3.1 Summary of material accounting policies (also refer

note 3.2)

a. Property, plant and equipment

Property, plant and equipment are measured and
carried at cost, net of accumulated depreciation
and impairment, if any. Costs directly attributable
to acquisition/construction are capitalized until the
property, plant and equipment are ready for use,
as intended by the management.

Depreciation on property, plant and equipment is
provided on a straight-line basis so as to expense
the cost less residual value over their estimated
useful lives as prescribed in Schedule II of the
Companies Act, 2013 except in respect of certain
assets, where the useful life of the assets has been
assessed based on a technical evaluation and
management estimate. The management believes
that these estimated useful lives are realistic and
reflect fair approximation of the period over which
the assets are likely to be used. The estimated
useful lives and residual values are reviewed at

the end of each reporting period and any change
in estimate is accounted for on a prospective
basis. The estimated useful lives are as mentioned
below:

Assets costing '5,000 or less are depreciated
within one year of the date they were first put to
use.

Advances paid towards the acquisition of
property, plant and equipment outstanding at each
reporting date are classified as capital advance
and disclosed under other non-current assets.

Cost incurred for property, plant and equipment
that are not ready for their intended use as on the
reporting date, is classified under capital work-
in-progress. The cost of self-constructed assets
includes the cost of materials & direct labour, any
other costs directly attributable to bringing the
assets to the location and condition necessary
for it to be capable of operating in the manner
intended by management and the borrowing costs
attributable to the acquisition or construction of
a qualifying asset. Expenses directly attributable
to construction of property, plant and equipment
incurred till they are ready for their intended use
are identified and allocated on a systematic basis
to the cost of related assets.

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.

b. Goodwill and Other intangible assets

Goodwill is initially measured at cost, being the
excess of the aggregate of the consideration
over the net of identifiable assets acquired and
liabilities assumed. If the fair value of the net
assets acquired is in excess of the aggregate
consideration transferred, the Company re¬
assesses whether it has correctly identified all
of the assets acquired and all of the liabilities
assumed and reviews the procedures used to
measure the amounts to be recognised at the
acquisition date. If the reassessment still results in
an excess of the fair value of net assets acquired
over the aggregate consideration transferred, then
the gain is recognised in OCI and accumulated in
equity as capital reserve. However, if there is no
clear evidence of bargain purchase, the entity
recognises the gain directly in equity as capital
reserve, without routing the same through OCI.
After initial recognition, goodwill is measured at
cost less any accumulated impairment losses.

Other intangible assets acquired are measured
on initial recognition at cost and carried at cost
less accumulated amortization and accumulated
impairment losses, if any. The intangible assets
acquired in a business combination are measured
at their fair value on the date of acquisition. Internally
generated intangible assets are recognised only
to the extent that the related development costs
meet the criteria for capitalisation.

Intangible assets with indefinite useful lives i.e.
Goodwill and Trademarks are not amortized, but
are tested for impairment annually or whenever
there is an indication that the recoverable amount
of a Cash Generating Unit (“CGU”) is less than
its carrying amount either individually or at the
cash-generating unit level. The assessment of
indefinite life for trademark 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.

Intangible assets with finite lives are amortized
on a straight line basis over their estimated useful
economic lives and assessed for impairment

whenever events or changes in circumstances
indicate that their carrying amounts may not be
recoverable. The amortization period and the
amortization method for an intangible asset with a
finite useful life is reviewed periodically. Following
table summarizes the nature of intangible assets
and their estimated useful lives.

Medical service agreements represent the long
term arrangement with third party hospitals
categorised as Partner Healthcare Facility (“PHF”).
Such rights are amortized on straight line basis
over the contract period.

Operation and management rights represent
the exclusive right to equip, administer, upgrade,
manage, operate and supervise the Dr. B.L Kapur
Memorial Hospital (a hospital of The Lahore
Hospital Society) and Max Super Speciality
Hospital Dwarka (a unit of Muthoot Hospital
Private Limited) (referred to as deemed separate
entities i.e. ‘Silos’). Such rights are amortized on
straight line basis over the contract period.

