2.4. Summary of material accounting policies
(a) Financial Instruments
Financial assets and financial liabilities are recognised in the Company’s statement of financial position when the Company
becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value, except for trade receivables that do not have a
significant financing component which are measured at transaction price. Transaction costs that are directly attributable to the
acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value
through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate,
on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair
value through profit or loss are recognised immediately in profit or loss.
i. Financial assets at fair value through other comprehensive income
Financial assets are measured at fair value through other comprehensive income if these financial assets are held within a
business 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.
ii. Financial assets at fair value through profit or loss
Financial assets are measured at fair value through profit or loss unless it is measured at amortized cost or at fair value through
other comprehensive income on initial recognition. The transaction costs directly attributable to the acquisition of financial
assets and liabilities at fair value through profit or loss are immediately recognized in statement of profit and loss.
iii. Financial assets at amortized cost
Financial assets are subsequently measured at amortized cost if these financial assets are held within a business whose objective
is to hold these assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
iv. Debt instruments at amortized cost
A ‘debt instrument’ is measured at the amortized cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and
b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest
(SPPI) on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate
(EIR) method.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral
part of the EIR.
The EIR amortization is included in finance income in the profit or loss. The losses arising from impairment are recognized in
the profit or loss.
This category generally applies to trade and other receivables.
v. De-recognition of financial asset
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it
transfers the financial asset and the transfer qualifies for de-recognition under Ind AS 109.
vi. Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and
borrowings, or as payables, as appropriate. The company’s financial liabilities include trade and other payables, loans and
borrowings including bank overdrafts.
The subsequent measurement of financial liabilities depends on their classification, which is described below.
vii Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated
upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are
incurred for the purpose of repurchasing in the near term.
viii Financial liabilities at amortized cost
Financial liabilities are subsequently carried at amortized cost using the effective interest (‘EIR’) method. Gains and losses are
recognized inprofit or loss when the liabilities are derecognized as well as through the EIR amortization process. Amortized cost
is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the
EIR. The EIR amortization is included as finance costs in the statement of profit and loss.
Interest-bearing loans and borrowings are subsequently measured at amortized cost using EIR method. For trade and other
payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short
maturity of these instruments.
ix De-recognition of financial liability
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing
financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing
liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and
the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statement of profit or
loss.
x Reclassification of financial assets and liabilities
The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition, no
reclassification is made for financial instruments.
xi Fair value of financial instruments
In determining the fair value of its financial instruments, the Group uses following hierarchy and assumptions that are based on
market conditions and risks existing at each reporting date.
Fair value hierarchy:
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized 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 recognized in the financial statements on a recurring basis, the Group determines whether
transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is
significant to the fair value measurement as a whole) at the end of each reporting period.
(b) Investment property
Investment property, which is property held to earn rentals and/or for capital appreciation (including property under construction
for such purposes), Investment property are stated at deemed cost/ cost, net of accumulated depreciation. Cost including
transaction costs. Subsequent to initial recognition, investment properties are measured in accordance with Ind AS 16’s
requirements for cost model.
Depreciation is calculated on the straight-line method over a period of sixty years,which is useful lives estimated by the
management, which are equal to those prescribed under Schedule II to the Companies Act, 2013.
An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use
and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property
(calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or
loss in the period in which the property is derecognised.
(c) Property, Plant and Equipment:
Property, plant and equipment are stated at deemed cost/ cost, net of accumulated depreciation and accumulated impairment
losses, if any. The cost comprises purchase price, including duties and taxes (other than those refundable),borrowing costs if
capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use.
Any trade discounts and rebates are deducted in arriving at the purchase price.
Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is
depreciated separately. This applies mainly to components for machinery. 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. Likewise,
when a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement
if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred.
Subsequent expenditure related to an item of property, plant and equipment is added to its book value only if it increases
the future benefits from its previously assessed standard of performance. All other expenses on existing property, plant and
equipment, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the statement
of profit and loss for the period during which such expenses are incurred.
Borrowing costs directly attributable to acquisition of property, plant and equipment which take substantial period of time to get
ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as
capital advances under other non-current assets.
An item of property, plant and equipment and any significant part initially recognized is de-recognized upon disposal or when
no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset
(calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income
statement when the Property, plant and equipment is de-recognized.
Costs of assets not ready for use at the balance sheet date are disclosed under capital work- in- progress.
Depreciation is calculated on the straight-line method using the following useful lives estimated by the management, which are
equal to those prescribed under Schedule II to the Companies Act, 2013.
(d) Intangible Assets:
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization and accumulated impairment losses, if any.
Intangible assets comprising of computer software are amortized on the straight-line method basis over a period of three years,
which is estimated bythe management to be the useful life of the asset. In case of certain DP specific assets, the intangible
assets are amortized on a straight-line basis over a period of four years.
The residual values, useful lives and methods of amortization of intangible assets are reviewed at each financial year end and
adjusted prospectively, if appropriate.
Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognized in the statement of profit and loss when asset is
derecognized.
(e) Impairment of assets:
A. Financial assets
The Company assesses at each date of balance sheet whether a financial asset is impaired and measures the required expected
credit losses through a loss allowance. The Company recognizes lifetime expected losses for all contract assets and / or all trade
receivables that do not constitute a financing transaction. For all other financial assets, expected credit losses are measured at
an amount equal to the 12-month expected credit losses or at an amount equal to the lifetime expected credit losses if the credit
risk on the financial asset has increased significantly since initial recognition.
B. 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 such transactions can be identified, an appropriate valuation model is
used. if 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) net selling price 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
group of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired
and is written down to its recoverable amount. 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 net selling price, recent market transactions are taken into account, if available.If no such
transactions can be identified, an appropriate valuation model is used.
Impairment losses are recognized in the statement of profit and loss. After impairment, depreciation is provided on the revised
carrying amount of the asset over its remaining useful life.
|