D. Summary of Material Accounting Policies
The following are the material accounting policies applied by the Company in
preparing its financial statements consistently to all the periods presented
I. Current versus non-current classification
The Company presents assets and liabilities in the Balance Sheet based on
current/non-current classification.
An asset is current when it is:
• Expected to be realised or intends to be sold or consumed in the normal operating
cycle;
• Held primarily for the purpose of trading;
• Expected to be realised within twelve months after the reporting period; or
• Cash and 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:
Ý It is expected to be settled in the normal operating cycle;
Ý It is held primarily for the purpose of trading;
Ý It is due to be settled within twelve months after the reporting period; or
Ý 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.
Operating cycle
Operating cycle of the Company is the time between the acquisition of assets for
processing and their realization in cash or cash equivalents. As the Company's normal
operating cycle is not clearly identifiable, it is assumed to be twelve months.
II. Use of estimates and judgments
The estimates and judgments used in the preparation of the financial statements are
continuously evaluated by the Company and are based on historical experience and
various other assumption and factors (including expectations of future events) that the
Company believes to be reasonable under the existing circumstances. Difference
between actual results estimates are recognized in the period in which the result is
known/materialized.
The said estimates are based on the facts and events, that existed as at reporting date, or
that occurred after that date but provide additional evidence about conditions existing as
at the reporting date.
III. Financial instruments
A financial instrument is a contract that gives rise to a financial asset of one entity and a
financial liability or equity instrument of another entity.
A. Financial asset
i. Classification and measurement
Classification
The Company classifies its financial assets, other than investments in subsidiaries and
joint venture in the following measurement categories:
a. those to be measured subsequently at fair value (either through other
comprehensive income, or through profit or loss), and
b. those measured at amortised cost.
The classification depends on the Company's business model for managing the financial
assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss
or other comprehensive income. For investments in debt instruments, this will depend on
the business model in which the investment is held. For investments in equity
instruments, this will depend on whether the Company has made an irrevocable election
at the time of initial recognition to account for the equity investment at fair value through
other comprehensive income.
The Company reclassifies debt investments when and only when its business model for
managing those assets changes.
Measurement
At initial recognition, all financial assets are measured initially at fair value plus, in the case
of financial assets not recorded at fair value through profit or loss, transaction costs that
are attributable to the acquisition of the financial asset. Transaction costs of financial
assets carried at fair value through profit or loss are expensed in profit or loss. Purchase or
sales of financial assets that require delivery of assets within a time frame established by
regulation or convention in the market place (regular way trade) are recognised on trade
date.
Debt instruments
Subsequent measurement of debt instruments depends on the Company's business
model for managing the asset and the cash flow characteristics of the asset. There is only
one measurement category into which the Company classifies its debt instruments as
follows:
Amortised cost
Assets that are held for collection of contractual cash flows where those cash flows
represent solely payments of principal and interest are measured at amortised cost. A
gain or loss on a debt investment that is subsequently measured at amortised cost and is
not part of a hedging relationship is recognised in profit or loss when the asset is
derecognised or impaired. Interest income from these financial assets is included in
finance income using the effective interest rate method.
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method, less provision for impairment.
Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents
includes cash on hand, deposits held at call with financial institutions, other 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, and bank overdrafts which are repayable on demand and form an
integral part of an entity's cash management system.
Other bank overdrafts are shown within borrowings in current liabilities in the balance
sheet.
ii. Impairment of financial assets
The Company assesses on a forward-looking basis the expected credit losses
associated with its assets carried at amortised cost. The impairment methodology
applied depends on whether there has been a significant increase in credit risk. Note
25.2 details how the Company determines whether there has been a significant
increase in credit risk. For trade receivables only, the Company applies the simplified
approach permitted by Ind AS 109 Financial Instruments, which requires expected
lifetime losses to be recognised from initial recognition of the receivables.
iii. Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of
similar financial assets) is primarily derecognised when:
• The rights to receive cash flows from the financial asset have been transferred, or
• The Company retains the contractual rights to receive the cash flows of the financial
asset but assumes a contractual obligation to pay the cash flows to one or more
recipients.
When the Company has transferred an asset, it evaluates whether it has transferred
substantially all risks and rewards of ownership of the financial asset. In such cases,
the financial asset is derecognised. When the Company has not transferred
substantially all the risks and rewards of ownership of a financial asset, the financial
asset is not derecognised.
