2 Material accounting policies
i Basis of preparation
The financial statements of the Company have been prepared to comply in all material respects with the
Indian Accounting Standards (hereinafter referredto as the 'Ind AS’)as notified by Ministry of Corporate
Affairs pursuant to Section 133of the Act read with Companies (Indian Accounting Standards) Rules, 2015,
as amended, and other relevant provisions of the Act. The Company has uniformly applied the accounting
policies forall the periods presented in these financial statements.
The financial statements have been prepared on going concern basis in accordance with accounting
principles generally accepted in India. Further, the financial statements have been prepared on historical
cost convention except forcertain financial assets and financial liabilities which are measured at fair
values, share based payments and employee benefit plans which are measured using actuarial valuation
as explained in relevant accounting policy, on accrual basis of accounting. Historical cost is generally based
on the fairvalue of the consideration given in exchange forgoods and services.
The statement of cash flow has been prepared under the indirect method as set out in Indian Accounting
Standard (Ind AS 7),'Statement of Cash Flows'.
ii Operating cycle for current and non-current classification
All the assets and liabilities have been classified as current ornon-current, wherever applicable, as per the
operating cycle of the Company as per the guidance set out in Schedule III to the Companies Act, 2013.
An asset is treated as current when it is:
• Expected to be realised orconsumed in normal operating cycle
• Held primarily forthe purpose of trading
• Expected to be realised within twelve months after the reporting period, or
• Cash orcash equivalent unless restricted from being exchanged orused to settle a liability forat least
twelve months after the reporting period
All other assets are classified as non-current.
Aliability is current when:
• It is expected to be settled in normal operating cycle
• It is held primarily forthe 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 forat least twelve months after
the reporting period.
Operating cycle forthe business activities of the Company is based on the nature of products and the time
between the acquisition of assets forsale and their realisation in cash and cash equivalents. The Company
has ascertained its operating cycle as upto twelve months forthe purpose of current and non-current
classification of assets and liabilities.
iii Accounting estimates
The estimates and judgements used in the preparation of the financial statements are continuously
evaluated by the Company and are based on historical experience and various other assumptions and
factors (including expectations of future events) that the Company believes to be reasonable under the
existing circumstances. Differences between actual results and estimates are recognised in the period in
which the results are known/materialised.
The said estimates are based on the facts and events, that existed as at the reporting date, orthat occurred
after that date but provide additional evidence about conditions existing as at the reporting date.
iv Rounding of amounts
All amounts disclosed in the financial statements and notes have been rounded off to the nearest lakhs as
per the requirement of Schedule III, unless otherwise stated.
v Fair value measurement
The Company measures financial instruments, at fairvalue at each balance sheet date.
Fair value is the price that would be received to sell an asset orpaid to transfer a liability in an orderly
transaction between market participants at the measurement date, regardless of whether that price is
directly observable orestimated using another valuation technique. In estimating the fairvalue of an asset
ora liability, the Company take into account the characteristics of the asset orliability if market participants
would take those characteristics into account when pricing the asset orliability at the measurement date.
Fair value formeasurement and/ ordisclosure purposes in these financial statements is determined on such
a basis, except foremployee share based payment, leasing transactions, and measurements that have
some similarities to fairvalue but are not fairvalue, such as net realisable value in inventories orvalue in
use in impairment of assets. The basis of fairvaluation of these items are given as part of their respective
accounting policies.
In addition, forfinancial reporting purposes, fairvalue measurements are categorised into Level 1, 2 or 3
based on the degree to which the inputs to the fairvalue measurements are observable and the significance
of the inputs to the fairvalue measurement in its entirety, which are described as follows:
- Level 1inputs are quoted prices (unadjusted) in active markets foridentical assets orliabilities that the
Company can access at the measurement date;
- Level 2inputs are inputs, other than quoted prices included within Level 1,that are observable forthe
asset orliability, either directly orindirectly; and
- Level 3inputs are unobservable inputs forthe asset orliability.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company
determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation
(based on the lowest level input that is significant to the fairvalue measurement as a whole) at the end of
each reporting period.
