(1) MATERIAL ACCOUNTING POLICIES
This note provides a list of the material accounting policies
adopted in the preparation of these financial statements.
These policies have been consistently applied except where
a newly issued accounting standard is initially adopted or a
revision to an existing account standard required a change to
the accounting policy hitherto to in use.
i) Basis of preparation
a) Compliance with Ind AS
These financial statements have been prepared in
accordance with Indian Accounting Standards ("Ind
AS”) prescribed under Section 133 of the Companies
Act, 2013 read with Rule 3 of the Companies (Indian
Accounting Standards) Rules, 2015 and relevant
amendment rules issued thereafter. The Company
has consistently applied accounting policies from the
previous year.
b) Historical cost convention
The financial statements have been prepared on
accrual basis under the historical cost convention,
except for the following:
- certain financial assets and liabilities (including
derivative instruments) that is measured at fair
value;
- defined benefit plans - plan assets measured at
fair value; and
- share-based payments
Historical cost is generally based on the fair value of
the consideration given in exchange for goods and
services.
c) Current versus non-current classification
The Company presents assets and liabilities in
the balance sheet based on current/ non-current
classification.
An asset is treated as current when it is:
Expected to be realised or intended to be sold or
consumed in normal operating cycle.
Held primarily for the purpose of trading.
Expected to be realised within twelve months after
the reporting period, or
Cash or cash equivalent 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 current when:
It is expected to be settled in normal operating cycle
It is held primarily for the purpose of trading
It is due to be settled within twelve months after the
reporting period, or
There is no unconditional right to defer the settlement
of the liability for at least twelve months after the
reporting period
The Company classifies all other liabilities 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.
d) Going Concern
The Directors have, at the time of approving the
financial statements, a reasonable expectation that
the Company has adequate resources to continue
its operational existence for the foreseeable future.
Thus, the Company has applied the going concern
basis in preparing the financial statements.
ii) Segment reporting
Operating segments are reported in a manner consistent
with the internal reports provided to the chief operating
decision maker (CODM), Managing Director. Refer note 30
for segment information presented.
iii) Property, plant and equipment
Property Plant and Equipment are stated in balance sheet
at cost less accumulated depreciation and accumulated
impairment losses, if any. Cost of acquisition is inclusive
of freight, duties, taxes and other incidental expenses.
Freehold land is not depreciated.
Subsequent costs are included in the asset's carrying
amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits
associated with the item will flow to the Company and the
cost of the item can be measured reliably. The carrying
amount of any component accounted for as a separate
asset is derecognised when replaced. All other repairs
and maintenance are charged to profit or loss during the
reporting period in which they are incurred.
In case of the revaluation model, whereby assets are
carried at revalued amounts, being their fair value at the
date of revaluation less subsequent depreciation and
impairment. Revaluation increases (if any) are credited
to Other Comprehensive Income and accumulated in
equity under the heading "Other Equity - Revaluation."
Revaluation decreases (if any) that offset previous
increases for the same asset are debited to the
revaluation reserve through OCI; other decreases are
charged to profit or loss.
Depreciation methods, estimated useful lives and
residual value:
Depreciation is provided on the straight-line method
to allocate their cost, net of their residual values, over
the estimated useful lives of the assets as prescribed
in the Schedule II of the Companies Act, 2013 except
for certain fixed assets where, based on technical
evaluation by internal managements experts, the useful
life of certain items of plant and machinery, buildings,
office equipment and furniture and fixture have been
determined to be different from those mentioned in
schedule II of the Companies Act, 2013, in order to
reflect the actual usage of assets.
Depreciation on additions / disposals is provided on a
pro-rata basis i.e. from (upto) the date on which the asset
is ready for use / disposed off. The estimated useful life
and residual value are reviewed at end of each reporting
period. Considering Company's plan to use the Property
Plant and Equipments throughout the economic life of the
asset and discard the asset only through scrap therefore
no residual value has been considered.
Spare parts having useful life of more than one period are
accounted for as separate items and are depreciated over
the useful life.
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. The
impact of such written down (if any) is charged to the
statement of profit and loss.
Gains and losses on disposals are determined by comparing
proceeds with carrying amount. These are 'included in
profit or loss within other income/ other expenses.
iv) Intangible assets
Computer software:
Intangible assets are stated at acquisition cost, net of
accumulated amortization and impairment losses, if any.
Costs associated with maintaining software programmes
are recognised as an expense as incurred.
