3 Material accounting policies
3.1 Revenue from contract with customer
i Sale of goods
Revenue is recognised upon transfer of control of
promised goods to customers in an amount that
reflects the consideration which the Company
expects to receive in exchange for those goods.
Revenue from the sale of goods is recognised at
the point in time when control is transferred to the
customer which is usually on dispatch / delivery.
Revenue is measured based on the transaction
price, which is the consideration, adjusted for
rebates and discounts, price adjustments and
returns, if any, as specified in the contracts with
the customers. Revenue excludes taxes collected
from customers on behalf of the government.
Due to short nature of credit period given to
customers there is no financing component in
the contract.
ii Sale of Services
Based on the terms of the contract with customers,
revenue from development and other services
is recognised over time because the customer
simultaneously receives and consumes the
benefits provided to them or at a point in time.
For revenue recognised over a period of time, the
Company uses an input method in measuring
progress of the services because there is a direct
relationship between the Company effort (i.e.,
based on the labour hours incurred, raw material
consumed) and the transfer of service to the
customer. The Company recognises revenue on
the basis of the man hours expended and raw
material consumed relative to the total expected
man hours and raw material consumption to
complete the service.
iii Export entitlements
Export entitlements from Government authorities
are recognised in the statement of profit and
loss when the right to receive credit as per the
terms of the scheme is established in respect of
the exports made by the Company, and where
there is no significant uncertainty regarding the
ultimate collection/determination of amounts of
the relevant export proceeds.
Contract balances
Contract assets
A contract asset is the right to consideration in
exchange for goods or services transferred to the
customer. If the Company performs by transferring
goods or services to a customer before the
customer pays consideration or before payment
is due, a contract asset is recognised for the earned
consideration that is conditional.
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
Contract liabilities
A contract liability is recognised if a payment is
received or a payment is due (whichever is earlier)
from a customer before the Company transfers
the related goods or services. 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).
3.2 Other Income
i Interest Income
Interest income is recognised using the effective
interest method as set out in Ind AS 109 - Financial
Instruments: Recognition and Measurement,
when it is probable that the economic benefits
associated with the transaction will flow to the
Company and the amount of the revenue can
be measured reliably. The effective interest
method is a method of calculating the amortised
cost of a financial asset or a financial liability (or
group of financial assets or financial liabilities)
and of allocating the interest income over the
relevant period.
ii Dividend Income
Dividend income is recognised when right to
receive payment is established and it is probable
that the economic benefits associated with the
transaction will flow to the Company and the
amount of the revenue can be measured reliably.
3.3 Foreign currency
Transactions in foreign currencies are translated
into the Company's functional currency at the
exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated
in foreign currencies are translated into the
functional currency at the exchange rate at the
reporting date. Non-monetary assets and liabilities
that are measured at fair value in a foreign currency
are translated into the functional currency at the
exchange rate when the fair value was determined.
Non-monetary assets and liabilities that are
measured based on historical cost in a foreign
currency are translated at exchange rate prevailing
at the date of initial transaction. Foreign currency
exchange differences are generally recognised in
the statement of profit and loss.
Exchange differences arising on the settlement
of monetary items or on translating monetary
items at rates different from those at which they
were translated on initial recognition during the
period or in previous Financial Statements are
recognised in the Standalone Statement of Profit
and Loss in the period in which they arise. When a
gain or loss on a non-monetary item is recognised
in Other Comprehensive Income, any exchange
component of that gain or loss is recognised
in Other Comprehensive Income. Conversely,
when a gain or loss on a non-monetary item is
recognised in Standalone Statement of Profit and
Loss, any exchange component of that gain or loss
is recognised in Standalone Statement of Profit
and Loss.
3.4 Employee benefits
Short-term employee benefits
Short-term employee benefits obligations are
measured on an undiscounted basis and are
expensed as the related service is provided.