Ateach reporting date, the Management analyses the movements in the values of assets and liabilities which
are required to be remeasured or re-assessed asper the Company's accounting policies. For this analysis,
the management verifies the major inputs applied in the latest valuation by agreeing the information in the
valuation computation to contracts and other relevant documents.
The Management also compares the change in the fairvalue of each asset and liability with relevant
external sources to determine whether the change is reasonable.
vi Plant, property and equipment
Property, plant and equipment are stated at cost of acquisition including attributable interest and finance
costs, if any, till the date of acquisition/ installation of the assets less accumulated depreciation and
impairment losses, if any. Cost of acquisition comprises the purchase price and any directly attributable
cost of bringing the asset to its working condition forits intended use. Any trade discounts and rebates are
deducted in arriving at the purchase price.
Subsequent expenditure relating to property, plant and equipment is capitalised 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. All other expenses on existing plant, property and equipment including day-to¬
day repair and maintenance expenditure and cost of replacing parts, are charged to the statement of profit
and loss forthe year during which such expenses are incurred.
An item of property, plant and equipment and any significant part initially recognised is derecognised
upon disposal orwhen no future economic benefits are expected from its use ordisposal. The cost and
related accumulated depreciation are eliminated from the financial statements, either on disposal or when
retired from active use. Gains orlosses arising from derecognition of property, plant and equipment are
measured as the difference between the net disposal proceeds and the carrying amount of the asset and
are recognised in the statement of profit and loss when the asset is derecognised.
On transition to Ind AS,the Company has elected to continue with the carrying value of all of its property,
plant and equipment recognised as at 1April 2020measured as per the previous GAAPand use that
carrying value as the deemed cost of the property, plant and equipment and intangibles except forcertain
class of intangibles.
vii Capital work-in-progress
Capital work-in-progress, representing expenditure incurred in respect of assets under development and not
ready fortheir intended use, are carried at cost. Cost includes related acquisition expenses, construction
cost, related borrowing cost and other direct expenditure.
viii Intangible assets
Intangible assets are stated at cost, 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.
Intangible asset comprises of software which is acquired separately and is measured on initial recognition
at cost. Following initial recognition, intangible asset is carried at cost less accumulated amortisation
and accumulated impairment losses, if any. Costs incurred towards purchase of computer software are
amortised using the straight-line method over a period based on management's estimate of useful lives of
such software.
ix Depreciation and amortisation
Depreciation is provided forproperty, plant and equipment soas to expense the cost less residual value
over their estimated useful lives on a straight line basis. Intangible assets are amortised from the date they
are available foruse, over their estimated useful lives. The estimated useful lives are as mentioned below:
Leasehold improvements are amortised over the period of lease on pro-rata basis orthe estimated useful
lives given above, whichever is lower.
Schedule II to the Companies Act, 2013prescribes useful lives forproperty, plant and equipment and allows
Companies to use higher/lower useful lives and residual values if such useful lives and residual values
can be technically supported and justification fordifference is disclosed in the financial statements. The
management believes that the depreciation rates currently used fairly reflect its estimate of the useful lives
and residual values of property, plant and equipment.
Depreciation is provided on the Straight Line Method ('SLM') considering the nature of the asset, the
estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated
technological changes, manufacturer's warranties and maintenance support, etc.
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. Depreciation on additions is provided on a pro¬
rata basis, from the date on which asset is ready to use.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are
accounted in the statement of profit and loss under other income or other expenses.
x Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability orequity instrument of another entity. All financial assets are recognised on trade date when the
purchase of a financial asset is under a contract whose term requires delivery of the financial asset within
the timeframe established by the market concerned. Financial assets are initially measured at fairvalue,
plus transaction costs, except forthose financial assets which are classified as at fairvalue through profit
and loss (FVTPL) at inception. All recognised financial assets are subsequently measured in their entirety at
either amortised cost or fairvalue.
Classification of financial assets
Financial assets are classified as 'equity instrument' if it is non-derivative and meets the definition of 'equity'
forthe issuer. All other non-derivative financial assets are 'debt instruments'.
Financial assets at amortised cost and the effective interest method
Debt instruments are measured at amortised cost if both of the following conditions are met:
- the asset is held within a business model whose objective is to hold assets in order to collect contractual
cash flows; and
- the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
Debt instruments meeting these criteria are subsequently measured at amortised cost using the effective
interest method less any impairment, with interest recognised on an effective yield basis in investment
income.