When the Company has neither transferred a financial asset nor retains substantially
all risks and rewards of ownership of the financial asset, the financial asset is
derecognised if the Company has not retained control of the financial asset. When
the Company retains control of the financial asset, the asset is continued to be
recognised to the extent of continuing involvement of the asset.
iv. Income recognition
Interest income from debt instruments is recognised using the effective interest rate
method. The effective interest rate is the rate that exactly discounts estimated future
cash receipts through the expected life of the financial asset to the gross carrying
amount of a financial asset. When calculating the effective interest rate, the Company
estimates the expected cash flows by considering all the contractual terms of the
financial instrument (for example, prepayment, extension, call and similar options)
but does not consider the expected credit losses. Dividends are recognised in profit or
loss only when the right to receive payment is established, it is probable that the
economic benefits associated with the dividend will flow to the Company, and the
amount of the dividend can be measured reliably.
B. Financial liabilities
i. Initial recognition and measurement:
Financial liabilities are classified, at initial recognition, as financial liabilities at fair
value through statement of Profit and Loss, loans and borrowing, payables, or as
derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognized 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 cash credit facilities from banks and derivative financial
instruments.
ii. Subsequent measurement:
The measurement of financial liabilities depends on their classification, as described
below:
Financial liabilities at fair value through Statement of Profit and loss. Financial
liabilities at fair value through profit and loss include financial liabilities held for
trading and financial liabilities designated upon initial recognition at fair value
through Profit and loss. Financial liabilities are classified as held for trading if they are
incurred for the purpose of repurchasing in the near term. This category also includes
derivatives financial instruments entered into by the company that are not
designated as hedging instruments in hedge relationships as defined by Ind AS 109.
Gains or losses on liabilities held for trading are recognized in the Statement of Profit
and loss.
Financial liabilities designated upon initial recognition at fair value through statement
of profit and loss are designated as such at the initial date of recognition and only if
the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value
gains/losses attributable to changes in own credit risks are recognized in OCI. These
gains/losses are not subsequently transferred to P&L. However, the company may
transfer the cumulative gain or loss within equity. All other changes in fair value of
such liability are recognized in the statement of profit and loss.
Loans and borrowings:
After initial recognition, interest-bearing loans and borrowings are subsequently
measured at amortised cost using the EIR method. Gains and losses are recognized in
the 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 or premium on
acquisition and fees 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 guarantee contracts:
Financial guarantee contracts issued by the company are those contracts that require
a payment to be made to reimburse the holder for a loss it incurs because the
specified debtor fails to make a payment when due in accordance with the terms of a
debt instrument.
Financial guarantee contracts are recognized initially as a liability at fair value through
statement of profit and loss (FVTPL), adjusted for transaction costs that are directly
attributable to the issuance of the guarantee. Subsequently, the liability is measured
at the higher of the amount of loss allowance determined as per impairment
requirements of Ind AS 109 and the amount recognized less cumulative amortisation.
iii. Derecognition:
A financial liability is derecognised when the obligation under the liability is
discharged or cancelled or expires. When an existing financial liability is replaced by
another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is
treated as the derecognition of the original liability and the recognition of a new
liability. The difference in the respective carrying amounts is recognized in the
statement of Profit and loss.
C. Derivative financial instrument:
The Company uses derivative financial instruments, such as forward currency
contracts, to hedge its foreign currency risks. Such derivative financial instrument is
initially recognized at fair value through consolidated statement of Profit and loss
(FVTPL) on the date on which a derivative contract is entered into and is subsequently
re-measured at fair value. Derivatives are carried as financial assets when the fair
value is positive and as financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivative financial
instrument are classified in the consolidated statement of Profit and loss and
reported with foreign exchange gains/(loss) not within results from operating
activities. Changes in fair value and gains/(losses) on settlement of foreign currency
derivative financial instruments relating to borrowings, which have not been
designed as hedge are recorded as finance cost.
D. 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 recognized
amounts and there is an intention to settle on a net basis, to relate the assets and
settle the liabilities simultaneously.
IV. Property, plant and equipment
Property, plant and equipment are stated at cost, net of recoverable taxes less
accumulated depreciation and accumulated impairment losses, if any. The cost
comprises purchase price and borrowing costs if capitalisation criteria are met, the
cost of replacing part of the fixed assets and directly attributable cost of bringing the
asset to its working condition for the intended use. Each 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. This applies mainly to components for machinery.
When significantly parts of fixed assets are required to be replaced at intervals, the
company recognizes such parts as individual assets with specific useful lives and
depreciates them accordingly. Likewise, when a major overhauling is performed, its
cost is recognized in the carrying amount of the Property, plant and equipment as a
replacement if the recognition criteria are satisfied. Any trade discounts and rebates
are deducted in arriving at the purchase price.