A liability is recognised for the amount expected
to be paid if the Company has a present legal or
constructive obligation to pay this amount as a
result of past service provided by the employee and
the amount of obligation can be estimated reliably.
Post employment employee benefits
i Defined contribution plans
A defined contribution plan is a post¬
employment benefit plan under which an
entity pays fixed contributions into a separate
entity and will have no legal or constructive
obligation to pay further amounts.
The Company makes specified monthly
contributions to Provident fund, Employee
State Insurance and Labour Welfare Fund
and are recognised as an employee benefit
expense in the statement of profit and loss on
an accrual basis.
Contribution to Superannuation Fund, a
defined contribution scheme, administered
by Life Insurance Corporation of India,
based on a specified percentage of eligible
employees’ salary.
ii Defined benefit plans
A defined benefit plan is a post-employee
benefit plan other than a defined contribution
plan. The Company’s net obligation in
respect of defined benefit plans is calculated
separately for each plan by estimating the
amount of future benefit that employees
have earned in the current and prior periods,
discounting that amount and deducting the
fair value of any plan assets.
The calculation of defined benefit obligations
is performed annually by a qualified actuary
using the projected unit credit method.
When the calculation results in a potential
asset for the Company, the recognised asset
is limited to the present value of economic
benefits available in the form of any future
refunds from the plan or reductions in
future contributions to the plan. To calculate
the present value of economic benefits,
consideration is given to any applicable
minimum funding requirements.
Re-measurement of the net defined benefit
liability, which comprise actuarial gains and
losses, the return on plan assets (excluding
interest) and the effect of the asset ceiling
(if any, excluding interest), are recognised
immediately in other comprehensive income
(OCI). Net interest expense (income) on the
net defined liability (assets) is computed
by applying the discount rate, used to
measure the defined benefit obligation at
the beginning of the annual period to the
then-net defined liability (asset) after taking
into account any changes as a result of
contribution and benefit payments during
the year. Net interest expense and other
expenses related to gratuity benefit scheme
are recognised in profit or loss.
When the benefits of a plan are changed
or when a plan is curtailed, the resulting
change in benefit that relates to past
service or the gain or loss on curtailment is
recognised immediately in profit or loss. The
Company recognises gains and losses on the
settlement of a defined benefit plan when the
settlement occurs.
Gratuity
The Company has an obligation towards
gratuity, a defined benefit scheme covering
eligible employees. The Company accounts for
gratuity benefits payable in future based on an
independent actuarial valuation method as stated
above. Gratuity for staff at Panoli plant is funded
through group gratuity insurance scheme of the
Life Insurance Corporation of India (‘LIC’).
The incremental impact of changes in regulations
(if any) during the year will be assessed and
disclosed by the company as Exceptional Items.
Refer note 41.
Pension Plan
The Company operates a pension scheme aimed
at rewarding long-term service and providing post¬
retirement financial stability to eligible employees.
The scheme is applicable to permanent employees
who meet specified eligibility criteria and retire
from service. Eligibility for pension benefits
requires a minimum of 7 years of continuous
service in specified senior roles (Management
Committee cadre or Company Secretary) at the
time of retirement. Benefits are available upon
retirement through superannuation or approved
voluntary retirement schemes and are calculated
based on the last drawn basic salary. The amount
and payout of pension benefits are determined
based on the tenure of service.
Other employee benefits
The Company’s net obligation in respect of
compensated absences such as paid annual
leave, medical benefit plan and other incentives
scheme is calculated using the projected unit
credit method, as at the date of the Balance Sheet.
Actuarial gains or losses comprising of experience
adjustments and the effects of changes in actuarial
assumptions are immediately recognised in the
statement of profit and loss.
3.5 Income tax
Income tax expense comprises current
and deferred tax. It is recognised in the
standalone statement of profit and loss or items
recognised directly in equity or in other
comprehensive income.
i Current tax
Current tax comprises the expected tax payable
or receivable on the taxable income or loss for
the year and any adjustment to the tax payable
or receivable in respect of previous years. The
amount of current tax reflects the best estimate
of the tax amount expected to be paid or received
after considering the uncertainty, if any, related
to income taxes. It is measured using tax rates
enacted or substantively enacted by the reporting
date. Current tax also includes any tax arising
from dividends.