The effective interest method is a method of calculating the amortised cost of a debt instrument and of
allocating interest over the relevant period. The effective interest rate is the rate that exactly discounts the
estimated future cash receipts (including all fees orpoints paid orreceived that form an integral part of the
effective interest rate, transaction costs and other premiums ordiscounts) through the expected life of the
debt instrument, or(where appropriate) a shorter period, to the net carrying amount on initial recognition.
The Company may irrevocably elect at initial recognition to classify a debt instrument that meets the
amortised cost criteria above as at FVTPL if that designation eliminates orsignificantly reduces an
accounting mismatch had the financial asset been measured at amortised cost.
Financial assets at fairvalue through other comprehensive income (FVTOCI)
Debt instruments are measured at FVTOCI if both of the following conditions are met:
- the asset is held within a business model whose objective is to hold assets in order to collect contractual
cash flows and selling assets; and
- the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
Debt instruments meeting these criteria are subsequently measured at fairvalue with any gains orlosses
arising on re-measurement recognised in other comprehensive income, except forimpairment gains or
losses, interest gain and foreign exchange gains orlosses which are recognised in the statement of profit
and loss. Interest calculated using the effective interest method is recognised in the statement of profit
and loss as investment income. When the debt instrument is derecognised the cumulative gain orloss
previously recognised in other comprehensive income is reclassified to the statement of profit and loss as a
reclassification adjustment.
Atinitial recognition, an irrevocable election is made (on an instrument-by-instrument basis) to designate
investments in equity instruments (other than held fortrading purpose) at FVTOCI.
Afinancial asset is held fortrading if:
- it has been acquired principally forthe purpose of selling it in the near term; or
- on initial recognition it is part of a portfolio of identified financial instruments that the company manages
together and has evidence of a recent actual pattern of short-term profit-taking; or
- it is a derivative that is not designated in an effective hedge relationship as a hedging instrument ora
financial guarantee.
Investments in equity instruments at FVTOCI are subsequently measured at fairvalue with gains and losses
arising from changes in fairvalue recognised in other comprehensive income and accumulated in the 'Gain/
(Loss) on Equity Instruments FVTOCI'. Where the asset is disposed of, the cumulative gain orloss previously
accumulated in the 'Gain/ (Loss) on Equity Instruments FVTOCI' is directly reclassified to retained earnings.
For equity instruments measured at fairvalue through other comprehensive income no impairments are
recognised in the statement of profit and loss.
Dividends on these investments in equity instruments are recognised in the statement of profit and loss in
investment income when the company's right to receive the dividends is established, it is probable that the
economic benefits associated with the dividend will flow to the entity; and the amount of the dividend can
be measured reliably.
Financial assets at fairvalue through profit and loss
(FVTPL)
Financial assets that do not meet the criteria of classifying as amortised cost or fair value through other
comprehensive income described above, or that meet the criteria but the entity has chosen to designate as
at FVTPL at initial recognition, are measured at FVTPL.
Investments in equity instruments are classified as at FVTPL, unless the Company designates an investment
that is not held fortrading at FVTOCI at initial recognition.
Financial assets at FVTPL are subsequently measured at fairvalue, with any gains orlosses arising on
remeasurement recognised in the statement of profit and loss. Interest income from these financial assets
is included in other income.
Dividend income on investments in equity instruments at FVTPL is recognised in the statement of profit and
loss in investment income when the Company's right to receive the dividends is established, it is probable
that the economic benefits associated with the dividend will flow to the entity, and the amount of the
dividend can be measured reliably.
Impairment of financial assets
On initial recognition of the financial assets, a loss allowance forexpected credit loss is recognised fordebt
instruments at amortised cost and FVTOCI. For debt instruments that are measured at FVTOCI, the loss
allowance is recognised in the statement of profit and loss
Ateach reporting date, the Company assesses whether the credit risk on a financial instrument has increased
significantly since initial recognition. When making the assessment, the company compares the risk of a
default occurring on the financial instrument as at the reporting date with the risk of a default occurring
on the financial instrument as at the date of initial recognition and consider reasonable and supportable
information, that is available without undue cost oreffort, that is indicative of significant increases in credit
risk since initial recognition.
