3.1.2. Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that
future economic benefits associated with the expenditure will
flow to the Company and the cost of the item can be measured
reliably.
3.1.3 Derecognition
Property, plant and equipment is derecognised when no future
economic benefits are expected from their use or upon their
disposal. Gains and losses on disposal of an item of property,
plant and equipment are determined by comparing the proceeds
from disposal with the carrying amount of property, plant and
equipment, and are recognised in the statement of profit and loss.
3.1.4 Depreciation
Depreciation is calculated on the cost of items of property, plant
and equipment using the straight-line method over their estimated
useful lives and is generally recognised in the statement of profit
and loss.
Depreciation on the following assets is provided based on their
estimated useful life ascertained through a technical evaluation:
3. Material accounting policy information
3.1 Property, plant and equipment and depreciation
3.1.1. Initial recognition and measurement
The cost of an item of property, plant and equipment shall be
recognised as an asset if, and only if its 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.
Items of property, plant and equipment (including capital-work-in
progress) are measured at cost less accumulated depreciation
and accumulated impairment losses, if any. Cost includes
expenditure that is directly attributable to bringing the asset to the
location and condition necessary for it to be capable of operating
in the manner intended by management.
Cost of an item of property, plant and equipment comprises its
purchase price, including import duties and non-refundable
purchase taxes, after deducting trade discounts and rebates,
any directly attributable cost of bringing the item to its working
condition for its intended use and estimated costs of dismantling
and removing the item and restoring the site on which it is located.
If significant parts of an item of property, plant and equipment
have different useful lives, then they are accounted for as separate
items (major components) of property, plant and equipment.
Leasehold Improvements are amortised over the lease period or
the remaining useful life, whichever is shorter.
Depreciation on additions to/deductions from property, plant &
equipment during the year is charged on pro-rata basis from/up
to the date in which the asset is available for use/disposed off.
Depreciation method, useful lives and residual values are
reviewed at each financial year-end and adjusted if appropriate.
Based on its technical evaluation, the management believes that
its estimates of useful lives as given above best represent the
period over which management expects to use these assets.
3.2 Intangible assets and intangible assets under
development and amortization
3.2.1 Recognition and measurement
Intangible assets acquired separately are measured on initial
recognition at cost. An intangible asset is recognised only if it
is probable that future economic benefits attributable to the
asset will flow to the Company and the cost of the asset can be
measured reliably. Following initial recognition, intangible assets
that are acquired by the Company and which have finite useful
lives are measured at cost less accumulated amortization and
accumulated impairment losses.
Subsequent expenditure is capitalised only when it the future
economic benefits embodied in the specific asset to which it
relates and the cost of the asset can be measured reliably. All
other expenditure is recognised in statement of profit and loss as
incurred.
Expenditure incurred and eligible for capitalizations with
respect to intangible assets is carried as intangible asset under
development till the asset is ready for its intended use.
3.2.2 Derecognition
An intangible asset is derecognised when no future economic
benefits are expected from their use or upon their disposal.
Gains and losses on disposal of an item of intangible assets are
determined by comparing the proceeds from disposal with the
carrying amount of intangible assets and are recognised in the
statement of profit and loss.
3.2.3 Amortization
Amortization is computed to write off the depreciable amount
of intangible assets over their estimated useful lives using
the straight-line method and is included in amortization in the
statement of profit and loss.
Software license is amortised over fifteen years and Computer
software is amortised over three to six years considering their
respective useful lives.
Amortization method, useful lives and residual values are reviewed
at the end of each financial year and adjusted, if required.
3.3. Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash
at banks and short-term deposits with an original maturity of
three months or less, which are subject to an insignificant risk of
changes in value.
3.4 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.
3.4.1 Financial assets
Recognition and initial measurement
The Company recognizes financial assets when it becomes a
party to the contractual provisions of the instrument. All financial
assets are recognised at fair value on initial recognition, except
for trade receivables which are initially measured at transaction
price. Transaction costs that are directly attributable to the
acquisition of financial assets, which are not at fair value through
the statement of profit and loss, are added to the fair value on
initial recognition.
Subsequent measurement
A. Debt instruments at amortised cost
A 'debt instrument' is measured at the amortised 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 amortised cost using the
effective interest rate ('EIR') method. Amortised 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 other income
in the statement of profit and loss. The losses arising from
impairment are recognised in the statement of profit and
loss. This category generally applies to trade and other
receivables.
B. Debt instrument at FVTOCI (Fair Value through OCI)
A 'debt instrument' is classified as at the FVTOCI if both of
the following criteria are met:
(a) The objective of the business model is achieved both
by collecting contractual cash flows and selling the
financial assets, and
(b) The asset's contractual cash flows represent SPPI.
Debt instruments included within the FVTOCI category
are measured initially as well as at each reporting date
at fair value. Fair value movements are recognised in the
OCI. However, the Company recognizes interest income,
impairment losses & reversals and foreign exchange gain
or loss in the statement of profit and loss. On derecognition
of the asset, cumulative gain or loss previously recognised
in OCI is reclassified from the equity to the statement of
profit and loss. Interest earned whilst holding FVTOCI debt
instrument is reported as interest income using the EIR
method.
C. Debt instrument at FVTPL (Fair value through the
statement of profit and loss)
FVTPL is a residual category for debt instruments. Any
debt instrument, which does not meet the criteria for
categorization as at amortised cost or as FVTOCI, is
classified as at FVTPL.
In addition, the Company may elect to classify a debt
instrument, which otherwise meets amortised cost or
FVTOCI criteria, as at FVTPL. However, such election
is allowed only if doing so reduces or eliminates a
measurement or recognition inconsistency (referred to as
'accounting mismatch'). Debt instruments included within
the FVTPL category are measured at fair value with all
changes recognised in the statement of profit and loss.
