C. Summary of material accounting
policies
C.1 Revenue recognition
a. Interest income
Interest income is recognised in the standalone
statement of profit and loss using the effective interest
rate (EIR) method for all financial assets measured at
amortised cost or debt instruments measured at Fair
Value through Other Comprehensive Income (FVOCI).
EIR is the rate that discounts estimated future cash
receipts through the expected life of the financial asset
to the gross carrying amount of the financial asset. The
calculation of EIR includes all fees received between
parties to the contract that are an integral part of the
contract, transaction costs and all other premiums or
discounts.
Transaction costs include incremental costs that are
directly attributable to the acquisition of financial assets.
Interest income on credit-impaired assets is recognised
by applying the effective interest rate to the amortised
cost (net of impairment loss allowance) of the financial
asset. If the financial asset is no longer credit-impaired,
the Company reverts to calculating interest income on a
gross basis.
Interest on financial assets measured at Fair Value
through Profit or Loss (FVTPL) is recognised at the
contractual rate of interest.
b. Dividend income
Income from dividends on shares of corporate bodies
and units of mutual funds is accounted for when the
Company's right to receive the dividend is established.
c. Other revenue from operations
The Company recognises revenue from contracts with
customers (other than financial assets to which Ind AS
109 'Financial instruments' is applicable) based on a
comprehensive assessment model as set out in Ind AS
115 'Revenue from contracts with customers'. Revenue
is measured at the transaction price allocated to the
performance obligation in accordance with Ind AS 115.
The Company identifies contract(s) with a customer
and its performance obligations under the contract,
determines the transaction price and its allocation to the
performance obligations in the contract and recognises
revenue only on satisfactory completion of performance
obligations.
In case of discounts, rebates, credits, price incentives or
similar terms, consideration is determined based on its
most likely amount, which is assessed at each reporting
period.
f
• Fees, commission and other services
Fees on value-added services and products
are recognised for the rendering of services and
products to the customer.
• Net gain on fair value changes:
The Company recognises gains/(losses) on fair
value change of financial assets measured at
FVTPL and FVOCI and realised gains/(losses) on
derecognition of financial assets measured at
FVTPL and FVOCI on net basis.
C.2 Financial instruments
A financial instrument is any contract that gives rise to
a financial asset of one entity and a financial liability or
equity instrument of another entity.
a. Financial assets
Financial assets are recognised in the Company's
financial statements when the Company becomes
a party to the contractual provisions of the financial
instruments.
• Classification
Upon initial recognition, financial assets are
classified into one of the following categories:
• Amortised Cost (AC),
• Fair Value through Other Comprehensive
Income (FVOCI), or
• Fair Value through Profit or Loss (FVTPL)
The classification is determined based on the
Company's business model for managing the
financial assets and the contractual cash flow
characteristics of the financial asset. The business
model for managing financial assets refers to the
way its financial assets are managed in order to
achieve its business objective. The business model
determines whether cash flows will result from
collecting contractual cash flows, selling financial
assets or both.
• Initial recognition and measurement
All financial assets are initially recognised at fair
value except the following:
• Investment in subsidiaries, associates and
joint venture which are recorded at cost;
• Financial assets measured at FVTPL are
recognised at fair value at the reporting date
Transaction costs and revenues that are directly
attributable to the acquisition or issue of financial
assets (other than financial assets measured at
FVTPL) are added to or deducted from the fair
value on initial recognition. Transaction costs and
revenues of financial assets measured at FVTPL
are recognised immediately in the standalone
statement of profit and loss. However, trade
receivables that do not contain a significant
financing component are measured at transaction
price.
• Subsequent measurement
• Financial assets at amortised cost
A financial asset is measured at amortised
cost if it meets both of the following
conditions:
• the asset is held within a business model
whose objective is to hold assets to collect
contractual cash flows and
• the contractual terms of the financial asset
represent contractual cash flows that are
Solely Payments of Principal and Interest
(SPPI) on the principal amount outstanding.
Subsequent to initial recognition, financial
assets held within this category are measured at
amortised cost using the effective interest method,
less any impairment losses.
• Financial assets at FVOCI
A financial asset is measured at FVOCI if it meets
both of the following conditions:
• the asset is held within a business model
whose objective is achieved by both
collecting contractual cash flows and selling
financial assets; and
• the contractual terms of the financial asset
represent contractual cash flows that are
solely payments of principal and interest on
the principal amount outstanding.
Financial assets designated as FVOCI are
subsequently measured at fair value, with
unrealised gains and losses recognised in other
comprehensive income, except for impairment
losses and foreign exchange gains and losses on
monetary assets.
• Financial assets at FVTPL
Financial assets not classified as either amortised
cost or FVOCI are measured at FVTPL. Subsequent
changes in fair value are recognised in the
standalone statement of profit and loss.
• Reclassification of financial assets
Financial assets are reclassified subsequent to
their recognition only if the Company changes
its business model for managing those financial
assets. Changes in business model are made and
applied prospectively from the reclassification date,
which is the first day of immediately next reporting
period following the changes in business model in
accordance with principles laid down under Ind AS
109 'Financial Instruments'.
