2. Material accounting policies
2.1 Statement of compliance and basis of preparation
The Standalone financial statements of the Company have been prepared in accordance with Indian
Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as
amended from time to time) and presentation requirements of Division II of Schedule III to the Companies
Act, 2013 (as amended from time to time), (Ind AS compliant Schedule III), as applicable to the Standalone
Financial Statements(SFS).
The Standalone financial statements have been prepared on a historical cost basis, except for the following
assets and liabilities which have been measured at fair value or at revalued amount:
^ Buildings classified as property, plant and equipment,
^ Derivative financial instruments,
^ Certain financial assets and liabilities measured at fair value (refer accounting policy regarding
financial instruments), and
^ Contingent consideration arising in business combination
^ Equity settled ESOP at grant date fair value and cash settled ESOP at fair value at each reporting
date
The accounting policies and related notes further described the specific measurements applied for each of
the assets and liabilities.
In addition, the carrying values of recognised assets and liabilities designated as hedged items in fair value
hedges that would otherwise be carried at amortised cost are adjusted to record changes in the fair values
attributable to the risks that are being hedged in effective hedge relationships. The Standalone financial
statements are presented in INR, and all values are rounded to the nearest lakhs (INR 00,000), except when
otherwise indicated.
The Company has prepared the financial statements on the basis that it will continue to operate as a going
concern.
2.2 Key sources of estimation
The preparation of financial statements in conformity with Ind AS requires that the management of the
Company makes estimates and assumptions that affect the reported amounts of income and expenses of
the period, the reported balances of assets and liabilities and the disclosures relating to contingent liabilities
as of the date of the financial statements. The estimates and underlying assumptions made by management
are explained under respective policies. Revisions to accounting estimates include useful lives of property,
plant and equipment & intangible assets, allowance for expected credit loss, future obligations in respect
of retirement benefit plans, expected cost of completion of contracts, provision for rectification costs, fair
value/recoverable amount measurement, tax provisions etc. Difference, if any, between the actual results and
estimates is recognised in the period in which the results are known.
2.3 Property, plant and equipment
Property, Plant and Equipment are measured at cost less accumulated depreciation and impairment loss
if any. The cost of property plant and equipment includes those incurred directly for the construction or
acquisition of the asset and directly attributable to bringing it to the location and condition necessary for it to
be capable of operating in the manner intended by the management and includes present value of expected
costs for dismantling/restoration wherever applicable.
The cost of major spares is recognized in the carrying amount of the item of property, plant and equipment,
in accordance with the recognition criteria set out in the standard. The carrying amount of the replaced
part is derecognized at the time of actual replacement. The costs of the day-to-day servicing of the item are
recognized in statement of profit or loss as incurred. Each component / part of an item of property, plant and
equipment with a cost that is significant in relation to the total cost of the item is depreciated separately only
when it has a different useful life. The gain or loss arising from de-recognition of an item of property, plant and
equipment is included in statement of profit or loss when the item is derecognized.
Depreciation on each part of an item / component of PPE provided on pro-rata basis using the written down
value method based on the expected useful life of the asset and is charged to the Statement of Profit and
Loss as specified in Part C of Schedule II to the Companies Act, 2013 and in the manner specified therein,
except in respect of self-generated units included in plant & machinery group which are depreciated over their
technically estimated useful lives of 10 years on written down value method. The estimated useful life has
been assessed based on technical evaluation, considering the nature of the asset and the estimated usage
basis management's best judgement of economic benefits from those classes of assets.
Property plant and equipment with finite life are evaluated for recoverability whenever there is an indication
that their carrying amounts may not be recoverable. If such indication exists, the recoverable amount (higher
of fair value less cost to sell and value in use) is determined on an individual asset basis unless the asset does
not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable
amount is determined for cash generating unit (CGU) to which the asset belongs. If the recoverable amount
of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or
CGU) is reduced to its recoverable amount. An impairment loss is recognized in the statement of profit and
loss account.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon
disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising
on derecognition of the asset (calculated as the difference between the net disposal proceeds and the
carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognised.
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.