If,at the reporting date, the credit risk on a financial instrument has not increased significantly since initial
recognition, the company measures the loss allowance forthat financial instrument at an amount equal to
12-month expected credit losses. If,the credit risk on that financial instrument has increased significantly
since initial recognition, the company measures the loss allowance fora financial instrument at an amount
equal to the lifetime expected credit losses.
For trade receivables and contract assets, the Company applies the simplified approach required by Ind AS
109, which requires expected life time losses to be recognized from initial recognition of the receivables.
The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the
reporting date is recognised as an impairment gain or loss in the statement of profit and loss.
De-recognition of financial assets
The Company derecognises a financial asset on trade date only when the contractual rights to the cash
flows from the asset expire, orwhen it transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another entity orwhen it retains contractual rights to retain contractual
cash flows from financial assets, but assumes a contractual obligation to pay the cash flows to one ormore
recipient. If the Company neither transfers nor retains substantially all the risks and rewards of ownership
and continues to control the transferred asset, the Company recognises its retained interest in the asset
and an associated liability foramounts it may have to pay. If the Company retains substantially all the risks
and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial
asset and also recognises a collateralised borrowing forthe proceeds received.
On de-recognition of a financial asset other than in its entirety (e.g. when the Company retains an option
to repurchase part of a transferred asset), the Company allocates the previous carrying amount of the
financial asset between the part it continues to recognise under continuing involvement, and the part it
no longer recognises on the basis of the relative fairvalues of those parts on the date of the transfer. The
difference between the carrying amount allocated to the part that is no longer recognised and the sum of
the consideration received forthe part no longer recognised and any cumulative gain orloss allocated to it
that had been recognised in other comprehensive income is recognised in the statement of profit and loss. A
cumulative gain orloss that had been recognised in other comprehensive income is allocated between the
part that continues to be recognised and the part that is no longer recognised on the basis of the relative
fairvalues of those parts.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fairvalue through profit and
loss (FVTPL), loans and borrowings, payables, as appropriate. All financial liabilities are recognised initially
at fairvalue and in the case of loans and borrowings and payables, net of directly attributable transaction
costs. The Company's financial liabilities include trade and other payables, loans and borrowings and
liability component of convertible instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at amortised cost (loans and borrowings)
After initial recognition interest bearing loans and borrowings are subsequently measured at amortised cost
using the effective interest rate (EIR) method. Gains and losses are recognised in statement of profit and
loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount orpremium on acquisition and focus or
costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement
of profit and loss. This category generally applies to borrowings.
Financial liabilities at fairvalue through profit and loss
Financial liabilities at fairvalue through profit and loss include financial liabilities held fortrading orfinancial
liabilities designated upon recognition as at fairvalue through profit orloss. Financial liabilities are classified
as held fortrading if they are incurred forthe purpose of repurchasing in the near term. Gains orlosses on
liabilities held fortrading are recognised in the statement of profit and loss. Financial liabilities designation
upon initial recognition at fairvalue through profit orloss are designated as such at the initial date of
recognition, and only if the criteria in Ind AS109 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 statement of profit and loss. However, the Company may transfer the
cumulative gains orloss within equity. All other changes in fairvalue of such liability are recognised in the
statement of profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if
there is a currently enforceable legal right to offset the recognised amounts and there is an intention to
settle on a net basis, to realise the assets and settle the liabilities simultaneously.
xi Revenue from contracts with customers and trade receivables
Sale of services
Revenue from contracts with customers is recognised when control of the goods orservices are transferred
to the customer at an amount that reflects the consideration to which the Company expects to be entitled
in exchange forthose goods orservices. The Company recognises revenue from sale of services at a point
in time when the cargo is delivered to the customers oras per the customers instructions.
Revenue is measured based on the consideration to which the Company expects to be entitled from a
customer, net of discounts, and excludes goods and services tax collected from the customer and remitted
to the appropriate taxing authorities. Due to the short nature of credit period given to customers, there is
no financing component in the contract. Revenue is only recognised to the extent that it is highly probable
a significant reversal will not occur. Customers do not have a contractual right to return goods.