Current tax assets and current tax liabilities are
offset only if, the Company:
a) has a legally enforceable right to set off the
recognised amounts; and
b) intends either to settle on a net basis,
or to realise the asset and settle the
liability simultaneously.
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 reflects 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.
ii 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
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.
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.
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.
3.6 Inventories
a Measurement of Inventory
The Company measures its inventories at the lower
of cost and net realisable value.
b Cost of Inventories
The cost of inventories shall comprise all costs
of purchase, costs of conversion and other costs
incurred in bringing the inventories to their present
location and condition.
The costs of purchase of inventories comprise
the purchase price, import duties and other taxes
(other than those subsequently recoverable by the
entity from the taxing authorities), and transport,
handling and other costs directly attributable to
the acquisition of finished goods, materials and
services. Trade discounts, rebates and other similar
items are deducted in determining the costs
of purchase.
The costs of conversion of inventories include
costs directly related to the units of production
and a systematic allocation of fixed and variable
production overheads that are incurred in
converting materials into finished goods.
Other costs are included in the cost of inventories
only to the extent that they are incurred in
bringing the inventories to their present location
and condition.
The cost of inventories is assigned by weighted
average cost formula. The Company uses the same
cost formula for all inventories having a similar
nature and use to the Company.
c Net realisable value
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. Net realisable
value is ascertained for each item of inventories
with reference to the selling prices of related
finished products.
The practice of writing inventories down below
cost to net realisable value is consistent with the
view that assets should not be carried in excess of
amounts expected to be realised from their sale
or use. Inventories are usually written down to net
realisable value item by item.
Estimates of net realisable value of finished goods
and stock-in-trade are based on the most reliable
evidence available at the time the estimates are
made, of the amount the inventories are expected
to realise. These estimates take into consideration
fluctuations of price or cost directly relating to
events occurring after the end of the period to
the extent that such events confirm conditions
existing at the end of the period. Materials and
other supplies held for use in the production
of inventories are not written down below cost
if the finished products in which they will be
incorporated are expected to be sold at or above
cost. However, when a decline in the price of
materials indicates that the cost of the finished
products exceeds net realisable value, the
materials are written down to net realisable value.
Amount of any reversal of write-down of
inventories shall be recognised as an expense
as when the event occurs. A new assessment is
made of net realisable value in each subsequent
period. When the circumstances that previously
caused inventories to be written down below cost
no longer exist or when there is clear evidence
of an increase in net realisable value because of
changed economic circumstances, the amount
of the write-down is reversed. Amounts such
reversed shall be recognised as a reduction in the
amount of inventories and as an expense in the
period in which reversal occurs.
d Valuation of Spare parts, stand-by equipments
and servicing equipments
Spare parts, stand-by equipment and servicing
equipment are recognised as Property, Plant and
Equipment if and only if it is probable that future
economic benefits associated with them will flow
to the Company and their cost can be measured
reliably. Otherwise such items are classified and
recognised as Inventory.
3.7 Property, plant and equipment
i Recognition and measurement
Items of property, plant and equipment are
measured at cost less accumulated depreciation
and accumulated impairment losses, if any.
The cost of an item of property, plant and
equipment comprises:
a) its purchase price, including import duties
and non-refundable purchase taxes, after
deducting trade discounts and rebates.
b) any directly attributable cost of bringing the
asset to its location and condition necessary
for it to be capable of operating in the manner
intended by management.
c) the estimated costs of dismantling and
removing the item and restoring the site on
which it is located.
Income and expenses related to the incidental
operations, not necessary to bring the item to
the location and condition necessary for it to be
capable of operating in the manner intended by
management, are recognised in the statement of
profit and loss.
