iii) Material accounting policies
a) Current versus non-current classification
The Company presents assets and liabilities
in the balance sheet based on current/ non¬
current classification.
An asset is treated as current when it is:
• Expected to be realised or intended to be sold or
consumed in normal operating cycle,
• Held primarily for the purpose of trading,
• Expected to be realised within twelve months after
the reporting period, or
• Cash or cash equivalent unless restricted from
being exchanged or used to settle a liability for
at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
• It is expected to be settled in normal operating
cycle,
• It is held primarily for the 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 for at least twelve months
after the reporting period.
The Company classifies all other liabilities as non¬
current.
Deferred tax assets and liabilities are classified as
non-current assets and liabilities.
Based on the nature of products and the time
between acquisition of assets for processing and
their realisation in cash and cash equivalents, the
Company has ascertained its operating cycle as
twelve months for the purpose of current or non¬
current classification of assets and liabilities.
b) Property, plant and equipment
Recognition and initial measurement
Property, plant and equipment are stated at their
cost of acquisition. The cost comprises the purchase
price, borrowing cost (if capitalisation criteria are
met) and any attributable costs of bringing the
asset to its working condition for its intended use.
Any trade discount and rebates are deducted in
arriving at the purchase price. Subsequent costs
are included in the asset’s carrying amount or
recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits
attributable to such subsequent cost associated with
the item will flow to the Company. All other repair and
maintenance costs are recognised in statement of
profit or loss as incurred.
I n case an item of property, plant and equipment
is acquired on deferred payment basis, interest
expense included in deferred payment is recognised
as interest expense and not included in the cost
of asset.
Subsequent measurement (depreciation and
useful lives)
Depreciation on property, plant and equipment is
provided on the straight-line method prescribed
under Schedule II of the Act, computed on the basis
of useful lives prescribed under Schedule II of the
Act or technical evaluation of the property, plant
and equipment by the management and/or external
technical expert which are mentioned below:
De-recognition
An item of property, plant and equipment and any
significant part, initially recognised, is de-recognised
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
asset is derecognized.
c) Intangible assets
Recognition and initial measurement
Intangible assets acquired separately are measured
on initial recognition at cost. Following initial
recognition, intangible assets are carried at cost less
accumulated amortization and impairment losses,
if any.
Subsequent measurement (amortisation and
useful lives)
All intangible assets are accounted for using the cost
model whereby capitalised costs are amortised on a
straight-line basis over their estimated useful lives.
The estimated useful life of an identifiable intangible
asset is based on a number of factors including the
effects of obsolescence, demand, competition, and
other economic factors (such as the stability of the
industry, and known technological advances), and
the level of maintenance expenditures required to
obtain the expected future cash flows from the asset.
Residual values and useful lives are reviewed at each
reporting date. The following useful lives are applied:
The residual values, useful lives and method of
depreciation are reviewed at each financial year end
and adjusted prospectively, if appropriate.
Where, during any financial year, any addition has
been made to any asset, or where any asset has
been sold, discarded, demolished or destroyed,
or significant components replaced; depreciation
on such assets is calculated on a pro rata basis as
individual assets with specific useful life from the
month of such addition or, as the case may be, up
to the month on which such asset has been sold,
discarded, demolished or destroyed or replaced.
The amortisation period and the amortisation
method for intangible assets are reviewed at least
at the end of each reporting period. Changes in
the expected useful life or the expected pattern of
future economic benefits embodied in the asset are
considered to modify the amortisation period or
method, as appropriate, and are treated as changes
in accounting estimates.
I ntangible assets with indefinite useful lives like
goodwill acquired in business combination are not
amortised, but are tested for impairment annually,
either individually or at the cash generating unit
level. The assessment of indefinite useful life is
reviewed annually to determine whether indefinite
life continues to be supportable. The change in
useful life from indefinite to finite life if any, is made
on prospective basis, and is treated as change in
accounting estimates.
De-recognition
Gains or losses arising from derecognition of an
intangible asset 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 or loss when the asset
is derecognised.
d) Impairment of non-financial assets
For impairment assessment purposes, assets are
grouped at the lowest levels for which there are
largely independent cash inflows (cash generating
units). As a result, some assets are tested individually
for impairment and some are tested at cash¬
generating unit level.