Subsequent expenditure related to an item of Property, plant and equipment is added
to its book value only if it increases the future benefits from the existing asset beyond
its previously assessed standard of performance. All other expenses on existing
Property, plant and equipment, including day-to-day repair and maintenance
expenditure and cost of parts replaced, are charged to the statement of Profit and
Loss for the period during which such expenses are incurred.
Capital work in progress comprised of cost of Property, plant and equipment that are
yet not installed and not ready for their intended use at the balance sheet date.
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
applicable.
The Company calculates depreciation on items of property, plant and equipment on a
straight-line method (SLM) basis as per the Companies Act 2013.
Derecognition
An item of property, plant and equipment 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.
V. Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost.
Following initial recognition, Intangible assets are carried at cost less accumulated
amortisation and accumulated impairment losses, if any.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortised over their useful economic lives 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 assets 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 recognized in the Statement of Profit and Loss. 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.
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 recognized in the Statement of Profit and Loss when the asset is
derecognised.
Amortisation
Software is amortized over management estimate of its useful life of 5 years.
VI. Impairment of non-financial assets
The Company assesses at each reporting date whether there is an indication that an
asset may be impaired. If any indication exists, the Company estimates the asset's
recoverable amount. An asset's recoverable amount is the higher of an asset's or cash
generating unit's (CGU) net selling price and its value in use. The recoverable amount
is determined for an individual asset, unless the asset does not generate cash inflows
that are largely independent of those from other assets or groups of assets. Where
the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is
considered impaired and is to its recoverable amount.
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 the 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.
VII. Inventories
Inventories of Raw material, Work-in-progress, finished goods and Stock-in-trade are
valued at the lower of cost and net realisable value. However, Raw material and other
items held for use in the production of inventories are not written down below cost if
the finished products in which they will be incorporated are expected to be sold at or
above cost.
Costs incurred in bringing each product to its present location and conditions are
accounted for as follows:
Cost of Raw Material, Packing material, Chemicals, Stores and Consumables, Finished
goods, trading and other products are ascertained on FIFO basis.
All other inventories of stores, consumables, project material at site are valued at
cost. The stock of waste is valued at net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business,
less estimated costs of completion and the estimated costs necessary to make the
sale.
VIII. Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will
flow to the company and the revenue can be reliably measured, regardless of when
the payment is being made. Revenue is measured at the fair value of the
consideration received or receivable. Amounts disclosed as revenue are exclusive of
Goods & Services Tax net of returns, trade discounts, rebates and amounts collected
on behalf of third parties.
The Company recognises revenue when the amount of revenue can be reliably
measured, it is probable that future economic benefits will flow to the Company and
specific criteria have been met for each of the Company's activities as described
below. The Company bases its estimates on historical results, taking into
consideration the type of customer, the type of transaction and the specifics of each
arrangement.
The specific recognition criteria described below must also be met before revenue is
recognized.
a. Sale of Goods
Revenue from the sale of goods is recognised when all the following conditions are
satisfied:
• the Company has transferred to the buyer the significant risks and rewards of
ownership of the goods;
• the Company retains neither continuing managerial involvement to the degree
usually associated with ownership nor effective control over the goods sold;
• the amount of revenue can be measured reliably;
• it is probable that the economic benefits associated with the transaction will flow
to the Company; and
• the costs incurred or to be incurred in respect of the transaction can be measured
reliably.
b. Sale of Services
Sales are recognised upon the rendering of services and are recognised net of Goods
& Services Tax (GST).
c. Interest income
Interest is recognized on a time proportion basis taking into account the amount
outstanding and the applicable interest rate.
d. Dividend
Dividend Income is recognised when the Company's right to receive is established
which is generally occurred when the shareholders approve the dividend.
e. All other items are recognised on accrual basis.
IX. Taxes on Income
Tax expense comprises of current income tax and deferred tax.
Current income tax
Current income tax assets and liabilities are measured at the amount expected to be
recovered from or paid 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.
Current income tax relating to items recognised outside the statement of Profit and
Loss is recognised outside the statement of Profit and Loss (either in other
comprehensive income or in equity). Deferred 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 provision where appropriate.
Deferred income tax
Deferred income tax is provided using the liability method on temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purpose at the reporting date.
Deferred tax liabilities are recognized for all taxable temporary differences, except.
- When the Deferred tax liability arises from the initial recognition of goodwill or an
asset or liability in a transaction other than a business combination that at the time of
the transaction affects neither accounting profit nor taxable profit or loss;
- In respect of taxable temporary differences associated with investments in
subsidiaries, when the timing of the reversal of the temporary differences can be
controlled and it is probable that the differences will not reverse in the foreseeable
future.