If significant parts of an item of property, plant and
equipment have different useful lives, then they
are accounted and depreciated for as separate
items (major components) of property, plant
and equipment.
Any gain or loss on disposal of an item of property,
plant and equipment is recognised in the
statement of profit and loss.
Capital work in progress is stated at cost, net of
accumulated impairment loss, if any.
ii. Subsequent expenditure
Subsequent expenditure is capitalised only if it
is probable that the future economic benefits
associated with the expenditure will flow to
the Company.
iii. Depreciation
Depreciable amount for assets is the cost of an
asset, or other amount substituted for cost.
Depreciation on the depreciable amount of an item
of Property, plant and equipment is allocated on a
systematic basis over its useful life. The Company
provides depreciation on the straight-line method.
The Company believes that straight line method
reflects the pattern in which the asset's future
economic benefits are expected to be consumed
by the Company. Based on internal technical
evaluation, taking into account the nature of
the asset, the estimated usage of the asset, the
operating conditions of the asset, past history of
replacement, anticipated technological changes,
manufacturers warranties and maintenance
support, etc: the management believes useful lives
of the assets are appropriate. The depreciation
method is reviewed at least at each financial year-
end and, if there has been a significant change
in the expected pattern of consumption of the
future economic benefits embodied in the asset,
the method is changed to reflect the changed
pattern. Such a change is accounted for as a
change in an accounting estimate in accordance
with Ind AS 8 -Accounting Policies, Changes in
Accounting Estimates and Errors.
The useful life of an asset is reviewed at least at
each financial year-end. Depreciation is calculated
using the straight-line method on cost of items of
property, plant and equipment over the estimated
useful lives prescribed under Schedule II of the Act.
In case of Ships, based on internal assessment and
technical evaluation carried out, management
believes that the useful life is 30 years, which is
higher and different from the useful life of 20 years
as prescribed under Part C of Schedule II of the Act.
The estimated useful lives of items of property,
plant and equipment are as follows:
Leasehold improvements amortised over the
period of lease.
3.8 Borrowing costs
Borrowing costs are interest and other costs
(including exchange differences relating to
foreign currency borrowings to the extent that
they are regarded as an adjustment to interest
costs) incurred in connection with the borrowing
of funds. Borrowing costs that are directly
attributable to the acquisition or construction
of an asset that necessarily takes a substantial
period of time to get ready for its intended use are
capitalised as part of the cost of that asset till the
date it is ready for its intended use or sale. Other
borrowing costs are recognised as an expense in
the period in which they are incurred.
3.9 Intangible assets
i. Recognition and measurement
Expenditure on research activities is recognised in
the statement of profit and loss as incurred.
Development expenditure is capitalised as part
of the cost of the research and development,
only if the expenditure can be measured
reliably, the product or process is technically and
commercially feasible, future economic benefits
are probable, and the Company intends to and
has sufficient resou rces to complete development
and sell the asset. Otherwise, it is recognised in
profit or loss as incurred. Subsequent to initial
recognition, the asset is measured at cost less
accumulated amortisation and any accumulated
impairment losses.
Other intangible assets, includes computer
software, which are acquired by the Company
are initially measured at cost. Such intangible
assets are subsequently measured at cost less
accumulated amortisation and any accumulated
impairment losses.
ii. Subsequent expenditure
Subsequent expenditure is capitalised only when it
increases the future economic benefits embodied
in the specific asset to which it relates. All other
expenditure, including expenditure on internally
generated goodwill and brands, is recognised in
the statement of profit and loss as incurred.
iii. Amortisation
Amortisation is calculated to write off the cost of
intangible assets using the straight-line method
over their estimated useful lives, and is included in
depreciation and amortisation in the statement of
profit and loss.
Other intangible assets are amortised over the
estimated useful lives as given below:
• Computer Software 5 years
• Product related intangible 5 years
Amortisation methods and useful lives are
reviewed at each reporting date and adjusted
if appropriate.