The Company assesses at each balance sheet
date whether there is any indication that an asset
may be impaired. If any such indication exists, the
Company estimates the recoverable amount of the
asset. If such recoverable amount of the asset or
the recoverable amount of the cash generating unit,
to which the asset belongs, is less than its carrying
amount, the carrying amount is reduced to its
recoverable amount. The reduction is treated as an
impairment loss and is recognized in the statement
of profit and loss. If at the balance sheet date, there is
an indication that a previously assessed impairment
loss no longer exists then the recoverable amount
is reassessed, and the asset is reflected at the
recoverable amount, subject to a maximum of
depreciated historical cost. Impairment losses
previously recognised are accordingly reversed in
the statement of profit and loss.
To determine value-in-use, management estimates
expected future cash flows from each cash¬
generating unit and determines a suitable discount
rate in order to calculate the present value of those
cash flows. The data used for impairment testing
procedures are directly linked to the Company’s
latest approved budget, adjusted as necessary
to exclude the effects of future re-organisations
and asset enhancements. Discount factors are
determined individually for each cash-generating
unit and reflect current market assessment of the
time value of money and asset-specific risk factors.
e) Borrowing costs
Borrowing costs directly/generally attributable to
the acquisition, construction or production of a
qualifying asset, that necessarily takes a substantial
period of time to get ready for its intended use or
sale, are capitalized as part of the cost of the asset.
All other borrowing costs are expensed in the
period in which they occur. Borrowing costs consist
of interest calculated using the effective interest
method that an entity incurs in connection with the
borrowing of funds. Borrowing cost also includes
exchange differences, to the extent regarded as an
adjustment to the borrowing costs.
Eligible transaction/ancillary costs incurred in
connection with the arrangement of borrowings are
adjusted with the proceeds of the borrowings.
f) Inventories
Inventories are stated at lower of cost or net realisable
value. The cost in respect of the various items of
inventory is computed as under:
• Raw material cost includes direct expenses and is
determined based on weighted average method.
• Stores and spares cost includes direct expenses
and is determined on the basis of weighted
average method.
• In case of finished goods and work-in-progress,
cost includes raw material cost plus conversion
costs and other overheads incurred to bring the
goods to their present location and condition.
• In case of stock-in-trade, cost includes direct
expenses and is determined on the basis of
weighted average method.
Net realisable value is the estimated selling price in
the ordinary course of business, less any applicable
selling expenses. Provision for obsolescence
and slow-moving inventory is made based on
management’s best estimates of net realisable value
of such inventories.
The amount of any write-down of inventories to
net realisable value and all losses of inventories, is
recognized as an expense in the period the write¬
down or loss occurs. The amount of any reversal
of any write-down of inventories, arising from an
increase in net realisable value, is recognized as a
reduction in the amount of inventories recognized as
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g) Foreign currency translation
Functional and presentation currency
The financial statements are presented in Indian
Rupees (INR or I), which is also the Company’s
functional currency and are rounded to two decimal
places of crores.
Transactions and balances
Transactions in foreign currencies are initially
recorded by the Company at its functional currency
spot rates at the date the transaction first qualifies
for recognition.
Monetary assets and liabilities, denominated in
foreign currencies, are translated at the functional
currency spot rates of exchange at the reporting date.
Exchange differences arising on settlement or
translation of monetary items as at reporting date
are recognised in statement of profit and loss.
Non-monetary items that are measured in terms of
historical cost, in a foreign currency are translated
using the exchange rates at the dates of the initial
transactions. Non-monetary items measured at fair
value in a foreign currency are translated using the
exchange rates at the date when the fair value is
determined. The gain or loss arising on translation
of non-monetary items measured at fair value is
treated in line with the recognition of the gain or loss
on the change in fair value of the item (i.e., translation
differences on items whose fair value gain or loss is
recognised in other comprehensive income (‘OCI’) or
profit or loss are also recognised in OCI or statement
of profit and loss, respectively).
h) Right-of-use assets and lease liabilities
As a lessee
Classification of lease
The Company’s leased asset classes primarily
consist of leases for land, building and plant and
machinery. The Company assesses whether a
contract contains a lease, at the inception of a
contract. A contract is, or contains, a lease 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.