Amortisation methods and periods:
The Company amortises intangible assets with the finite
useful life (computer software) using straight line method
over a period of 6 years.
v) Inventories
Raw materials and stores, work in progress, traded and
finished goods:
Raw materials and stores, work-in-progress, traded and
finished goods are stated at the lower of cost and net
realisable value. Cost of raw materials and traded goods
comprises cost of purchases after deducting rebates
and discounts. Cost of work-in-progress and finished
goods comprises direct materials, direct labour and an
appropriate proportion of variable and fixed overhead
expenditure, the later being allocated on the basis of
normal operating capacity, based upon the stage of
completion of work-in-process. Cost of inventories also
include all other costs incurred in bringing the inventories
to their present location and condition. Net realisable
value is the estimated selling price in the ordinary course
of business less the estimated costs of completion and the
estimated costs necessary to make the sale.
The basis of determining cost for various categories of
inventories is as follows:
Raw materials Weighted average
Stores and Spare parts Weighted average
Work-in-process and Materials and appropriate
Finished goods share of labour and overheads
vi) Revenue Recognition
Sale of goods: Revenue towards satisfaction of a
performance obligation is measured at the amount
of transaction price (net of variable consideration)
allocated to that performance obligation. The
transaction price of goods sold is net of goods and
service tax, sales return and variable considerations on
account of various discounts and schemes. The variable
considerations are estimate of the expected amounts
based on an analysis of historical experience, or as the
most likely amount in a range of possible outcomes.
Variable consideration includes various forms of
discounts like volume discounts, price concessions,
incentives, etc. on the goods sold or services rendered
to its customers, dealers and distributors. In all such
cases, accumulated experience is used to estimate and
provide for the variability in revenue, using the methods
specified in Ind AS 115 and the revenue is recognised to
the extent that it is highly probable that a significant
reversal in the amount of cumulative revenue recognised
will not occur in future on account of refund or discounts.
The Company recognises revenue when obligations
under the terms of a contract are satisfied and
control is transferred. This generally occurs with
shipment or delivery, depending on the terms of the
underlying contract, or when services have been
rendered. At contract inception the Company assesse
its performance obligation in the contract and
allocates the arrangement consideration to separately
identifiable performance obligation based on their
relative stand-alone selling price. Further revenue and
advertisement & sales promotion expenses are grossed
up as and when gifts/ vouchers has been provided
to the customers. Payment terms with customers
vary by customer, but are generally 30-90 days.
When consideration from a customer is received prior
to transferring of goods or services under the terms of
a sales contract, the Company record deferred revenue,
which represents a contract liability. Deferred revenue
is included in Other Current Liabilities in the Balance
Sheet. The Company recognize deferred revenue after
transferring the control of the goods or services to the
customer and all revenue recognition criteria are met
which by the nature of the contract with the customer is
completed in less than one year.
vii) Employee Benefits
a) Short-term obligations
Liabilities for wages and salaries, including non¬
monetary benefits that are expected to be settled
wholly within 12 months after the end of the period
in which the employees render the related service
and are measured at the amounts expected to be
paid when the liabilities are settled. The liabilities are
presented as current employee benefit obligations
under other financial liabilities in the balance sheet.
Employee State Insurance (State Plan): Contribution
are made to the regulatory authorities and are
recognised as employee benefits expense in the
statement of profit and loss as and when due. The
Company does not carry any further obligations, apart
from the contributions made on a monthly basis.
b) Other long-term employee benefit obligations
The liabilities for earned leave and sick leave which
are not expected to be settled wholly within 12
months after the end of the period in which the
employees render the related service. They are
therefore measured as the present value of expected
future payments to be made in respect of services
provided by employees up to the end of the reporting
period by actuaries using the projected unit credit
method. The benefits are discounted using the
market yields at the end of the reporting period
that have terms approximating to the terms of the
related obligation. Remeasurements as a result of
experience adjustments and changes in actuarial
assumptions are recognised in other comprehensive
income / loss.
c) Post employment obligations
Defined Contribution Plans
1. Employee Pension Scheme 1995 : Contribution
are made to the regulatory authorities and are
recognised as employee benefits expense in the
statement of profit and loss as and when due.
This benefits is classified as Defined Contribution
Schemes as the Company does not carry any
further obligations, apart from the contributions
made on a monthly basis.