3.10 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.
a. Financial assets
i. Recognition and initial measurement
Trade receivables and debt securities issued are
initially recognised when they are originated. All
other financial assets are initially recognised when
the Company becomes a party to the contractual
provisions of the instrument.
All financial assets are measured subsequently
at either amortised cost, fair value through other
comprehensive income (OCI), or fair value through
profit or loss, depending on the classification of the
financial assets.
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.
With the exception of trade receivables that do
not contain a significant 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 significant financing component or
for which the Company has applied the practical
expedient are measured at the transaction price
determined under standard on revenue from
contracts with customers. Refer to the accounting
policies for revenue from contracts with customers.
In order for a financial asset to be classified and
measured at amortised cost or fair value through
OCI, it needs to give rise to contractual cash flows
that are 'solely payments of principal and interest
(SPPI); on the principal amount outstanding. This
assessment is referred to as the SPPI test and is
performed at an instrument level. Financial assets
with cash flows that are not SPPI are classified
and measured at fair value through profit or loss,
irrespective of the business model.
The Company's business model for managing
financial assets refers to how it manages its
financial assets in order to generate cash flows.
The business model determines whether cash
flows will result from collecting contractual cash
flows, selling the financial assets, or both. Financial
assets classified and measured at amortised
cost are held within a business model with the
objective to hold financial assets in order to collect
contractual cash flows while financial assets
classified and measured at fair value through
OCI are held within a business model with the
objective of both holding to collect contractual
cash flows and selling the financial asset.
Purchases or sales of financial assets that require
delivery of assets within a time frame established
by regulation or convention in the market place
(regular way trades) are recognised on the trade
date, i.e., he date that the Company commits to
purchase or sell the asset.
ii. Classification
On initial recognition, a financial asset is classified
as measured at
• amortised cost; or
• fair value through profit or loss (FVTPL); or
• fair value through other comprehensive
income (FVOCI)
Financial assets are not reclassified subsequent to
their initial recognition, except if and in the period
the Company changes its business model for
managing financial assets.
A financial asset is measured at amortised cost if it
meets both of the following conditions and is not
designated as at FVTPL:
• the asset is held within a business model
whose objective is to hold assets to collect
contractual cash flows; and
• the contractual terms of the financial asset
give rise on specified dates to cash flows that
are solely payments of principal and interest
on the principal amount outstanding.
A debt investment is measured at FVOCI if it
meets both of the following conditions and is not
designated as at FVTPL:
• the asset is held within a business model
whose objective is achieved by both collecting
contractual cash 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.
On initial recognition of an equity investment
that is not held for trading, the Company may
irrevocably elect to present subsequent changes
in the investment’s fair value in OCI (designated as
FVOCI - equity investment). This election is made
on an investment- by- investment basis.
All financial assets not classified as measured at
amortised cost or FVOCI as described above are
measured at FVTPL. This includes all derivative
financial assets. On initial recognition, the
Company may irrevocably designate a financial
asset that otherwise meets the requirements to
be measured at amortised cost or at FVOCI as
at FVTPL if doing so eliminates or significantly
reduces an accounting mismatch that would
otherwise arise.
Financial assets: Business model assessment
The Company makes an assessment of the
objective of the business model in which a
financial asset is held at a portfolio level because
this best reflects the way the business is managed
and information is provided to management. The
information considered includes:
• the stated policies and objectives for
the portfolio and the operation of those
policies in practice. These include whether
management’s strategy focuses on earning
contractual interest income, maintaining a
particular interest rate profile, matching the
duration of the financial assets to the duration
of any related liabilities or expected cash
outflows or realising cash flows through the
sale of the assets;
• how the performance of the portfolio
is evaluated and reported to the
Company’s management;
• the risks that affect the performance of the
business model (and the financial assets held
within that business model) and how those
risks are managed;
• how managers of the business are
compensated - e.g. whether compensation is
based on the fair value of the assets managed
or the contractual cash flows collected; and
• the frequency, volume and timing of sales of
financial assets in prior periods, the reasons
for such sales and expectations about future
sales activity.