Gains or losses on derecognition of goodwill
and other intangible assets are measured as
the difference between the net proceeds from
disposal, if any, and the carrying amount of such
asset and are recognised in the Statement of
Profit and Loss when the asset is derecognised.

c. Impairment assessmentGoodwill and other non financial assets

Goodwill is allocated to each of the cash-generating
units (“CGU”) (or groups of cash-generating units)
that is expected to benefit from the synergies of
the combination. A CGU is the smallest identifiable
group of assets that generates cash inflows that
are largely independent of the cash inflows from
other assets or group of assets.

A cash-generating unit to which goodwill and
other non financial assets have been allocated
is tested for impairment on an annual basis and/
or whenever events or changes in circumstances
indicate that their carrying amounts may not be
recoverable. If the recoverable amount of a CGU
is less than its carrying amount, the impairment
loss is first allocated to the goodwill of the
respective CGU. Excess impairment loss over
the goodwill is allocated on all the remaining
assets of the respective CGU in the ratio of their
respective carrying values. An impairment loss on
assets (including goodwill) is recognised in the
Statement of Profit and Loss. Such impairment loss
is subsequently reversed (except in the case of
goodwill) if there is an increase in the recoverable
amount of the assets arising from a change
in estimates, subject to the carrying amount
not exceeding the original carrying amount.
Upon disposal of the relevant CGU, the portion of
goodwill attributable to that CGU is included in the
calculation of gain or loss on disposal.

The recoverable amount of CGUs is determined
based on higher of value in use and fair value
less cost to sell. Key assumptions in the cash
flow projections are based on current economic
conditions, estimated long-term growth rates and
weighted average cost of capital and estimated
operating margins. 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 time
value of money and the risks specific to the asset
for which the estimates are made.

For assets excluding goodwill, the Company
reviews the carrying amounts of its property, plant
and equipment and intangible assets to assess
whether there is any indication that such assets
may be impaired. If any such indication exists, the
recoverable amount of the asset is reassessed
to determine the extent of any impairment
loss. Where it is not possible to estimate the
recoverable amount of an individual asset, the
Company determines the recoverable amount of
the CGU to which the asset belongs.

Further, for assets excluding goodwill, an
assessment is made at each reporting date to
determine whether there is an indication that
previously recognised impairment losses no

longer exist or have decreased. If such indication
exists, the Company estimates the asset’s or CGU’s
recoverable amount. A previously recognised
impairment loss is reversed only if there has been
a change in the estimates assumptions used to
determine the asset’s recoverable amount since
the last impairment loss was recognised. The
carrying amount of the asset is increased to its
revised recoverable amount, provided that this
amount does not exceed the carrying amount
that would have been determined (net of any
accumulated depreciation) had no impairment loss
been recognised for the asset in prior years. Such
reversal is recognised in the Statement of Profit
and Loss unless the asset is carried at a revalued
amount, in which case, the reversal is treated as a
revaluation increase.

d. Investment property

Property that is held for long-term rental yields or
for capital appreciation or for both, is classified
as investment property. Investment property is
measured initially at cost, including transaction
costs. Subsequent to initial recognition, investment
property is stated at cost less accumulated
depreciation and accumulated impairment loss, if
any.

Transfers to, or from, investment properties are
made at the carrying amount when there is a
change in use.

An item of investment property is derecognised
upon disposal or when no future economic benefits
are expected to arise from the continued use of
asset. Any gain or loss arising on the disposal or
retirement of an item of investment property is
determined as the difference between the sales
proceeds, if any and the carrying amount of the
property and is recognised in the Statement of
Profit and Loss. Income received from investment
property is recognised in the Statement of Profit
and Loss on a straight line basis over the term of
the lease.

Investment property is depreciated using the
straight-line method over their estimated useful
life.

e. Financial Instruments
Initial recognition

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. The Company recognizes financial assets
and financial liabilities when it becomes a party
to the contractual provisions of the instrument.
All financial assets and liabilities are recognized
at fair value on initial recognition, except for
trade receivables which are initially measured
at transaction price. Transaction costs that are
directly attributable to the acquisition or issue of
financial assets or financial liabilities, which are
not at fair value through profit or loss, are added
to the fair value on initial recognition.

Subsequent recognition

Financial assets carried at amortized cost

A financial asset is subsequently measured at
amortized cost if it is held, within a business model
whose objective is to hold the asset in order to
collect contractual cash flows and the contractual
terms of the financial asset give rise on specified
dates to cash flows that are solely payments of
principal and interest thereon.

