2 Summary of material accounting policies
This note provides a list of the material accounting policies
adopted in the preparation of these Indian Accounting
Standards (Ind AS) Standalone financial statements.
These policies have been consistently applied to all the
years except where newly issued accounting standard is
initially adopted.
2.01 Basis of preparation of Standalone Financial
Statements
These 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, (Ind AS
compliant Schedule III).
These standalone financial statements are separate
financial statements including Havells Employees Welfare
Trust prepared in accordance with Ind AS 27 " Separate
Financial Statements".
The financial statements have been prepared on a
historical cost convention, except for the following assets
and liabilities:
i) Certain financial assets and liabilities that is
measured at fair value/subsequently measured at
amortized cost;
ii) Assets held for sale-measured at fair value
less cost to sell;
iii) Defined benefit plans-plan assets measured at
fair value;
iv) Share based payments
The Ministry of Corporate Affairs vide notification dated
May 07, 2025 and August 13, 2025 notified the Companies
(Indian Accounting Standards) Amendment Rules, 2025
and Companies (Indian Accounting Standards) Second
Amendment Rules, 2025, respectively, which amended
certain accounting standards (see below) and are
effective for annual reporting periods beginning on or after
April 01,2025:
(a) Classification of Liabilities as Current or Non¬
current and Non-current Liabilities with Covenants
- Amendments to Ind AS 1
(b) Supplier Finance Arrangements - Amendments to
Ind AS 7 and Ind AS 107
(c) International Tax Reform - Pillar Two Model Rules -
Amendments to Ind AS 12
These amendments did not have any material impact
on the amounts recognised in prior periods and are not
expected to significantly affect the current or future periods.
2.02 Property, plant and equipment
Freehold Land is carried at historical cost. All other items
of Property, Plant and equipment are stated at historical
cost, less accumulated depreciation and accumulated
impairment losses, if any.
Depreciation on property, plant and equipment is
calculated on prorata basis on straight-line method using
the useful lives of the assets estimated by management.
The useful life is as follows:
The useful lives of all the assets except moulds and dies,
mobile phones and laptops have been determined as those
specified by part 'C' of Schedule II to the Companies Act,
2013. In respect of moulds and dies and mobile phones,
useful lives are lower than those specified by schedule II
to the Companies Act, 2013 and are depreciated over the
estimated useful lives of 6 years, 3 years respectively, in
respect of laptop useful life is more than those specified
by schedule II to the Companies Act, 2013 and are
depreciated over the estimated useful life of 4 years, in
order to reflect the actual usage of assets. The residual
values are not more than 5% of the original cost of the
assets. The asset's residual values and useful lives are
reviewed and adjusted if appropriate.
Lease hold improvements are depreciated on straight line
basis over shorter of the asset's useful life and their lease
term unless the entity expects to use the asset beyond
the lease term.
Leasehold land is amortized on a straight line basis over
the unexpired period of their respective lease ranging
from 90-99 years.
Brand and Trademarks
Brand and Trademarks acquired in business combination
are initially recognised at fair value at the date of acquisition.
Following initial recognition, brand and trademark are
carried at the above recognised value less accumulated
amortization and accumulated impairment losses, if any.
These Brand and trademarks have been in existence for
considerable period and Company intends to continue
use this intangible assets. Consequently, it is believed that
they have an indefinite life and are not amortised. Instead
impairment testing is performed annually and whenever a
triggering event has occurred to determine whether the
carrying value exceeds the recoverable amount.
Distributor/Dealer Network
Distributor/Dealer Network acquired in business
combination are initially recognised at fair value at the date
of acquisition. Following initial recognition, Distributor/
Dealer Network are carried at the above recognised
value less accumulated amortization and accumulated
impairment losses, if any. They are amortised on a
straight line basis over their estimated useful life of 8 years
assessed by the management.
Goodwill
Goodwill is initially measured at cost, being the excess
of the aggregate of the consideration transferred over
the fair value of net identifiable assets acquired and
liabilities assumed. If the fair value of the net assets
acquired is in excess of the aggregate consideration
transferred, the Company re-assesses whether it has
correctly identified all of the assets acquired and all of the
liabilities assumed and reviews the procedures used to
measure the amounts to be recognised at the acquisition
date. If the reassessment still results in an excess of
the fair value of net assets acquired over the aggregate
consideration transferred, then the gain is recognised in
other comprehensive income and accumulated in equity
as capital reserve. However, if there is no clear evidence
of bargain purchase, the entity recognises the gain directly
in equity as capital reserve, without routing the same
through other comprehensive income.
After initial recognition, goodwill is measured at cost
less any accumulated impairment losses, if any. For
the purpose of impairment testing, goodwill acquired
in a business combination is, from the acquisition date,
allocated to each of the Company's cash generating
units that are expected to benefit from the combination,
irrespective of whether other assets or liabilities of the
acquire are assigned to those units.