Interest income
Interest income is recognised on a time proportion basis taking into account the amount outstanding and
the applicable interest rate. Interest income is included under the head 'Other income' in the statement of
profit and loss.
Trade receivables
Trade receivables are amounts due from customers forgoods sold orservices performed in the ordinary
course of business. Trade receivables are recognised initially at the amount of consideration that is
unconditional unless they contain significant financing components, when they are recognised at fair value.
Company holds the trade receivables with the objective to collect the contractual cash flows and therefore
measures them subsequently at amortised cost using the effective interest method, less loss allowance.
xii Foreign currency transactions and balances
(i) Initial recognition
Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency
amount the exchange rate between the reporting currency and the foreign currency at the date of the
transaction.
(ii) Conversion
Foreign currency monetary items are translated using the exchange rate prevailing at the reporting date.
Non-monetary items which are measured in terms of historical cost denominated in a foreign currency
are translated using the exchange rate at the date of the transaction; and non-monetary items which are
carried at fairvalue denominated in a foreign currency are translated using the exchange rates that existed
when the values weredetermined.
(iii) Exchange differences
Exchange differences arising on settlement ortranslation of monetary items are recognised in profit orloss
except to the extent it treated as an adjustment to borrowing costs.
xiii Employee benefits
Defined contribution plan
Contributions to defined contribution scheme such as provident fund is charged as an expense based on
the amount of contribution required to be made as and when services are rendered by the employees.
The Company's provident fund contribution, in respect of all the employees, is made to a government
administered fund and charged as an expense to the statement of profit and loss. The above benefits are
classified as Defined Contribution Scheme as the Company has no further obligations beyond the monthly
contributions.
Defined benefit plan
Gratuity is a post-employment benefit and is in the nature of an unfunded defined benefit plan. The liability
recognised in the balance sheet in respect of gratuity is the present value of the defined benefit obligation
at the balance sheet date, together with adjustments forunrecognised actuarial gains orlosses and past
service costs. The defined benefit obligation is calculated at the balance sheet date by an independent
actuary using the projected unit credit method. The discount rates used fordetermining the present value
of the obligations under the defined benefit plan are based on the market yields on government bonds as at
the balance sheet date. Remeasurement gains and losses arising from experience adjustments and changes
in actuarial assumptions are recognised in the year 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.
xiii Employee benefits (contd.)
Provision forcompensated absences, is made based on an independent actuarial valuation on projected
unit credit method made at the end of each financial year.
Short-term employee benefits are recognised as expenses at the undiscounted amounts in the statement
of profit and loss of the year in which the related service is rendered.
xiv Borrowing costs relating to acquisition, construction or production of a qualifying asset which takes
substantial period of time to get ready for its intended use are added to the cost of such asset to the extent
they relate to the period till such assets
Borrowing costs relating to acquisition, construction orproduction of a qualifying asset which takes
substantial period of time to get ready forits intended use are added to the cost of such asset to the extent
they relate to the period till such assets are ready to be put to use. Other borrowing costs are charged to
the Statement of profit and loss in the period in which it is accrued. Any ancillary cost incurred in connection
with the arrangement of borrowings are amortised over the period of such borrowings.
xv Leases
The Company assesses at contract inception whether a contract is, orcontains, a lease. That is, if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys the right to control the use of an identified asset, the
Company assesses whether: (i) the contract involves the use of an identified asset (ii) the Company has
substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the
Company has the right to direct the use of the asset.
Company as a lessee:
Atlease commencement date, the Company recognises a right-of-use assets and a lease liabilities on the
balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement
of the lease liabilities, any initial direct costs incurred by the Company and any lease payments made in
advance of the lease commencement date. The Company depreciates the right-of-use assets on a straight¬
line basis from the lease commencement date to the earlier of the end of the useful life of the right-of use
assets orthe end of the lease term. The Company also assesses the right-of-use assets forimpairment
when such indicators exist. Atthe commencement date of lease, the Company measures the lease liabilities
at the present value of the lease payments to be made overthe lease term, discounted using the interest
rate implicit in the lease if that rate is readily available orthe Company's incremental borrowing rate. The
Company cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental
borrowing rate (IBR) to measure lease liabilities. When the lease liability is remeasured, the corresponding
adjustment is reflected in the right-of-use asset orstatement of profit and loss, as the case may be. The
Company has elected to account forshort-term leases and leases of low-value assets using the exemption
given under Ind AS 116,Leases. Instead of recognising a right-of-use asset and lease liability, the payments
in relation to these are recognised as an expense in profit orloss on a straight-line basis over the lease term
oron another systematic basis if that basis is more representative of the pattern of the Company's benefit.
