return and
volume rebates. The Company updates its estimates of refund liabilities (and the corresponding change in
the transaction price) at the end of each reporting period.
Cost to obtain a contract
The Company pays incentives to its agents for certain contract that they obtain for the Company. The
Company has elected to apply the optional practical expedient for costs to obtain a contract which allows
the Company to immediately expense incentives (included in operating expenses) because the amortization
period of the asset that the Company otherwise would have used is one year or less.
Costs to fulfil a contract are recognized as an expense in the period in which related revenue is recognised.
Other revenue streams
Dividend
Revenue is recognised when the Company's right to receive the payment is established which is generally
when the shareholders approve the dividend.
Interest income
For all debt instruments measured either at amortised cost or at fair value through other comprehensive
income, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly
discounts the estimated future cash payments or receipts over the expected life of the financial instrument
or a shorter period, where appropriate, to the gross carrying amount of the financial asset or to the amortised
cost of a financial liability. When calculating the effective interest rate, the Company estimates the expected
cash flows by considering all the contractual terms of the financial instrument but does not consider the
expected credit losses. Interest income is included in other income in the statement of profit and loss.
h) Taxes
Current income tax
Tax expense comprises current tax expense and deferred tax.
Current income tax assets and liabilities are measured at the amount expected to be recovered from or
paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are
enacted or substantively enacted, at the reporting date in India.
Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss
(either in other comprehensive income or in equity). Current tax items are recognised in correlation to the
underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken
in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation
and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The
Company shall reflect the effect of uncertainty for each uncertain tax treatment by using either most likely
method or expected value method, depending on which method predicts better resolution of the treatment.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of
assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable temporary differences except:
(i) When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in
a transaction that is not a business combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss and does not give rise to equal taxable and deductible
temporary differences;
(ii) In respect of taxable temporary differences associated with investments in subsidiaries, associates
and interests in joint ventures, when the timing of the reversal of the temporary differences can be
controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
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 except:
(i) When the deferred tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time
of the transaction, affects neither the accounting profit nor taxable profit or loss and does not give rise
to equal taxable and deductible temporary differences;
(ii) In respect of deductible temporary differences associated with investments in subsidiaries, associates
and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable
that the temporary differences will reverse in the foreseeable future and taxable profit will be available
against which the 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.
In assessing the recoverability of deferred tax assets, the Company relies on the same forecast
assumptions used elsewhere in the standalone financial statements and in other management reports,
which, among other things, reflect the potential impact of climate-related development on the business,
such as increased cost of production as a result of measures to reduce carbon emission.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year
when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss
(either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to
the underlying transaction either in OCI or directly in equity.
The Company offsets deferred tax assets and deferred tax liabilities if and only if it has a legally
enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and
deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same
taxable entity or different taxable entities which intend either to settle current tax liabilities and assets
on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in
which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
Goods and Services Tax (GST) / value added taxes paid on acquisition of assets or on incurring expenses
Expenses and assets are recognised net of the amount of GST/ value added taxes paid, except:
• When the tax incurred on a purchase of assets or services is not recoverable from the taxation authority,
in which case, the tax paid is recognised as part of the cost of acquisition of the asset or as part of the
expense item, as applicable;
• When receivables and payables are stated with the amount of tax included
The net amount of tax recoverable from, or payable to, the taxation authority is included as part of other
current/non-current assets/ liabilities in the balance sheet.
Minimum alternate tax (MAT) paid in a year is charged to the statement of profit and loss as current tax for
the year. The deferred tax asset is recognised for MAT credit available only to the extent that it is probable
that the concerned company will pay normal income tax during the specified period, i.e., the period for
which MAT credit is allowed to be carried forward. In the year in which the Company recognizes MAT credit
as an asset, it is created by way of credit to the statement of profit and loss and shown as part of deferred
tax asset. The Company reviews the "MAT credit entitlement" asset at each reporting date and writes down
the asset to the extent that it is no longer probable that it will pay normal tax during the specified period.