Recognition and initial measurement of
right-of-use assets
At the date of commencement of the lease, the
Company recognises a right-of-use asset (“ROU”)
and a corresponding lease liability for all lease
arrangements in which it is a lessee, except for
leases with a term of twelve months or less (short¬
term leases) and low value leases. For these short¬
term and low value leases, the Company recognizes
the lease payments as an operating expense on a
straight-line basis over the term of the lease.
Certain lease arrangements include options to
extend or terminate the lease before the end of the
lease term. ROU assets and lease liabilities include
these options when it is reasonably certain that they
will be exercised.
Subsequent measurement of right-of-use asset
The right-of-use assets are initially recognized at
cost, which comprises the initial amount of the lease
liability, adjusted for any lease payments made at or
prior to the commencement date of the lease, plus
any initial direct costs less any lease incentives. They
are subsequently measured at cost less accumulated
depreciation and impairment losses.
Right-of-use assets are depreciated from the
commencement date on a straight-line basis over
the shorter of the lease term and useful life of the
underlying asset. If ownership of the leased asset
gets transferred to the Company at the end of the
lease term, depreciation is calculated using the
estimated useful life of the asset. Right of use assets
are subject to impairment testing.
Lease liabilities
The lease liability is initially measured at amortized
cost at the present value of the future lease
payments. The lease payments are discounted using
the interest rate implicit in the lease or, if not readily
determinable, using the incremental borrowing
rates in the country of domicile of these leases.
Lease payments included in the measurement of
the lease liability are made up of fixed payments
(including in substance fixed payments) and variable
payments based on an index or rate. Subsequent to
initial measurement, the liability will be reduced for
payments made and increased for interest. Lease
liabilities are remeasured with a corresponding
adjustment to the related right of use asset, if the
Company changes its assessment of whether it will
exercise an extension or a termination option.
i) Fair value measurement
Fair value is the price that would be received on sale
of an asset or paid to transfer a liability in an orderly
transaction between market participants at the
measurement date. The fair value measurement is
based on the presumption that the transaction to sell
the asset or transfer the liability takes place either:
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most
advantageous market for the asset or liability
The principal or the most advantageous market must
be accessible by the Company.
The fair value of an asset or a liability is measured
using the assumptions that market participants would
use, when pricing the asset or liability, that market
participants act in their economic best interest.
A fair value measurement of a non-financial asset
takes into account a market participant’s ability to
generate economic benefits by using the asset in
its highest and best use or by selling it to another
market participant that would use the asset in its
highest and best use.
Company uses valuation techniques that are
appropriate in the circumstances and for which
sufficient data are available to measure fair value,
maximizing the use of relevant observable inputs and
minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is
measured or disclosed in the financial results 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 Company 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 or
each case.
For the purpose of fair value disclosures, the
Company has determined classes of assets and
liabilities on the basis of the nature, characteristics
and risks of the asset or liability and the level of the
fair value hierarchy, as explained above.
j) Revenue recognition from sale of products
and services
Recognition
Sales (including scrap sales) are recognised when
ownership of products is transferred to the buyer
as per the terms of the contract and are accounted
for net of returns and rebates. Control of products
refers to the ability to direct the use of and obtain
substantially all of the remaining benefits from
products. Sales, as disclosed, are exclusive of goods
and services tax.
To determine if it is acting as a principal or as an
agent, the Company assesses whether it has
exposure to the significant risks and rewards
associated with the rendering of logistics services.
Revenue from rendering of logistic services provided
to its customer after the transfer of control of
underlying goods is recognized on net basis, i.e.,
after deducting the amount contractually payable to
transporters out of the total consideration received
and is recognized once the facilitation of such
service is done as the Company does not assume
any performance obligation.
I ncome in respect of service contracts, which are
generally in the nature of providing infrastructure
and support services, are recognised in statement
of profit and loss when such services are rendered.
Customers are invoiced periodically (generally on
monthly basis).
For each performance obligation identified, the
Company determines at contract inception whether
it satisfies the performance obligation over time or
at a point in time. If the Company does not satisfy a
performance obligation over time, the performance
obligation is satisfied at a point in time. A receivable
is recognised when the goods are delivered, as
this is the case of point in time recognition where
consideration is unconditional because only the
passage of time is required.