• Derecognition of financial assets
Financial assets are derecognised when the
contractual rights to receive cash flows from the
asset have expired or have been transferred in
accordance with Ind AS 109, and the Company
has transferred substantially all risks and rewards
associated with the asset.
On derecognition of a financial asset in its entirety,
the difference between (a) the carrying amount
(measured at the date of derecognition) and (b)
the consideration received (including any new
asset obtained less any new liability assumed) is
recognised in the standalone statement of profit
and loss.
Financial assets are written off (either partially or
in full) when there is no reasonable expectation
of recovering a financial asset in its entirety or a
portion thereof. However, financial assets that are
written off could still be subject to enforcement
activities under the Company recovery procedures,
considering legal advice where appropriate. Any
recoveries made are recognised in the standalone
statement of profit and loss on actual realisation
from customer.
• Investment in subsidiaries, associates and
joint ventures
The Company has accounted for its investments
in subsidiaries, associates and joint ventures at
cost less impairment loss (if any). Investments are
reviewed for impairment if events or changes in
circumstances indicate that the carrying amount
may not be recoverable.
• Impairment of financial assets
The Company recognises expected credit loss
allowances on:
• Financial assets measured at amortised cost;
and
• Financial assets measured at FVOCI - debt
instruments.
Expected credit losses are measured based on
an assessment of the credit risk associated with
financial instruments. This assessment considers
historical experience, current economic conditions,
and forward-looking information relevant to the
collectability of contractual cash flows.
• General approach
Both Lifetime ECLs and 12-month ECLs are
calculated on either an individual basis or a
collective basis, depending on the nature of the
underlying portfolio of financial instruments.
Financial assets where no significant increase
in credit risk has been observed are considered
to be in 'stage 1', for which a 12-month ECL is
recognised. Financial assets that are considered
to have a significant increase in credit risk are
considered to be in 'stage 2' and those which are
in default or for which there is objective evidence
of impairment are considered to be in 'stage 3'.
Lifetime ECL is recognised for stage 2 and stage
3 financial assets.
The Company has established a policy to perform
an assessment, at the end of each reporting period,
of whether a financial instrument's credit risk has
increased significantly since initial recognition,
by considering the change in the risk of default
occurring over the remaining life of the financial
instrument.
Probability-Weighted Approach: Expected credit
losses are calculated using a probability-weighted
approach, considering a range of possible
outcomes and their associated probabilities. This
approach incorporates both likelihood of default
and the severity of loss in the event of default.
The Company maintains allowances for expected
credit losses, which are deducted from the
carrying amount of the financial asset to present
the net carrying amount on the balance sheet.
The allowance is adjusted through the standalone
statement of profit and loss to reflect changes in
expected credit losses.
• Simplified approach
The Company follows a 'simplified approach' for
recognition of impairment loss allowance on trade/
other receivables that do not contain a significant
financing component. The application of a
simplified approach does not require the Company
to track changes in credit risk. The Company uses
historical default rates to determine impairment
loss on the portfolio of trade receivables. At every
reporting date, these historical default rates are
reviewed and changes in the forward-looking
estimates are analysed.
b. Financial liabilities
Financial liabilities and equity instruments issued by
the Company are classified according to the substance
of the contractual arrangements entered into and the
definitions of financial liabilities and equity instruments.
• Initial recognition and measurement
All financial liabilities are recognised at fair value
and in case of borrowings and payables, net of
directly attributable costs. Fees of a recurring
nature are directly recognised in the standalone
statement of profit and loss as finance cost.
• Subsequent measurement
Financial liabilities are carried at amortised cost
using the effective interest method.
• Derecognition
A financial liability (or a part of a financial liability) is
derecognised from the Company's balance sheet
when the obligation specified in the contract are
discharged, cancelled or have expired. Any gains
or losses arising on derecognition of liabilities are
recognised in the standalone Statement of Profit
and Loss.
c. Compound financial instruments
The Company recognises separately the components
of a compound financial instrument that (a) creates a
financial liability of the entity and (b) grants an option to
the holder of the instrument to convert it into an equity
instrument of the entity.
d. Offsetting of financial instruments
Financial assets and financial liabilities are offset and the
net amount is reported in the Balance Sheet only where
the Company has a legally enforceable right to set off the
amount and Company intends, either to settle them on
a net basis or to realise the asset and settle the liability
simultaneously as permitted by Ind AS.
C.3 Cash and cash equivalents
Cash and cash equivalents comprise of cash on hand, cash
at bank, short-term deposits and short-term highly liquid
investments with original maturities of three months or less
that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
C.4 Trade receivable
A receivable represents the Company's right to an amount of
consideration that is unconditional.
C.5 Tax expenses
The tax expenses for the period comprise current tax and
deferred income tax. Tax is recognised in the standalone
statement of profit and loss, except to the extent that it relates
to items recognised in the other comprehensive income. In
which case, the tax is also recognised in other comprehensive
income or equity.
• Current tax
Current tax assets and liabilities are measured at the
amount expected to be recovered from or paid to the
income tax authorities, based on tax rates and laws that
are enacted at the reporting date.