Transfers of financial assets to third parties in
transactions that do not qualify for derecognition
are not considered sales for this purpose, consistent
with the Company’s continuing recognition of
the assets.
Financial assets that are held for trading or are
managed and whose performance is evaluated
on a fair value basis are measured at FVTPL.
iii Subsequent measurement and gains and
losses
Financial assets at FVTPL
These assets are subsequently measured at
fair value. Net gains and losses, including any
interest or dividend income, are recognised in the
statement of profit and loss.
Financial assets at amortised cost
These assets are subsequently measured at
amortised cost using the effective interest method.
The amortised cost is reduced by impairment
losses. Interest income, foreign exchange gains
and losses and impairment are recognised in
profit or loss. Any gain or loss on derecognition is
recognised in the statement of profit and loss.
Equity investments at FVOCI
These assets are subsequently measured at fair
value. Dividends are recognised as income in profit
or loss unless the dividend clearly represents a
recovery of pa rt of the cost of the i nvestment. Other
net gains and losses are recognised in OCI and are
not reclassified in the statement of profit and loss.
Impairment losses (and reversal of impairment
losses) on equity instrument measured at FVOCI
not reported separately from other changes in
fair value.
iv. Derecognition
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
retains substantially all of the risks and rewards
of ownership and does not retain control of the
financial asset.
If the Company enters into transactions whereby
it transfers assets recognised on its balance sheet,
but retains either all or substantially all of the
risks and rewards of the transferred assets, the
transferred assets are not derecognised.
v Impairment of financial assets
Trade Receivable and Contract asset
The company applies a simplified approach in
calculating ECL's. Therefore, the Company does
not track changes in credit risk, but instead
recognises a loss allowance based on lifetime
ECL's at each reporting date. The Company has
established a provision matrix that is based on
its historical credit loss experience, adjusted for
forward looking factors specific to the asset and
the economic environment.
Further disclosures relating to impairment of
financial assets are provided in Note no 13 -
Trade Receivables.
b. Financial liabilities
i. Recognition and initial measurement
All financial liabilities are initially recognised when
the Company becomes a party to the contractual
provisions of the instrument.
A financial liability is initially measured at fair
value. In the case of financial liabilities which are
recognised at fair value through profit and loss
(FVTPL), the transaction costs are recognised in
the statement of profit and loss. In other cases, the
transaction costs are attributed to the acquisition
or issue of financial liability.
ii Classification, subsequent measurement and
gains and losses
Financial liabilities are classified as measured
at amortised cost or FVTPL. A financial liability
is classified as at FVTPL if it is classified as held-
for- trading, or it is a derivative or it is designated
as such on initial recognition. Financial liabilities
at FVTPL are measured at fair value and net
gains and losses, including any interest expense,
are recognised in profit or loss. Other financial
liabilities are subsequently measured at amortised
cost using the effective interest method. Interest
expense and foreign exchange gains and losses
are recognised in profit or loss. Any gain or loss on
derecognition is also recognised in the statement
of profit and loss.
iii. Derecognition
The Company derecognises a financial liability
when its contractual obligations are discharged
or cancelled, or expire.
The Company also derecognises a financial
liability when its terms are modified and the cash
flows under the modified terms are substantially
different. In this case, a new financial liability based
on the modified terms is recognised at fair value.
The difference between the carrying amount of
the financial liability extinguished and the new
financial liability with modified terms is recognised
in the statement of profit and loss.
iv. Offsetting
Financial assets and financial liabilities are offset
and the net amount presented in the balance
sheet when, and only when, the Company
currently has a legally enforceable right to set off
the amounts and it intends either to settle them
on a net basis or to realise the asset and settle the
liability simultaneously.
c. Investment in subsidiaries
Investment in subsidiaries is carried at cost in the
standalone financial statements.
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