In the situations where the Company is entitled to a tax holiday under the Income-tax Act, 1961 enacted in
India, or tax laws prevailing in the respective tax jurisdictions where they operate, no deferred tax (asset or
liability) is recognized in respect of temporary differences which reverse during the tax holiday period, to
the extent the entity's gross total income is subject to the deduction during the tax holiday period. Deferred
tax in respect of temporary differences which reverse after the tax holiday period is recognized in the year
in which the temporary differences originate. However, the Company restricts recognition of deferred tax
assets to the extent it is probable that sufficient future taxable income will be available against which such
deferred tax assets can be realized. For recognition of deferred taxes, the temporary differences which
originate first are considered to reverse first.
i) Property, Plant and equipment
Freehold land is carried at historical cost (net of accumulated impairment). All other items of property,
plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment
losses, if any. Such cost includes the cost of replacing part of the plant and equipment and borrowing costs
for long-term construction projects if the recognition criteria are met. Likewise, when a major inspection
is performed, its cost is recognised in the carrying amount of the plant and machinery as a replacement
if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or
loss as incurred. The present value of the expected cost for the decommissioning of an asset after its use
is included in the cost of the respective asset if the recognition criteria for a provision are met. Refer to
significant accounting judgements, estimates and assumptions (note 2.3) for further information.
Capital work in progress is stated at cost, net of accumulated impairment loss, if any.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows.
When significant parts of plant and equipment are required to be replaced at intervals, the Company
depreciates them separately based on their specific useful lives except for:
Reach stackers are depreciated over a period of fifteen years, based on the technical assessment and
management estimates.
Forklifts (included in other equipments) are depreciated over a period of ten years, based on the technical
assessment and management estimates.
Container and reefer power packs (included in rolling stocks- container and reefer power packs) are
depreciated over a period of ten years, based on the technical assessment and management estimates.
Motor vehicles (including Trailers) are depreciated over a period of six to fifteen years, based on the
technical assessment and management estimates.
Railway rakes are depreciated over a period of thirty years, based on the technical assessment and
management estimates.
The Company, based on technical assessment made by technical expert and management estimate,
depreciates certain items of reach stackers, forklifts, container and reefer power packs, motor vehicles and
railway rakes over estimated useful lives which are different from the useful life prescribed in Schedule II
to the Companies Act, 2013. The management believes that these estimated useful lives are realistic and
reflect fair approximation of the period over which the assets are likely to be used.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon
disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss
arising on derecognition of the asset (calculated as the difference between the net disposal proceeds
and the carrying amount of the asset) is included in the statement of profit and loss when the asset is
derecognised.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed
at each financial year end and adjusted prospectively, if appropriate.
j) Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial
recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated
impairment losses. Internally generated intangibles, excluding capitalised development costs, are not
capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure
is incurred.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment
whenever there is an indication that the intangible asset may be impaired. The amortisation period and
the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of
each reporting period. Changes in the expected useful life or the expected pattern of consumption of future
economic benefits embodied in the asset are considered to modify the amortisation period or method, as
appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible
assets with finite lives is recognised in the statement of profit and loss unless such expenditure forms part
of carrying value of another asset.
An intangible asset is derecognised upon disposal (i.e., at the date the recipient obtains control) or when no
future economic benefits are expected from its use or disposal. Any gain or loss arising upon derecognition
of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of
the asset) is included in the statement of profit and loss, when the asset is derecognised.
Intangible assets with finite useful life are amortized on a straight-line basis over their estimated useful life
as under:
k) Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying
assets are capitalised during the period of time that is required to complete and prepare the assets for
its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time
to get ready for their intended use or sale. All other borrowing costs are expensed in the period in which
they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with
the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an
adjustment to the borrowing costs.