D. Equity Investments
All equity investments (other than investments in subsidiary
and associate) in entities are measured at fair value. Equity
instruments which are held for trading are classified as at
fair value through profit & loss (FVTPL). For all other equity
instruments, the Company decides to classify the same
either as at fair value through other comprehensive income
(FVTOCI) or FVTPL. The Company makes such election on
an instrument-by-instrument basis. The classification is
made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as
at FVTOCI, then all fair value changes on the instrument,
excluding dividends, are recognised in the other
comprehensive income (OCI). There is no recycling of the
amounts from OCI to statement of profit & loss (P&L), even
on sale of investment. However, the Company may transfer
the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are
measured at fair value with all changes recognised in the
statement of profit and loss.
Investments in tax free bonds and fixed deposits are
measured at amortised cost.
Investments in subsidiary, associates and strategic
investment are recognised at cost and are not adjusted
to fair value at the end of each reporting period. Cost of
investment represents the amount paid for the acquisition
of the said investments.
E. Derecognition
A financial asset (or, where applicable, a part of a financial
asset or part of a Company of similar financial assets) is
primarily derecognised (i.e., removed from the Company's
balance sheet) when:
• The rights to receive cash flows from the asset have
expired, or
• The Company has transferred its rights to receive
cash flows from the asset or has assumed an
obligation to pay the received cash flows in full
without material delay to a third party under a 'pass¬
through' arrangement and either (a) the Company has
transferred substantially all the risks and rewards of
the asset, or (b) the Company has neither transferred
nor retained substantially all the risks and rewards of
the asset but has transferred control of the asset.
F. Impairment of financial assets
In accordance with Ind AS 109, the Company applies
expected credit loss (ECL) model for measurement and
recognition of impairment loss on the following financial
assets and credit risk exposure:
a) Trade receivables
b) Financial assets that are debt instruments, and are
measured at amortised cost e.g., debt securities,
deposits and bank balance.
In case of trade receivables, the Company follows a
simplified approach wherein an amount equal to lifetime
ECL is measured and recognised as loss allowance.
Financial assets classified as amortised cost (listed as ii
above), subsequent to initial recognition, are assessed for
evidence of impairment at end of each reporting period basis
monitoring of whether there has been a significant increase
in credit risk. To assess whether there is a significant
increase in credit risk, the Company compares the risk of
a default occurring on the asset as at the reporting date
with the risk of default as at the date of initial recognition. It
considers available reasonable and supportive forwarding
looking information
If the credit risk of such assets has not increased
significantly, an amount equal to 12-month ECL is
measured and recognised as loss allowance. However, if
credit risk has increased significantly, an amount equal to
lifetime ECL is measured and recognised as loss allowance
Subsequently, if the credit quality of the financial asset
improves such that there is no longer a significant increase
in credit risk since initial recognition, the Company reverts to
recognising impairment loss allowance based on 12-month
ECL.
ECL allowance recognised (or reversed) during the period
is recognised as expense (or income) in the standalone
statement of profit and loss under the head 'Other expenses
Write - off
The gross carrying amount of a financial asset is written
off when the Company has no reasonable expectations
of recovering the financial asset in its entirety or a portion
thereof. A write-off constitutes a derecognition event.
3.4.2. Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial
liabilities at fair value through the statement of profit and loss,
borrowings, payables, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate. All financial
liabilities are recognised initially at fair value and, in the case of
borrowings and payables, net of directly attributable transaction
costs. The Company's financial liabilities include trade and other
payables.
Subsequent measurement
The measurement of financial liabilities depends on their
classification, as described below:
A. Financial liabilities at amortised cost
After initial measurement, such financial liabilities are
subsequently measured at amortised cost using the EIR
method. Gains and losses are recognised in the statement of
profit and loss when the liabilities are derecognised as well
as through the EIR amortization process. Amortised 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 costs
in the statement of profit and loss. This category generally
applies to trade payables and other contractual liabilities.
B. Financial liabilities at fair value through the statement of
profit and loss
Financial liabilities at fair value through the statement of
profit and loss include financial liabilities held for trading
and financial liabilities designated upon initial recognition
as at fair value through the statement of profit and loss.
Financial liabilities are classified as held for trading if
they are incurred for the purpose of repurchasing in the
near term. This category also includes derivative financial
instruments entered into by the Company that are not
designated as hedging instruments in hedge relationships
as defined by Ind-AS 109.
Gains or losses on liabilities held for trading are recognised
in the statement of profit and loss.
Financial liabilities designated upon initial recognition
at fair value through the statement of profit and loss are
designated at the initial date of recognition, and only if the
criteria in Ind AS 109 are satisfied. For liabilities designated
as FVTPL, fair value gains/ losses attributable to changes
in own credit risk are recognised in OCI. These gains/
losses are not subsequently transferred to the statement
of profit and loss. However, the Company may transfer the
cumulative gain or loss within equity. All other changes in
fair value of such liability are recognised in the statement
of profit and loss. The Company has not designated any
financial liability as at fair value through the statement of
profit and loss.
C. Derecognition
A financial liability is derecognised 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 recognised
in the statement of profit and loss.
3.5. Offsetting financial instruments
Financial assets and liabilities are offset, and the net amount is
reported in the balance sheet where there is a legally enforceable
right to offset the recognised amounts and there is an intention
to settle on a net basis or realize the asset and settle the
liability simultaneously. The legally enforceable right must not
be contingent on future events and must be enforceable in the
normal course of business and in the event of default, insolvency
or bankruptcy of the Company or the counterparty.
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