A cash generating unit to which goodwill has been
allocated is tested for impairment annually or earlier, when
there is an indication that the unit may be impaired. If the
recoverable amount of the cash generating unit is less than
its carrying amount, the impairment loss is allocated first
to reduce the carrying amount of any goodwill allocated
to the unit and then to the other assets of the unit pro rata
based on the carrying amount of each asset in the unit.
Any impairment loss for goodwill is recognised in profit or
loss. An impairment loss recognised for goodwill is not
reversed in subsequent periods.
Where goodwill has been allocated to a cash generating
unit and part of the operation within that unit is disposed
of, the goodwill associated with the disposed operation
is included in the carrying amount of the operation
when determining the gain or loss on disposal. Goodwill
disposed in these circumstances is measured based
on the relative values of the disposed operation and the
portion of the cash generating unit retained.
2.04 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 Company operates, or for the market in which
the asset is used.
Impairment losses of continuing operations, including
impairment on inventories, are recognised in the statement
of profit and loss, except for properties previously
revalued with the revaluation surplus taken to OCI. For
such properties, the impairment is recognised in OCI up
to the amount of any previous revaluation surplus.
Goodwill is tested for impairment annually 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 its carrying
amount, an impairment loss is recognised. Impairment
losses relating to goodwill cannot be reversed in
future periods.
Intangible assets with indefinite useful lives are tested for
impairment annually as at March 31 at the CGU level, as
appropriate and when circumstances indicate that the
carrying value may be impaired.
2.05 Financial instruments
(i) Financial Assets
The Company classifies its financial assets in the
following measurement categories:
Those to be measured subsequently at fair value
through profit or loss;
Those measured at amortized cost
The classification of financial assets at initial
recognition depends on the financial asset’s
contractual cash flow characteristics and the
Company's business model for managing them.
Initial recognition measurement
With the exception of trade receivables that do not
contain a material financing component or for which
the Company has applied the practical expedient,
the Company initially measures a financial asset at
its fair value plus, in the case of a financial asset not
at fair value through profit or loss, transaction costs.
Trade receivables that do not contain a material
financing component or for which the Company
has applied the practical expedient are measured at
the transaction price determined under Ind AS 115.
Refer to the accounting policies in section 'Revenue
from contracts with customers'.
Financial assets at amortised cost (debt
instruments)
A ‘financial asset’ is measured at the amortised cost
if both the following conditions are met:
a) Business Model Test : The objective is to hold
the financial asset to collect the contractual
cash flows (rather than to sell the instrument
prior to its contractual maturity to realise its fair
value changes) and;
b) Cash flow characteristics test: The contractual
terms of the financial asset give rise on
specific dates to cash flows that are solely
payments of principal and interest on principal
amount outstanding.
This category is most relevant to the Company.
Financial assets at fair value through profit or
loss
Financial assets at fair value through profit or loss
are carried in the balance sheet at fair value with net
changes in fair value recognised in the statement of
profit and loss.
ECLs are recognised in two stages. For credit
exposures for which there has not been a material
increase in credit risk since initial recognition, ECLs
are provided for credit losses that result from default
events that are possible within the next 12-months
(a 12-month ECL). For those credit exposures for
which there has been a material increase in credit risk
since initial recognition, a loss allowance is required
for credit losses expected over the remaining life of
the exposure, irrespective of the timing of the default
(a lifetime ECL).
The Company follows "simplified approach" for
recognition of impairment loss allowance on:
Trade receivables or contract revenue receivables;
Trade receivables which are held to collect and sale
basis accounted for as FVTPL
Under the simplified approach, the Company
does not track changes in credit risk. Rather, it
recognises impairment loss allowance based on
lifetime ECLs at each reporting date, right from its
initial recognition. The Company uses a provision
matrix to determine impairment loss allowance
on the portfolio of trade receivables. The provision
matrix is based on its historically observed default
rates over the expected life of trade receivable and
is adjusted for forward looking estimates. At every
reporting date, the historical observed default rates
are updated and changes in the forward looking
estimates are analysed.
!.06 Inventories
The costs of individual items of inventory are determined
on a moving weightage average basis. Volume rebates
or discounts are taken into account when estimating
the cost of inventory if it is probable that they have been
earned and will take effect.See note 2.12(i) for the other
accounting policies for inventories.
2.07 Revenue from contract with customers
The Company manufactures/trades and sells a range of
consumer electrical and electronic products. Revenue
from contracts with customers involving sale of these
products is recognised at a point in time when control of the
product has been transferred and there are no unfulfilled
obligation that could affect the customer's acceptance of
the products which usually happen on delivery/despatch
of the goods as applicable. The Company also provides
installation, annual maintenance and warranty services
that are either sold separately or bundled together with
the sale of goods. The Company recognises these
service revenue from sales of services over a period of
time, because the customer simultaneously receives
and consumes the benefits provided by the Company.