Financial assets carried at fair value through
other comprehensive income (FVTOCI)
(debt instruments)

A financial asset is subsequently measured at fair
value through other comprehensive income if it is
held within a business model whose objective is
achieved by both collecting contractual cash flows
and selling such financial asset and the contractual
terms of the financial asset give rise on specified
dates to cash flows that are solely payments of
principal and interest thereon.

Financial assets carried at fair value through
other comprehensive income (FVTOCI) (equity
instruments)

Upon initial recognition, the Company elects to
classify irrevocably its equity investments as equity
instruments designated at fair value through OCI
when they meet the definition of equity under Ind
AS 32 ‘Financial Instruments: Presentation’ for the
issuer and are not held for trading. The classification
is determined on an instrument-by-instrument
basis. Equity investments which are held for
trading and contingent consideration recognised
by an acquirer in a business combination to which
Ind AS 103 applies are classified as at FVTPL.

Gains and losses on these financial assets are
never recycled to profit or loss. Dividends are
recognised as other income in the Statement

of Profit and Loss when the right to receive has
been established, except when the Company
benefits from such proceeds as a recovery of
part of the cost of the financial asset, in which
case, such gains are recorded in OCI. Equity
instruments designated at fair value through
OCI are not subject to impairment assessment.
The Company elected to classify irrevocably its
non-listed equity investments under this category.

Financial assets at fair value through profit or
loss

A financial asset which is not classified in any of
the above categories is subsequently fair valued
through profit or loss.

(i) Financial assets
Trade receivables

Trade receivables from healthcare services
are recognised and billed at amounts
estimated to be collectable under government
reimbursement programs, reimbursement
arrangements with third party administrators
and insurance, contractual arrangements
with corporates including public sector
undertakings and individual customers.
The billing on government reimbursement
programs is at pre-determined net realizable
contracted rates per treatment that are
established by statute or regulation.
Revenues for non-governmental payors
with which the Company has contracts are
recognised at the prevailing contract rates.
The remaining non-governmental payors
are billed at the Company’s standard rates
for services and a contractual adjustment
is recorded to recognize revenues based
on historic reimbursement. The contractual
adjustment and the allowance for doubtful
accounts and the collectability of receivables
are reviewed on a regular basis.

Unbilled revenue

Unbilled revenue represents value of
services rendered to the customers and for
which invoice has not been raised. These
are reported under other current financial
assets.

I mpairment and derecognition of financial
assets

In accordance with Ind AS 109, the Company
applies expected credit losses (“ECL”)

model for measurement and recognition of
impairment loss on the following financial
asset and credit risk exposure.

(a) Financial assets measured at amortized
cost;

(b) Financial assets measured at fair value
through other comprehensive income
(“FVTOCI”);

The Company follows “simplified approach”
for recognition of allowance for impairment
loss on trade receivables. Accordingly, under
the simplified approach, the Company does
not track day to day changes in credit risk.
Rather, it recognises allowance for impairment
loss based on lifetime ECLs at the time of initial
revenue recognition. The Company uses a
provision matrix to determine allowance for
impairment loss allowance on the portfolio
of trade receivables. The provision matrix is
based on the empirical evidence over the
expected life of various categories of trade
receivables and these are reviewed and
updated based on forward looking estimates
at every reporting date.

For recognition of impairment losses on
other financial assets and assessment of risk
exposure, the Company determines whether
there has been a significant increase in the
credit risk since initial recognition. If credit
risk has not increased significantly since
initial recognition, 12-month ECL is used to
measure the impairment loss allowance.
However, if credit risk has increased
significantly since initial recognition, lifetime
ECL is used. If, in a subsequent period, credit
quality of the financial instrument improves
such that there is no longer a significant
increase in credit risk since initial recognition,
then the Company reverts to measuring
the impairment loss allowance based on
12-months ECL.

The Company derecognises a financial asset
when the contractual rights to the cash flows
from the financial asset expire or it transfers
the financial asset and such transfer qualifies
for derecognition under Ind AS 109.

(ii) Financial liabilities
Trade Payables

These amounts represent liabilities for goods
and services availed by the Company prior to

the end of the financial year which are unpaid.
Trade and other payables are presented as
Current Liabilities if payments are due within
12 months of the end of reporting date.