2. Superannuation Fund: Contribution towards
Superannuation Fund is administered by a trust
set up by the Company, which is recognized by the
Income Tax authorities. Such benefits are classified
as Defined Contribution Schemes as the Company
does not carry any further obligations, apart from
the contributions made on a monthly basis.
Defined Benefit Plans
1. Provident Fund: Provident Fund contributions
are made to the Trusts administered by the
Company. Eligible employees of the Company
receive benefits from a provident fund, which is
a defined benefit plan. Both the eligible employee
and the Company make monthly contributions
to the provident fund plan equal to a specified
percentage of the covered employee's salary.
The Company contributes a portion to the Trusts
administered by the Company. Those trusts
invests in specific designated instruments as
permitted by Indian law. The remaining portion
is contributed to the government administered
pension fund. The rate at which the annual interest
is payable to the beneficiaries by the trust is being
administered by the government. The Company
has an obligation to make good the shortfall, if
any, between the return from the investments of
the Trusts and the notified interest rate.
2. Gratuity: The Company provides for gratuity,
a defined benefit plan (the "Gratuity Plan”)
covering eligible employees in accordance with
the Payment of Gratuity Act, 1972. The Gratuity
Plan provides a lump sum payment to vested
employees at retirement, death, incapacitation or
termination of employment, of an amount based
on the respective employee's salary and the
tenure of employment.
The liability or assets recognised in the balance
sheet in respect of defined benefit provident fund
plans is the present value of the defined benefit
obligation at the end of the reporting period
less the fair value of plan assets. The liability
recognised in the balance sheet in respect of
defined benefit gratuity plan is the present value
of the defined benefit obligation at the end of the
reporting period.
The defined benefit obligations are calculated at
the end of the reporting period by actuaries using
the projected unit credit method.
The present value of the defined benefit
obligations is determined by discounting the
estimated future cash outflows by reference to
market yields at the end of the reporting period on
government bonds that have terms approximating
to the terms of the related obligation.
For defined benefit provident fund plan, the net
interest cost is calculated by applying the discount
rate to the net balance of the defined benefit
obligations and the fair value of the plan assets.
For defined benefit gratuity plan, the interest cost
is calculated by applying the discount rate to the
balance of the defined benefit obligations.
This cost is included in employee benefit expense
in the statement of profit and loss.
Remeasurement gains and losses arising from
experience adjustments and changes in actuarial
assumptions are recognised in the period in
which they occur, directly in other comprehensive
income. They are included in retained earnings
in the statement of changes in equity and in the
balance sheet.
Changes in the present value of the defined benefit
obligations resulting from plan amendments or
curtailments are recognised immediately in profit
or loss as past service cost.
d) Termination benefits
Termination benefits are payable when employment
is terminated by the Company before the normal
retirement date, or when an employee accepts
voluntary redundancy in exchange for these
benefits. The Company recognises termination
benefits at the earlier of the following dates: (a)
when the Company can no longer withdraw the offer
of those benefits; and (b) when the entity recognises
costs for a restructuring that is within the scope of
Ind AS 37 and involves the payment of terminations
benefits. In the case of an offer made to encourage
voluntary redundancy, the termination benefits
are measured based on the number of employees
expected to accept the offer. Benefits falling due
more than 12 months after the end of the reporting
period are discounted to present value.
e) Bonus plans
The Company recognises a liability and an expense
for bonuses. The Company recognises a provision
where contractually obliged or where there is
a past practice that has created a constructive
obligation.
viii) Income Tax
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 for each jurisdiction
adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences and to unused tax
losses.
The current income tax charge is calculated on the basis of
the tax laws enacted or substantively enacted at the end of
the reporting period. Management periodically evaluates
positions taken in tax returns with respect to situations in
which applicable tax regulation is subject to interpretation.
It establishes provisions where appropriate on the basis of
amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the
liability method, on temporary differences arising
between the tax bases of assets and liabilities and
their carrying amounts in the financial statements.
Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantially enacted
by the end of the reporting period and are expected to
apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for all deductible
temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to
utilise those temporary differences and losses."
Deferred tax assets and liabilities are offset when there
is a legally enforceable right to offset deferred tax assets
and liabilities and when the deferred tax balances relate
to the same taxation authority. Current tax assets and
tax liabilities are offset where the entity has a legally
enforceable right to offset and intends either to settle on
a net basis, or to realise the asset and settle the liability
simultaneously.