Company as a lessor:
Leases forwhich the Company is a lessor classified as finance oroperating lease. Lease income from
operating leases where the Company is a lessor is recognised in income on a straight-line basis over
the lease term unless the receipts are structured to increase in line with expected general inflation to
compensate forthe excepted inflationary cost increases. The respective leased assets are included in the
balance sheet based on their nature.
xvi Earnings per share
The Company reports basic and diluted earnings per share in accordance with Ind AS 33on Earnings per
share. Basic EPS is calculated by dividing the net profit orloss forthe year attributable to equity shareholders
(after deducting preference dividend and attributable taxes) by the weighted average number of equity
shares outstanding during the year.
For calculating diluted earnings per share, the net profit orloss forthe year attributable to equity shareholders
and the weighted average number of shares outstanding during the year are adjusted forthe effects of all
dilutive potential equity shares. Dilutive potential equity shares are deemed converted as of the beginning
of the period, unless they have been issued at a later date. In computing the dilutive earnings per share, only
potential equity shares that are dilutive and that either reduces the earnings per share orincreases loss per
share are included.
xvii Taxes
Current tax
Current tax is recognised based on the estimated tax liability computed after taking credit forallowances
and exemptions in accordance with the Income Tax Act, 1961. Current tax assets and liabilities forthe
current and prior yearsare measured at the amount expected to be recovered from, orpaid to, the
taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted, or
substantively enacted, at the reporting date in the countries where the Company operates and generates
taxable income. 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.
Income tax expense comprises of current tax expense and the net change in the deferred tax asset or
liability during the year. Current and deferred taxes are recognised in the statement of profit and loss, except
when they relate to items that are recognised in other comprehensive income ordirectly in equity, in which
case, the current and deferred tax are also recognised in other comprehensive income ordirectly in equity,
respectively.
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 establishes provisions where appropriate.
xvii Taxes (contd.)
Deferred tax
Deferred tax assets and liabilities are recognised for temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts. Deferred tax is determined by applying the balance
sheet approach. Deferred tax assets and liabilities are recognised for all deductible temporary differences
between the financial statements' carrying amount of existing assets and liabilities and their respective
tax base. Deferred tax assets and liabilities are measured using the enacted tax rates or tax rates that are
substantively enacted at the balance sheet date. The effect on deferred tax assets and liabilities of a change
in tax rates is recognised in the period that includes the enactment date.
Deferred tax assets are only recognised to the extent that it is probable that future taxable profits will
be available against which the temporary differences can be utilised. Such assets are reviewed at each
Balance Sheet date to reassess realisation.
Deferred tax assets include Minimum Alternative Tax (MAT) paid in accordance with the tax laws in India,
to the extent it would be available for set off against future current income tax liability. Accordingly, MAT
is recognised as deferred tax asset in the balance sheet when the asset can be measured reliably and it is
probable that the future economic benefit associated with the asset will be realised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current
tax assets and liabilities. 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.
xviii Impairment of non-financial assets
The carrying amount of assets is reviewed at each balance sheet date if there is any indication of impairment
based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an
asset exceeds its recoverable amount. The recoverable amount is the greater of the assets, net selling price
and value in use. 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
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. After impairment, depreciation is
provided on the revised carrying amount of the asset over its remaining useful life.
xix Borrowings
Borrowings are initially recognised at net of transaction costs incurred and measured at amortised cost. Any
difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the
statement of profit and loss over the period of the borrowings using the effective interest method.
xx Borrowing costs
Interest and other borrowing costs attributable to qualifying assets are capitalised. Other interest and
borrowing costs are charged to statement of profit and loss.
xxi Equity shares
Equity shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax, from the proceeds.
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