The Company recognises contract liabilities for
consideration received in respect of unsatisfied
performance obligations and reports these amounts
as other liabilities in the balance sheet. Similarly, if
the Company satisfies a performance obligation
before it receives the consideration, the Company
recognises either a contract asset or a receivable in
its balance sheet, depending on whether something
other than the passage of time is required before the
consideration is due.
Measurement
The Company considers the terms of the contract
and its customary business practices to determine
the transaction price. The transaction price is the
amount of consideration to which the Company
expects to be entitled, in exchange for transferring
promised goods or services to a customer, excluding
amounts collected on behalf of third parties (for
example, indirect taxes). The consideration promised
in a contract with a customer may include fixed
consideration, variable consideration (if reversal is
less likely in future), or both. The sale of goods is
typically made under credit payment terms differing
from customer to customer and ranges between
0-90 days. No element of financing is deemed
present as the sales are largely made on advance
payment terms or with credit term of not more than
one year.
The transaction price is allocated by the Company
to each performance obligation (or distinct good or
service) in an amount that depicts the amount of
consideration to which it expects to be entitled, in
exchange for transferring the promised goods or
services to the customer.
Periodically, the Company enters into volume or
other rebate programs where once a certain volume
or other conditions are met, it refunds the customer
some portion of the amounts previously billed or
paid. For such arrangements, the Company only
recognizes revenue for the amounts it ultimately
expects to realize from the customer. The Company
estimates the variable consideration for these
programs using the most likely amount method or the
expected value method, whichever approach best
predicts the amount of the consideration, based on
the terms of the contract and available information
and updates its estimates in each reporting period.
k) Income recognition
Interest income
I nterest income on financial assets at amortised
cost and financial assets at fair value through other
comprehensive income (FVOCI), is calculated using
the effective interest method and is recognised in
statement of profit and loss as part of other income.
Interest income is calculated by applying the
effective interest rate to the gross carrying amount
of a financial asset, except for financial assets that
subsequently become credit impaired. For credit-
impaired financial assets, the effective interest rate
is applied to the net carrying amount of the financial
asset (after deduction of the loss allowance).
Dividends
Dividends are received from financial assets at fair
value through profit or loss and at FVOCI. Dividends
are recognised as other income in statement of
profit and loss when the right to receive payment
is established. This applies even if they are paid
out of pre-acquisition profits, unless the dividend
clearly represents a recovery of part of the cost of
the investment.
l) 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.
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition,
as subsequently measured at amortised cost, fair
value through other comprehensive income (OCI),
and fair value through profit or loss.
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 Ind AS 115. Refer
to the accounting policies in section (j) Revenue from
contracts with customers.
I n order for a financial asset to be classified and
measured at amortised cost or fair value through
OCI, it needs to give rise to 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.
Purchases or sales of financial assets that require
delivery of assets within a time frame established by
regulation or convention in the marketplace (regular
way trades) are recognised on the trade date, i.e., the
date that the Company commits to purchase or sell
the asset.
Subsequent measurement of financial assets and
financial liabilities is described below.
Financial assets
Classification and subsequent measurement
For the purpose of subsequent measurement,
financial assets are classified into the following
categories upon initial recognition:
i. Financial assets at amortised cost - a
financial instrument is measured at amortised
cost if both the following conditions are met:
• The asset is held within a business model
whose objective is to hold assets for
collecting contractual cash flows, and
• 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 method. Effective
interest rate (EIR) is the rate that exactly
discounts estimated future cash receipts
through the expected life of the financial asset
to the net carrying amount of the financial
assets. The future cash flow includes all other
transaction costs paid or received, premiums
or discounts, if any, etc.
ii. Investments in equity instruments of
subsidiaries and associates - Investments in
equity instruments of subsidiaries, joint ventures
and associates are accounted for at cost in
accordance with Ind AS 27 Separate Financial
Statements. On disposal of these investments,
the difference between net disposal proceeds
and the carrying amount are recognised in the
statement of profit and loss.
iii. Financial assets at fair value
• Investments in equity instruments other
than above - All equity investments in
scope of Ind AS 109 are measured at fair
value. Equity instruments which are held
for trading are generally classified as at fair
value through profit and loss (FVTPL). For
all other equity instruments, the Company
decides to classify the same either as at fair
value through other comprehensive income
(FVOCI) or fair value through profit and loss
(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 FVOCI, 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 profit
or loss, even on sale of investment. However,
the Company may transfer the cumulative
gain or loss within equity. Dividends on such
investments are recognised in statement of
profit and loss, unless the dividend clearly
represents a recovery of part of the cost of
the investment.