Revenue from such services is recognised when the
Company has objective evidence that all criterion for
acceptance has been satisfied. A receivable is recognised
when the control of the product is transferred as the
consideration is unconditional and payment becomes
due upon passage of time as per the terms of contract
with customers.
(a) Sale of goods
Revenue from sale of goods is recognised at the
point in time when control of the goods is transferred
to the customer, generally on delivery/dispatch of the
goods and there are no unfulfilled obligations.
The Company considers, whether there are other
promises in the contract in which there are separate
performance obligations, to which a portion of
the transaction price needs to be allocated. In
determining the transaction price for the sale of
goods, the Company allocates a portion of the
transaction price to different performance obligations
goods bases on its relative standalone prices and
also considers the following:-
(i) Variable consideration
The Company recognises revenue from the
sale of goods measured at the standalone
selling price of the consideration received or
receivable, net of returns and allowances,
trade discounts and volume rebates. 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 goods to
the customer. The variable consideration is
estimated at contract inception and constrained
until it is highly probable that a material 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 operates
several sales incentive programmes wherein
the customers are eligible for several benefits
on achievement of underlying conditions
as prescribed in the scheme programme
such as credit notes, reimbursement,
investments etc. Revenue from contract with
customer is presented after deducting cost of
all these schemes.
(ii) Warranty obligations
The Company generally provides for
warranties for general repair of defects. These
warranties are assurance-type warranties
under Ind AS 115, which are accounted for
under Ind AS 37 (Provisions, Contingent
Liabilities and Contingent Assets). However,
in certain non-standard contracts in respect
of sale of consumer durable goods, the
Company provides extended warranties and
such warranties are termed as service-type
warranties and therefore, accounted for as
separate performance obligations to which the
Company allocates a portion of the transaction
price. Revenue from service-type warranties is
recognised over the period in which the service
is provided based on the time elapsed
(iii) Singificant Financing Components
In respect of short-term advances from its
customers, using the practical expedient in
Ind AS 115, the Company does not adjust
the promised amount of consideration for the
effects of a material financing component if it
expects, at contract inception, that the period
between the transfer of the promised good or
service to the customer and when the customer
pays for that good or service will be within
normal operating cycle.
In respect of long term contracts, the transaction
price for these contracts is discounted, using
the interest rate implicit in the contract (i.e.,
the interest rate that discounts the cash
selling price of the equipment to the amount
paid in advance).
No material element of financing is deemed
present as the sales are made with a credit
term of 21 to 90 days, which is consistent with
market practice.
(b) Sale of services
The Company provides installation, annual
maintenance and extended warranty services
that are sold separately. The Company recognises
revenue from sales of services over time, because
the customer simultaneously receives and consumes
the benefits provided by the Company. Revenue from
services related activities is recognised as and when
services are rendered and on the basis of contractual
terms with the parties.
(c) Contract balances
A contract asset is the right to consideration in
exchange for goods or services transferred to the
customer. Contract assets are in the nature of unbilled
receivables, which arises when Company satisfies
a performance obligation but does not have an
unconditional rights to consideration. A receivables
represents the Company's right to an amount of
consideration that is unconditional. Contract assets
are subject to impairment assessment. Refer to
accounting policies on impairment of financial assets
in section (Financial instruments - initial recognition
and subsequent measurement).
A contract liability is the obligation to transfer
goods or 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 goods or 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 (i.e.,
transfers control of the related goods or services
to the customer).
A trade 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).
(d) Income from Service Concession Arrangement
Revenue related to Street Lights Upgrade services
provided under service concession arrangement is
recognised as per the agreement with the grantor.
The Company recognises a financial asset arising
from the service concession agreement when it has
an unconditional contractual right to receive cash or
another financial asset from or at the direction of the
grantor of the concession for the upgrade services
provided. Such financial assets are measured at fair
value upon initial recognition.
2.08 Other Income
(a) 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
(for example, prepayment, extension, call and similar
options) but does not consider the expected credit
losses. Interest income is included in other income in
the statement of profit and loss.
2.09 Leases
Company as a lessee
The Company's lease asset classes primarily comprise of
lease for land and building. 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 (ROU)
The Company classifies ROU assets as part of
Property plant and equipment in Balance Sheet and
lease liability in " Financial Liability".
ii) Lease Liabilities
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.
(iii) Short-term leases and leases of low-value
assets
The Company applies the short-term lease
recognition exemption to its short-term leases (i.e.,
those leases that have a lease term of 12 months
or less from the commencement date and do not
contain a purchase option). It also applies the lease
of low-value assets recognition exemption to leases
that are considered to be low value. Lease payments
on short-term leases and leases of low-value assets
are recognised as expense on a straight-line basis
over the lease term.
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