• Deferred tax
Deferred tax is recognised on temporary differences
between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax
bases used in the computation of taxable profit.
Deferred tax assets are recognised to the extent it is
probable that taxable profit will be available against
which the deductible temporary differences, and the
carry forward of unused tax losses can be utilised.
Deferred tax items in correlation to the underlying
transaction relating to Other comprehensive income or
Equity are recognised in Other comprehensive income
and Equity, respectively.
Deferred tax liabilities and assets are measured at the
tax rates that are expected to apply in the period in
which the liability is settled or the asset realised, based
on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period.
The carrying amount of Deferred tax assets are reviewed
at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable
profit will be available to allow all or part of the deferred
tax asset to be utilised. Unrecognised deferred tax
assets are reassessed at each reporting date and are
recognised to the extent that it has become probable
that future taxable profits will allow the deferred tax
assets to be recovered.
Deferred tax assets and deferred tax liabilities are offset if a
legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred taxes relate to
the same taxable entity and the same taxation authority.
C.6 Property, plant and equipment
Property, Plant and Equipment (PPE) are stated at cost,
net of recoverable taxes, trade discount and rebates less
accumulated depreciation and impairment losses, if any.
Such cost includes purchase price, borrowing cost and
any cost directly attributable to bringing the assets to its
working condition for its intended use, net charges on foreign
exchange contracts and adjustments arising from exchange
rate variations attributable to the assets.
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 associated with
the item will flow to the entity and the cost can be measured
reliably.
Each part of an item of property, plant and equipment with a
cost that is significant in relation to the total cost of that item
are depreciated separately.
Property, plant and equipment not ready for the intended use
on the date of the Balance Sheet are disclosed as 'Capital
work-in-progress'. Advances given towards the acquisition of
property, plant and equipment outstanding at each balance
sheet date are disclosed in other non-financial assets.
Administrative and other general overhead expenses that are
specifically attributable to the acquisition of Property, Plant and
Equipment are allocated and capitalised as a part of the cost
of the respective Property, Plant and Equipment. Expenses on
repair and maintenance are charged to the statement of profit
and loss during the year in which such costs are incurred.
Depreciation on property, plant and equipment is provided
using straight line method on cost. Depreciation is provided
based on useful life of the assets as prescribed in Schedule
II to the Act.
The residual values, useful lives and methods of depreciation
of property, plant and equipment are reviewed at each financial
year end and adjusted prospectively, if appropriate.
Gains or losses 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 standalone statement of profit and
loss when the asset is derecognised.
C.7 Leases
The determination of whether an arrangement is (or contains)
a lease is based on the substance of the arrangement at the
inception of the lease. The arrangement is, or contains, a lease
if fulfilment of the arrangement is dependent on the use of a
specific asset or assets and the arrangement conveys a right-
to-use the asset or assets, even if that right is not explicitly
specified in the arrangement. The Company, as a lessee,
recognises a Right-of-Use (ROU) asset and a lease liability for
its enforceable leasing arrangements, if the contract conveys
the right to control the use of an identified asset.
The contract conveys the right to control the use of an
identified asset, if it involves the use of an identified asset and
the Company has substantially all of the economic benefits
from use of the asset and has the right to direct the use of the
identified asset.
The Company measures the lease liability at the present value
of the lease payments that are not paid at the commencement
date of the lease. The lease payments are discounted using
the interest rate implicit in the lease if that rate can be readily
determined. If that rate cannot be readily determined, the
Company uses an incremental borrowing rate.
Costs, including depreciation, are recognised as an expense
in the standalone statement of profit and loss. Initial direct
costs are recognised immediately in the standalone statement
of profit and loss.
For short-term and low-value leases, the company recognises
the lease payments as an operating expense on a straight¬
line basis over the lease term. None of the agreements and
contracts of the Company are resulting into ROU asset and
lease liability.
C.8 Other intangible assets
Other intangible assets are stated at cost of acquisition
net of recoverable taxes, trade discount and rebates less
accumulated amortisation/depletion and impairment losses,
if any. Such cost includes purchase price, borrowing costs
and any cost directly attributable to bringing the asset to its
working condition for the intended use, net charges on foreign
exchange contracts and adjustments arising from exchange
rate variations attributable to the other intangible assets.
Administrative and other general overhead expenses that are
specifically attributable to the acquisition of other intangible
assets are allocated and capitalised as part of the cost of the
other intangible assets. Expenses on software support and
maintenance are charged to the standalone statement of profit
and loss during the year in which such costs are incurred.
Gains or losses arising from derecognition of an other
intangible asset are measured as the difference between the
net disposal proceeds and the carrying amount of the asset
and are recognised in the standalone statement of profit and
loss when the asset is derecognised.
Intangible Assets are amortised using the straight line method
on cost over the useful life of the assets.
Other intangible assets not ready for the intended use on the
date of the Balance Sheet are disclosed as 'Intangible assets
under development'.
The amortisation period and the amortisation method for
other intangible assets with a finite useful life are reviewed at
each reporting date.
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