Equity instruments included within the
FVTPL category are measured at fair value
with all changes recognised in statement of
profit and loss.
• Derivative assets - All derivative assets are
measured at fair value through profit and loss
(FVTPL).
De-recognition of financial assets
A financial asset is primarily de-recognised 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.
Reclassification of financial assets
The Company determines classification of financial
assets and liabilities on initial recognition. After initial
recognition, no reclassification is made for financial
assets which are equity instruments and financial
liabilities. For financial assets which are debt
instruments, a reclassification is made only if there is
a change in the business model for managing those
assets. Changes to the business model are expected
to be infrequent. The Company’s senior management
determines change in the business model as a result
of external or internal changes which are significant
to the Company’s operations. Such changes are
evident to external parties. A change in the business
model occurs when the Company either begins or
ceases to perform an activity that is significant to
its operations. If the Company reclassifies financial
assets, it applies the reclassification prospectively
from the reclassification date which is the first day
of the immediately next reporting period following
the change in business model. The Company does
not restate any previously recognised gains, losses
(including impairment gains or losses) or interest.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition,
as financial liabilities at fair value through profit
or loss, loans and 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 loans and borrowings and
payables, net of directly attributable transaction
costs. The Company’s financial liabilities include
trade and other payables, loans and borrowings,
including bank overdrafts, financial guarantee
contracts and derivative financial instruments.
Subsequent measurement
After initial recognition, the financial liabilities, other
than derivative liabilities, are subsequently measured
at amortised cost using the effective interest
method (EIR).
Amortised cost is calculated by considering any
discount or premium on acquisition and fees or
costs that are an integral part of the EIR. The effect
of EIR amortisation is included as finance costs in
the statement of profit and loss.
All derivative liabilities are measured at fair value
through profit and loss (FVTPL).
De-recognition of financial liabilities
A financial liability is de-recognised 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 de¬
recognition 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.
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, i.e., to realize the assets and
settle the liabilities simultaneously.
m) Impairment of financial assets
All financial assets except for those at FVTPL are
subject to review for impairment at each reporting
date to identify whether there is any objective
evidence that a financial asset or a group of financial
assets is impaired. Different criteria to determine
impairment are applied for each category of
financial assets.
In accordance with Ind AS 109, the Company applies
expected credit loss (ECL) model for measurement
and recognition of impairment loss for financial
assets carried at amortised cost.
ECL is the weighted average of difference between all
contractual cash flows that are due to the Company
in accordance with the contract and all the cash flows
that the Company expects to receive, discounted at
the original effective interest rate, with the respective
risks of default occurring as the weights. When
estimating the cash flows, the Company is required
to consider -
• All contractual terms of the financial assets
(including prepayment and extension) over the
expected life of the assets.
• Cash flows from the sale of collateral held or
other credit enhancements that are integral to the
contractual terms.
Trade receivables
i. For debtors that are not past due - The Company
applies approach required by Ind AS 109
‘Financial Instruments’, which requires lifetime
expected credit losses to be recognised upon
initial recognition of receivables. Lifetime ECL
are the expected credit losses resulting from all
possible default events over the expected life of
a financial instrument.
Lifetime expected credit losses are assessed
and accounted based on the Company’s
historical counter party default rates and
forecast of macro-economic factors, by
dividing receivables that are not considered
to be individually significant by reference to
the business segment of the counter party
and other shared credit risk characteristics to
evaluate the expected credit loss. The expected
credit loss estimate is then based on recent
historical counter party default rates. The
Company defines default as an event when the
financial asset is past due for more than 365
days. This definition is based on management’s
expectation of the time period beyond which
if a receivable is outstanding, it is objective
evidence of impairment.
ii. For debtors considered past due - any
enhancement in the accrual done for
expected credit loss on individually significant
receivables is made to recognise any additional
expected credit loss on amount recoverable.
The Company writes off trade receivables when
there is objective evidence that such amounts
would not be recovered. Financial assets that
are written-off are still subject to enforcement
activity by the Company.