2.4 Intangible assets
Intangible asset is recognised when it is probable that future economic benefits that are attributable to the
asset will flow to the enterprise and the cost of the asset can be measured reliably. Intangible assets acquired
separately are measured on initial recognition at cost. Internally generated intangibles, excluding capitalised
development costs (refer below policy for R&D costs), are not capitalised and the related expenditure is
reflected in profit or loss in the period in which the expenditure is incurred.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment
whenever there is an indication that the intangible asset may be impaired. The amortisation period and
the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of
each reporting period. Changes in the expected useful life or the expected pattern of consumption 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. The amortisation expense on intangible
assets with finite lives is recognised in the statement of profit and loss unless such expenditure forms part of
carrying value of another asset.
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either
individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to
determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite
to finite is made on a prospective basis.
An intangible asset is derecognised upon disposal (i.e., at the date the recipient obtains control) or when no
future economic benefits are expected from its use or disposal. Any gain or loss arising upon derecognition
of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the
asset) is included in the statement of profit and loss when the asset is derecognised.
2.5 Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are recognised
as an intangible asset when the Company can demonstrate:
^ The technical feasibility of completing the intangible asset so that the asset will be available for
use or sale
^ Its intention to complete and its ability and intention to use or sell the asset
^ How the asset will generate future economic benefits
^ The availability of resources to complete the asset
^ The ability to measure reliably the expenditure during development
2.6 Investment in subsidiaries, associates and joint ventures
A subsidiary is an entity that is controlled by another entity.
An associate is an entity over which the Company has significant influence. Significant influence is the power
to participate in the financial and operating policy decisions of the investee but is not control or joint control
over those policies.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement
have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of
an arrangement, which exists only when decisions about the relevant activities require unanimous consent of
the parties sharing control.
The Company's investments in its subsidiaries, associates and joint ventures are accounted at cost less
impairment.
2.7 Impairment of investments
Investment is evaluated for impairment by adopting the 'Value in Use' model for the purposes of ascertaining
the estimated recoverable amount of the investment. In the absence of computation of 'Value in Use', the net-
worth of the investee company is considered as the amount of 'value in use' and impairment is considered
accordingly.
If the recoverable amount is less than its carrying amount, the impairment loss is recorded in the Statement
of Profit and Loss. When an impairment loss subsequently reverses, the carrying amount of the Investment is
increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not
exceed the cost of the Investment. A reversal of an impairment loss is recognised immediately in Statement
of Profit or Loss.
2.8 Current versus non-current classification
The Company segregates assets and liabilities into current and non-current categories for presentation in the
balance sheet after considering its normal operating cycle and other criteria set out in Ind AS 1, “Presentation
of Financial Statements”. For this purpose, current assets and liabilities include the current portion of non¬
current assets and liabilities respectively. Deferred tax assets and liabilities are always classified as non¬
current.
The operating cycle is the time between the acquisition of assets for processing and their realization in cash
and cash equivalents. The Company has identified period up to twelve months as its operating cycle.
2.9. Foreign currencies
The Company's Standalone financial statements are presented in Indian Rupee (INR), which is also the
Company's functional currency.
2.10 Transactions and balances
Transactions in foreign currencies are initially recorded by the Company at functional currency spot rates
at the date the transaction first qualifies for recognition. However, for practical reasons, the Company uses
average rate if the average approximates the actual rate at the date of the transaction.
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 are recognised in profit or 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 OCI or profit or loss are also recognised in OCI or profit or loss, respectively).
In determining the spot exchange rate to use on initial recognition of the related asset, expense or income
(or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance
consideration, the date of the transaction is the date on which the Company initially recognises the non¬
monetary
asset or non-monetary liability arising from the advance consideration. If there are multiple payments or
receipts in advance, the Company determines the transaction date for each payment or receipt of advance
consideration.