Deferred tax assets are recognized for all deductible temporary differences, the carry
forward of unused tax credits and any unused tax losses. Deferred tax assets are
recognized to the extent it is probable that future taxable amounts will be available
against the deductible temporary differences and the carry forward of unused tax
credits and unused tax losses can be utilised except:
- When the deferred tax asset arises relating to the deductible temporary difference
arises from the initial recognition of an asset or liability in a transaction other than a
business combination that at the time of the transaction affects neither accounting
profit nor taxable profit or loss.
- In respect of deductible temporary differences associated with investments in
subsidiaries, associates and interests in joint arrangements, deferred tax assets are
recognised only to the extent that it is probable that the temporary differences will
reverse in the foreseeable future and taxable profit will be available against which the
temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date 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 assets is to be utilised. Unrecognized
deferred tax assets are re-assessed at each reporting date and are recognised to the
extent that it has become probable that future taxable profits will allow the deferred
tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to
apply in the year when the asset is realised or the liability is settled, based on tax rates
(and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside the statement of Profit and Loss is
recognised outside the statement of Profit and Loss. Deferred tax items are
recognised in correlation to the underlying transaction either in other
comprehensive income or directly in equity.
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.
X. Employee benefits
Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits that are expected
to be settled wholly within 12 months after the end of the period in which the
employees render the related service are recognized in respect of employees services
up to the end of the reporting period and are measured at the amounts expected to
be paid when the liabilities are settled. The liabilities are presented as current
employee benefit obligations in the balance sheet.
Other long-term employee benefit obligations
The liabilities for earned leave and sick leave are not expected to be settled wholly
within 12 months after the end of the period in which the employees render the
related service. They are therefore measured as the present value of expected future
payments to be made in respect of services provided by employees up to the end of
the reporting period on government bonds using the projected unit credit method.
The benefits are discounted using the market yields at the end of the reporting period
that have terms approximating to the terms of the related obligation.
Remeasurements as a result of experience adjustments and changes in actuarial
assumptions are recognised in profit or loss.
The obligations are presented as current liabilities in the balance sheet if the
Company does not have an unconditional right to defer settlement for at least twelve
months after the reporting period, regardless of when the actual settlement is
expected to occur.
Post-employment obligations
The Company operates the following post-employment schemes:
a) defined benefit plans such as gratuity and
b) defined contribution plans such as provident fund.
Defined benefit plan
The liability or asset recognised in the balance sheet in respect of defined benefit
gratuity plans is the present value of the defined benefit obligation at the end of the
reporting period less the fair value of plan assets. The defined benefit obligation is
calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the
estimated future cash outflows by reference to market yields at the end of the
reporting period on government bonds that have terms approximating to the terms
of the related obligation. The net interest cost is calculated by applying the discount
rate to the net balance of the defined benefit obligation and the fair value of plan
assets. This cost is included in employee benefit expense in the statement of profit
and loss.
Remeasurement gains and losses arising from experience adjustments and changes
in actuarial assumptions are recognised in the period 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.
Changes in the present value of the defined benefit obligation resulting from plan
amendments or curtailments are recognised immediately in profit or loss as past
service cost.
Defined contribution plans
The Company pays provident fund contributions to publicly administered provident
funds as per local regulations. The Company has no further payment obligations once
the contributions have been paid. The contributions are accounted for as defined
contribution plans and the contributions are recognised as employee benefit
expense when they are due. Prepaid contributions are recognised as an asset to the
extent that a cash refund or a reduction in the future payments is available.
XI. Foreign Currency Transactions
Items included in the financial statements of the Company are measured using the
currency of the primary economic environment in which the Company operates ('The
Functional Currency') The Financial statements are presented in Indian Rupee (INR),
which is the company's functional and presentation currency.
Transactions in Foreign currency are recorded at the rate of exchange in force at the
time transactions are affected and exchange difference, if any, on settlement of
transaction is recognized in the Statement of Profit & Loss. Monetary transaction
balance other than FCDL as on date of Balance Sheet have been reported at exchange
rate on Balance Sheet date and difference charged to the Statement of Profit & Loss.
Forward contract premium paid on forward contracts are amortized to Statement of
Profit &Loss over life of such contract.
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 that are measured at fair value in a foreign
currency are translated using the exchange rates at the date when the fair value was
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).
XII. Fair value measurement
The Company measures financial instruments such as Investments at fair value at the
end of each reporting period.