Current and deferred tax is recognised in profit or loss,
except to the extent that it relates to items recognised in
other comprehensive income or directly in equity. In this
case, the tax is also recognised in other comprehensive
income or directly in equity, respectively.
ix) Foreign Currency Translations
a) Functional and presentation currency
Items included in the financial statements are
measured using the currency of 'the primary economic
environment in which the entity operates ('the functional
currency'). The financial statements are presented in
Indian Rupee (INR), which is Goodyear India Limited's
functional and presentation currency.
b) Transactions and balances
Foreign currency transactions are translated into the
functional currency using the exchange rates at the
dates of the transactions. 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 recognised
in profit or loss.
All foreign exchange gains and losses related to items
recognised in the financial statement are presented
in the statement of profit and loss on a net basis
within other income/other expenses.
x) Leases
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.
The Company recognizes right-of-use asset representing
its right to use the underlying asset for the lease term at the
lease commencement date. The cost of the right-of-use
asset measured at inception shall comprise of the amount
of the initial measurement of the lease liability adjusted for
any lease payments made at or before the commencement
date less any lease incentives received, plus any initial direct
costs incurred. The right-of-use assets is subsequently
measured at cost less any accumulated depreciation,
accumulated impairment losses, if any and adjusted for any
remeasurement of the lease liability. The right-of-use asset
is depreciated from the commencement date on a straight¬
line basis over the shorter of the lease term and useful life
of the underlying asset. Right-of-use assets are tested
for impairment whenever there is any indication that their
carrying amounts may not be recoverable. Impairment loss,
if any, is recognised in the statement of profit and loss as
per Ind AS 36.
Company as a Lessee
The Company determines the lease term as the non¬
cancellable period of a lease, together with both periods
covered by an option to extend the lease if the Company
is reasonably certain to exercise that option; and periods
covered by an option to terminate the lease if the Company
is reasonably certain not to exercise that option. In assessing
whether the Company is reasonably certain to exercise
an option to extend a lease, or not to exercise an option
to terminate a lease, it considers all relevant facts and
circumstances that create an economic incentive for the
Company to exercise the option to extend the lease, or not
to exercise the option to terminate the lease. The Company
evaluates if an arrangement qualifies to be a lease as per the
requirements of Ind AS 116. Identification of a lease requires
significant judgment. The Company uses significant
judgement in assessing the lease term (including anticipated
renewals) and the applicable discount rate. The discount
rate is generally based on the incremental borrowing rate
calculated as the weighted average rate specific to the
portfolio of leases with similar characteristics.
The Company recognises the amount of the re¬
measurement of lease liability as an adjustment to the
right-of-use asset. Where the carrying amount of the
right-of-use asset is reduced to zero and there is a further
reduction in the measurement of the lease liability, the
Company recognizes any remaining amount of the re¬
measurement in statement of profit and loss.
The Company may elect not to apply the requirements of
Ind AS 116 to leases for which the underlying asset is of low
value. The lease payments associated with these leases
are recognized as an expense on a straight-line basis over
the lease term.
The Right-to-use assets is presented as a separate line
item in the Balance Sheet
The Company measures the lease liability at the present
value of the lease payments that are not paid at the
commencement date of the lease. The lease payments
are discounted using the interest rate implicit in the
lease from the standpoint of the lessor, if that rate can
be readily determined. If that rate cannot be readily
determined, the Company uses incremental borrowing
rate. For leases with reasonably similar characteristics,
the Company may adopt the incremental borrowing rate
for the entire portfolio of leases as a whole. The lease
payments shall include fixed payments, variable lease
payments, residual value guarantees and payments of
penalties for terminating the lease, if the lease term
reflects the lessee exercising an option to terminate the
lease. The lease liability is subsequently remeasured
by increasing the carrying amount to reflect interest
on the lease liability, reducing the carrying amount to
reflect the lease payments made and remeasuring the
carrying amount to reflect any reassessment or lease
modifications or to reflect revised in-substance fixed
lease payments.
xi) Impairment of Assets - non financial assets
Goodwill and intangible assets that have an indefinite useful
life are not subject to amortisation and are tested annually
for impairment, or more frequently if events or changes
in circumstances indicate that they might be impaired.
Other assets are tested for impairment whenever events
or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is
recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset's fair value less costs of
disposal and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash inflows which
are largely independent of the cash inflows from other
assets or groups of assets (cash-generating units). Non¬
financial assets that suffered an impairment are reviewed
for possible reversal of the impairment at the end of each
reporting period.
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