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.
l) Leases
The Company assesses at contract inception whether a contract is, or contains a lease. That is, if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration.
Company as a lessee
The Company applies a single recognition and measurement approach for all leases, except for short-term
leases and leases of low-value assets. The Company recognises lease liabilities to make lease payments
and right-of-use assets representing the right to use the underlying assets.
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 accumulated 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:
• Leasehold land - 10 to 60 years
• Leasehold building - 3 to 30 years
If ownership of the leased asset transfers to the Company at the end of the lease term or the cost
reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of
the asset.
The right-of-use assets are also subject to impairment. Refer to the accounting policies in section
Impairment of non-financial assets.
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 (including in substance fixed payments) less any lease incentives receivable, variable lease
payments that depend on an index or a rate, and amounts expected to be paid under residual value
guarantees. The lease payments also include the exercise price of a purchase option reasonably certain
to be exercised by the Company and payments of penalties for terminating the lease, if the lease term
reflects the Company exercising the option to terminate. Variable lease payments that do not depend
on an index or a rate are recognised as expenses in the period in which the event or condition that
triggers the payment occurs.
In calculating the present value of lease payments, the Company uses its incremental borrowing rate at
the lease commencement date because the interest rate implicit in the lease is not readily determinable.
After the commencement date, the amount of lease liabilities is increased to reflect the accretion of
interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is
remeasured if there is a modification, a change in the lease term, a change in the lease payments (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 machinery
and equipment and buildings (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).
The Company applies the low-value assets recognition exemption on a lease-to-lease basis, if
the qualifies as leases of certain assets that are considered to be low value assets. In making this
assessment, the Company also factors below key aspects:
• The assessment is conducted on an absolute basis and is independent of the size, nature, or
circumstances of the lessee.
• The assessment is based on the value of the asset when new, regardless of the asset's age at the
time of the lease.
• The lessee can benefit from the use of the underlying asset either independently or in combination
with other readily available resources, and the asset is not highly dependent on or interrelated with
other assets.
• If the asset is subleased or expected to be subleased, the head lease does not qualify as a lease of
a low-value asset.
Based on the above criteria, the Company has classified leases of buildings as leases of low value
assets.
Lease payments on short-term leases and leases of low-value assets are recognised as expense on a
straight-line basis over the lease term.
m) Impairment of non-financial assets
The Company assesses, at each reporting date, whether there is an indication that an asset may be
impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company
estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or
cash-generating unit's (CGU) fair value less costs of disposal and its value in use. The recoverable amount
is determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU
exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable
amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken
into account. If no such transactions can be identified, an appropriate valuation model is used. These
calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or
other available fair value indicators.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are
prepared separately for each of the Company's CGUs to which the individual assets are allocated. These
budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term
growth rate is calculated and applied to project future cash flows after the fifth year. To estimate cash
flow projections beyond periods covered by the most recent budgets/forecasts, the Company extrapolates
cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an
increasing rate can be justified. In any case, this growth rate does not exceed the long-term average growth
rate for the products, industries, or country or countries in which the entity operates, or for the market in
which the asset is used.
Impairment losses are recognised in the statement of profit and loss.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there
is an indication that previously recognised impairment losses no longer exist or have decreased. If such
indication exists, the Company estimates the asset's or CGU's recoverable amount. A previously recognised
impairment loss is reversed only if there has been a change in the assumptions used to determine the
asset's recoverable amount since the last impairment loss was recognised. The reversal is limited so that
the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount
that would have been determined, net of depreciation, had no impairment loss been recognised for the
asset in prior years. Such reversal is recognised in the statement of profit or loss.
Goodwill is tested for impairment annually as at the year end and when circumstances indicate that the
carrying value may be impaired.
Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of
CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than it's carrying
amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in
future periods.
The Company assesses whether climate risks, including physical risks and transition risks could have
a significant impact. If so, these risks are included in the cash-flow forecasts in assessing value-in-use
amounts.
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