2.11 Financial instruments
Financial assets and/or financial liabilities are recognised when the Company becomes party to a contract
embodying the related financial instruments. All financial assets, financial liabilities and financial guarantee
contracts are initially measured at fair value except for trade receivables not containing a significant financing
component are initially measured at transaction price. Transaction costs that are attributable to the acquisition
or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair
value through profit or loss) are added to or deducted from, the fair value of such financial assets or liabilities,
on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognised in profit or loss. In case of funding to subsidiary
companies in the form of interest free or concession loans and preference shares, the excess of the actual
amount of the funding over initially measured fair value is accounted as an equity investment. A financial asset
and a financial liability is offset and presented on net basis in the balance sheet when there is a current legally
enforceable right to set-off the recognised amounts and it is intended to either settle on net basis or to realise
the asset and settle the liability simultaneously.
(i) Financial assets:
A. All recognised financial assets are subsequently measured in their entirety either at amortised
cost or at fair value as follows:
1. Investments in debt instruments that are designated as fair value through profit or
loss (FVTPL) - at fair value. Debt instruments at FVTPL is a residual category for debt
instruments, if any, and all changes are recognised in profit or loss.
2. Investments in debt instruments that meet the following conditions are subsequently
measured at amortised cost (unless the same designated as fair value through profit or
loss): • 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 instrument give rise
on specified dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
3. Investment in debt instruments that meet the following conditions are subsequently
measured at fair value through other comprehensive income [FVTOCI] (unless the same
are designated as fair value through profit or loss) • The asset is held within a business
model whose objective is achieved both by collecting contractual cash flows and selling
financial assets; and • The contractual terms of instrument give rise on specified dates
to cash flows that are solely payments of principal and interest on the principal amount
outstanding.
4. Investment in equity instruments issued by subsidiary, associate and joint venture
companies are measured at cost less impairment.
B. For financial assets that are measured at FVTOCI, income by way of interest and dividend,
provision for impairment and exchange difference, if any, (on debt instrument) are recognised
in profit or loss and changes in fair value (other than on account of above income or expense)
are recognised in other comprehensive income and accumulated in other equity. On disposal of
debt instruments at FVTOCI, the cumulative gain or loss previously accumulated in other equity
is reclassified to profit or loss. In case of equity instruments at FVTOCI, such cumulative gain or
loss is not reclassified to profit or loss on disposal of investments.
C. A financial asset is primarily derecognised when:
1. the right to receive cash flows from the asset has expired, or
2. the Company has transferred its rights to receive cash flows from the asset or has assumed
an obligation to pay the received cash flows in full without material delay to a third party
under a pass-through arrangement; and (a) the Company has transferred substantially all
the risks and rewards of the asset, or (b) the Company has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred control of the asset.
On derecognition of a financial asset in its entirety, the difference between the carrying
amount at the date of derecognition and the consideration received is recognised in profit
or loss.
D. Impairment of financial assets: For trade receivable, the Company applies the simplified
approach of Ind AS 109, which requires measurement of loss allowance at an amount equal
to lifetime expected credit losses. Impairment loss on trade receivables is recognised using
expected credit loss model, which involves use of a provision matrix constructed on the basis
of historical credit loss experience as permitted under Ind AS 109 and is adjusted for forward
looking information. Impairment loss on investments is recognised when the carrying amount
exceeds its recoverable amount. For all other financial assets, expected credit losses are
recognised based on the difference between the contractual cashflows and all the expected cash
flows, discounted at the original effective interest rate. ECLs are measured at an amount equal
to 12-month expected credit losses or at an amount equal to lifetime expected credit losses if the
credit risk on the financial asset has increased significantly since initial recognition.
ii) Financial liabilities:
A. Financial liabilities, including derivatives and embedded derivatives, which are designated
for measurement at FVTPL are subsequently measured at fair value. Financial guarantee
contracts are subsequently measured at the amount of impairment loss allowance or the
amount recognised at inception net of cumulative amortisation, whichever is higher. All
other financial liabilities including loans and borrowings are measured at amortised cost
using Effective Interest Rate (EIR) method.
B. A financial liability is derecognised when the related obligation expires or is discharged or
cancelled.
2.12 Impairment of assets
As at the end of each financial year, the carrying amounts of PPE, investment property, intangible assets and
investments in subsidiary, associate and joint venture companies are reviewed to determine whether there is
any indication that those assets have suffered an impairment loss. If such indication exists, PPE, investment
property, intangible assets and investments in subsidiary, associate and joint venture companies are tested
for impairment so as to determine the impairment loss, if any. Goodwill is tested for impairment each year.
Impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount.
Recoverable amount is determined:
(i) in the case of an individual asset, at the higher of the fair value less costs of disposal and the
value-in-use; and
(ii) in the case of a cash generating unit (the smallest identifiable group of assets that generates
independent cash flows), at the higher of the cash generating unit's fair value less costs of
disposal and the value-in-use. (The amount of value-in-use is determined as the present value
of estimated future cash flows from the continuing use of an asset, which may vary based on
the future performance of the Company and from its disposal at the end of its useful life. For
this purpose, the discount rate (post-tax) is determined based on the weighted average cost
of capital of the company suitably adjusted for risks specified to the estimated cash flows of
the asset). If recoverable amount of an asset (or cash generating unit) is estimated to be less
than its carrying amount, such deficit is recognised immediately in the Statement of Profit and
Loss as impairment loss and the carrying amount of the asset (or cash generating unit) is
reduced to its recoverable amount. When an impairment loss recognised earlier is subject to full
or partial reversal, the carrying amount of the asset (or cash generating unit), except impairment
loss allocated to goodwill, is increased to the revised estimate of its recoverable amount, such
that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss is recognised for the asset (or cash generating unit) in prior
years. A reversal of an impairment loss (other than impairment loss allocated to goodwill) is
recognised immediately in the Statement of Profit and Loss.
d. Fair value measurement
The Company measures financial instruments, such as, derivatives, at fair value at each balance
sheet date.
Fair value is the price that would be received to sell 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, assuming 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.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximising the use of relevant observable inputs and minimising the
use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised
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 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 fair value measurement as a whole) at the end of
each reporting period.
The Company's Management Committee determines the policies and procedures for both recurring fair
value measurement, such as derivative instruments and unquoted financial assets measured at fair value,
and for non-recurring measurement, such as assets held for sale in discontinued operations. The Valuation
Committee comprises of the head of the investment properties segment, heads of the Company's internal
mergers and acquisitions team, the head of the risk management department, financial controllers and chief
finance officer.
External valuers are involved for valuation of significant assets, such as properties and unquoted financial
assets, and significant liabilities, such as contingent consideration. Involvement of external valuers is decided
upon annually by the Valuation Committee after discussion with and approval by the Company's Audit
Committee. Selection criteria include market knowledge, reputation, independence and whether professional
standards are maintained. Valuers are normally rotated every three years. The Valuation Committee decides,
after discussions with the Company's external valuers, which valuation techniques and inputs to use for each
case.
At each reporting date, the Valuation Committee analyses the movements in the values of assets and liabilities
which are required to be remeasured or re-assessed as per the Company's accounting policies. For this
analysis, the Valuation Committee verifies the major inputs applied in the latest valuation by agreeing the
information in the valuation computation to contracts and other relevant documents.
The Valuation Committee also compares the change in the fair value of each asset and liability with relevant
external sources to determine whether the change is reasonable.
On an interim basis, the Valuation Committee and the Company's external valuers present the valuation
results to the Audit Committee and the Company's independent auditors. This includes a discussion of the
major assumptions used in the valuations.
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.
2.13 Inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as
follows:
^ Raw materials: Cost includes the cost of purchase and other costs incurred in bringing the
inventories to their present location and condition. Cost is determined using the Weighted
Average Cost method.
^ Finished goods and work-in-progress: Cost includes the cost of direct materials and labour
and a proportion of manufacturing overheads based on normal operating capacity but excluding
borrowing costs. Cost is determined using the Weighted Average Cost method.
^ Traded goods: Cost includes the cost of purchase and other costs incurred in bringing the
inventories to their present location and condition. Cost is determined using the Weighted
Average Cost method.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs
of completion and the estimated costs necessary to make the sale.
2.14 Cash and bank balances
Cash and bank balances include fixed deposits, margin money deposits, earmarked balances with banks and
other bank balances which have restrictions on repatriation. Short-term and liquid investments being subject
to more than insignificant risk of change in value, are not included as part of cash and cash equivalents.
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