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, 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
statements 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 recognised in the financial statements on a recurring
basis, the Company determines whether transfers have occurred between levels in
the hierarchy by reassessing 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 determines the policies and procedures for both
recurring fair value measurement, such as derivative instruments and for non¬
recurring measurement, such as asset held for sale.
External valuers are involved for valuation of significant assets, such as properties.
Involvement of external valuers is decided upon annually by the management after
discussion with and approval by the Company's Audit Committee.
Selection criteria include market knowledge, reputation, independence and whether
professional standards are maintained. Management decides, after discussions with
the Company's external valuers, which valuation techniques and inputs to use for
each case.
At each reporting date, management analyses the movements in the values of assets
and liabilities which are required to be re-measured or re-assessed as per the
Company's accounting policies. For this analysis, management verifies the major
inputs applied in the latest valuation by agreeing the information in the valuation
computation to contracts and other relevant documents.
Management, in conjunction with the Company's external valuers, 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 yearly basis.
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.
XIM.Investment and other Financial Assets
Financial assets are recognized and measured in accordance with Ind AS 109 -
Financial Instruments. Accordingly, the company recognizes financial asset only when
it has contractual right to receive cash or other financial assets from another
Company.
a. Initial recognition and measurement
All financial assets, except investment in subsidiary are measured initially at fair value
plus, transaction costs that are attributable to the acquisition of the financial asset.
The transaction cost incurred for the purchase of financial assets held at fair value
through profit or loss is expended in the statement of Profit and Loss immediately.
b. Subsequent measurement
For the purpose of Subsequent measurement financial assets are classified in three
categories:
- Measured at amortised cost
- Measured at fair value through other comprehensive income (FVOCI)
- Measured at fair value through Profit and Loss (FVTPL)
XIV. Debt instruments at amortised cost
Assets that are held for collection of contractual cash flows where those cash flows
represent solely payments of principal and interest are measured at amortised cost.
Financial assets are accounted for at amortized cost using the effective interest
method. This category comprises trade accounts receivable, loans, cash and cash
equivalents, bank balances and other financial assets. A gain or loss on a debt
instrument that is subsequently measured at amortized cost and is not part of a
hedging relationship is recognized in the Statement of Profit and Loss when the asset
is derecognized or impaired. Interest income from these financial assets is included in
finance income using the effective interest rate method.
Debt instruments at fair value through other comprehensive income (FVOCI)
Assets that are held for collection of contractual cash flows and for selling the financial
assets, where the assets' cash flows represent solely payments of principal and
interest, are measured at fair value through Other Comprehensive Income (FVOCI).
The movement in carrying amount are taken through Other Comprehensive Income,
except for the recognition of impairment gains or losses, interest revenue and foreign
exchange gains and losses which are recognized in the Statement of Profit and Loss.
When the financial asset is derecognized, the cumulative gain or loss previously
recognized in Other Comprehensive Income is reclassified from equity to the
Statement of Profit and Loss and recognized in other gains/ (losses). Interest income
from these financial assets is included in finance income using the effective interest
rate method.
Debt instruments at fair value through Profit and Loss (FVTPL)
FVTPL is a residual category for debt instruments. Any debt instrument, which does
not meet the criteria for categorisation at amortized cost or s FVTOCI, is classified as
at FVTPL. Debt instruments included within the FVTPL category are measured at fair
value with all changes recognised in the Statement of Profit and Loss.
XV. Equity investments
All equity investments, except in subsidiary are measured at cost in scope of Ind AS
109 are measured at fair value. For all other equity instruments, the company may
make an irrevocable election to present in other comprehensive income subsequent
changes in the fair value. 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-instruments as a FVTOCI, then all fair
value changes on the instrument, excluding dividends, are recognized in other
comprehensive income (OCI). There is no recycling of the amounts from OCI to
Statement of Profit and Loss, even on sale of Investment. However, the company may
transfer the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category are measured at fair value
with all changes recognised in the Statement of Profit and Loss.
Derecognition
A financial asset (or, where applicable, a part of financial asset or part of a group of
similar financial assets) is primarily derecognised (i.e. removed from the company's
Balance sheet) when:
-The rights to receive cash flows from the asset have expired, or
-The company has transferred substantially all the risks and rewards of the asset
XVI.Borrowing cost
Borrowing costs directly attributable to the acquisition, construction or production of
an asset that necessarily takes a substantial period of time to get ready for its
intended use or sale are capitalised as part of the cost of the respective asset. All other
borrowing costs are expensed in the period in which they occur. Borrowing costs
consist of interest and other costs that the Company 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.
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