Other financial assets
For recognition of impairment loss on other
financial assets and risk exposure, the Company
determines whether there has been a significant
increase in the credit risk since initial recognition. If
the credit risk has not increased significantly since
initial recognition, the Company measures the loss
allowance at an amount equal to twelve months
expected credit losses, else at an amount equal to
the lifetime expected credit losses.
When making this assessment, the Company uses
the change in the risk of a default occurring over
the expected life of the financial asset. To make
that assessment, the Company compares the risk
of a default occurring on the financial asset as at
the balance sheet date with the risk of a default
occurring on the financial asset as at the date of
initial recognition and considers reasonable and
supportable information, that is available without
undue cost or effort, that is indicative of significant
increases in credit risk since initial recognition. The
Company assumes that the credit risk on a financial
asset has not increased significantly since initial
recognition, if the financial asset is determined to
have low credit risk at the balance sheet date.
n) Post- employment and other employee
benefit
Post-employment benefits
Defined contribution plans
A defined contribution plan is a plan under which
the Company pays fixed contributions into an
independent fund administered by the government,
for example, contribution towards Employees’
Provident Fund Scheme, Employees’ State Insurance
Scheme and National Pension Scheme. The
Company has no legal or constructive obligations
to pay further contributions after its payment of
the fixed contribution, which are recognised as
an expense in the year in which related employee
services are received.
Defined benefit plans
The Gratuity and Provident Fund (Funded) are defined
benefit plans. The cost of providing benefits under
the defined benefit plan is determined using the
projected unit credit method with actuarial valuations
being carried out at each balance sheet date, which
recognizes each period of service as giving rise to
additional unit of employee benefit entitlement and
measures each unit separately to build up the final
obligation. Gratuity fund is administered through Life
Insurance Corporation of India.
Remeasurements, comprising of actuarial gains
and losses, excluding amounts included in net
interest on the net defined benefit liability are
recognized immediately in the balance sheet with a
corresponding debit or credit to retained earnings
through other comprehensive income in the period
in which they occur. Remeasurements are not
reclassified to profit or loss in subsequent periods.
Other employee benefits
Long-term employee benefits: Compensated
absences
Liability in respect of compensated absences
becoming due or expected to be availed within one
year from the balance sheet date is recognised on
the basis of undiscounted value of estimated amount
required to be paid or estimated value of benefit
expected to be availed by the employees. Liability
in respect of compensated absences becoming
due or expected to be availed more than one year
after the balance sheet date is estimated based on
an actuarial valuation performed by an independent
actuary using the projected unit credit method.
Actuarial gains and losses arising from past
experience and changes in actuarial assumptions
are charged to the statement of profit and loss in the
year in which such gains or losses are determined.
Other short-term benefits
Expense in respect of other short-term benefits is
recognized on the basis of amount paid or payable
for the period during which services are rendered by
the employees.
o) Share based payments
Equity settled share based payments to employees
and others providing similar services are measured
at the fair value at the date of grant. Details regarding
the determination of the fair value of equity settled
share-based transactions are set out in note 45.
The fair value, determined at the date of grant
of the equity settled share-based payments, is
expensed on a straight-line basis over the vesting
period, based on the Company’s estimate of
equity instruments that will eventually vest, with a
corresponding increase in equity. At the end of each
reporting year, the Company revises its estimate of
the number of equity instruments expected to vest.
The impact of the revision of the original estimates,
if any, is recognised in statement of profit and loss
such that the cumulative expense reflects the revised
estimate, with a corresponding adjustment to the
equity settled share based payment reserve.
The Company has created an Employee Benefit
Trust for providing share based payment to its
employees and others. The Company uses the Trust
as a vehicle for distributing shares to employees and
others under the employee stock option scheme. The
Trust buys shares of the Company from the sources,
primary, secondary or combination, for giving shares
to employees. The Company treats Trust as its
extension and shares held by the Trust are treated
as treasury shares.
Own equity instruments that are reacquired (treasury
shares) are recognised at cost and deducted from
Equity. No gain or loss is recognised in statement
of profit and loss on the purchase, sale, issue
or cancellation of the Company’s own equity
instruments. Share options exercised during the
reporting year are satisfied with treasury shares. The
dilutive effect of outstanding options is reflected as
additional share dilution in the computation of diluted
earnings per share.
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