Borrowings

Interest-bearing borrowings are measured
at amortized cost using the Effective Interest
Rate (“EIR”) method and included in finance
costs. Gain or loss is recognised in Statement
of Profit and Loss when the liability is
derecognised. 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. Impact of
liquidity risk has been disclosed in notes.

Derecognition

A financial liability (or a part thereof of a
financial liability) is derecognised when
the obligation specified in the contract is
discharged or cancelled or expires.

. Investment in subsidiaries

The investment in subsidiaries, except for the
ones fair valued on business combination is
carried at cost, less impairment if any, as per Ind
AS 27. The Company, regardless of the nature
of its involvement with an entity (the investee),
determines whether it is a parent by assessing if
it controls the investee. Control on an investee is
demonstrated when the Company is exposed, or
has rights to variable returns from its involvement
with the investee and has the ability to affect those
returns through its power over the investee.

On disposal of investment, the difference between
its carrying amount and net disposal proceeds is
charged or credited to the Statement of Profit and
Loss.

Impairment of investments

The Company reviews its carrying value of
investments annually, or more frequently
when there is an indication for impairment.
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 in the Statement
of Profit or Loss.

g. Business combinationBusiness combination other than under com¬
mon control

In ‘acquisition method of accounting’, the cost of an
acquisition is measured at fair value of the assets
acquired, equity instruments issued and liabilities
incurred or assumed at the date of acquisition,
which is the date on which control is transferred to
the Company. The cost of acquisition also includes
the fair value of any contingent consideration.
Acquisition related costs are recognised in profit
and loss as incurred.

At the date of acquisition, the identifiable assets
acquired and liabilities including contingent
liabilities assumed are measured initially at their
fair value, except that:

a) deferred tax assets or liabilities and assets
or liabilities related to employee benefit
arrangements are recognised and measured
in accordance with Ind AS 12 and Ind AS 19
respectively;

b) liabilities or equity instruments related to
share-based payments arrangement of the
acquiree or share-based arrangements of the
group entered into to replace share-based
payment arrangements of the acquiree are
measured in accordance with Ind AS 102 at
the acquisition date; and

c) assets (or disposal group) that are classified
as held for sale in accordance with Ind AS
105 are measured in accordance with that
standard.

Business combination under common control

Business combinations involving entities or
businesses in which all the combining entities
or businesses are ultimately controlled by the
same party or parties both before and after the
business combination and where control is not
transitory, are accounted for as per the pooling of
interest method. The accounting for the business
combination is carried out from the beginning of
the earliest comparative period presented. The
assets and liabilities of the combining entities
are recognised at their carrying amounts. The
identity of the reserves is preserved and appears
in the financial statements of the transferee in the

same form in which they appeared in the financial
statements of the transferor. The difference, if any,
between the consideration and the amount of
share capital of the transferor entity is transferred
to capital reserve. The consequential impact of
such business combination on the carrying values
of deferred tax assets and/or deferred tax liabilities
in the hands of combined entity is reassessed and
change, if any, is recognised in the Statement of
Profit and Loss.

h. RevenueI) Revenue from contracts with
customers

The Company earns revenue primarily by
providing healthcare services and sale
of drugs and medical consumables. The
Company also earns revenue through
medical services agreements, laboratory
services and operation and management
contracts. Revenue from contracts with
customers is recognised when control of the
goods is transferred or services are rendered
to the customer at an amount that reflects the
consideration to which the Company expects
to be entitled in exchange for those goods or
services net of returns and allowances, trade
discounts and volume rebates. Revenue
is usually recognised when it is probable
that economic benefits associated with the
transaction will flow to the entity, amount of
revenue can be measured reliably and entity
retains neither ownership nor effective control
over the goods sold or services rendered.
Contracts with customers could include
promises to transfer multiple services
to a customer. The Company assesses
the services promised in a contract and
identifies distinct performance obligations
in the contract. Revenue for each distinct
performance obligation is measured at an
amount that reflects the consideration which
the Company expects to receive in exchange
for services. Further, revenue recognised is
net of applicable discounts, allowances and
tax collected from customers. The Company
also determines whether the performance
obligation is satisfied at a point in time or
over a period of time. These judgments
and estimates are based on various factors
including contractual terms and historical
experience.

other ancillary activities is recognised
based on the terms of the contract
and when it is probable that economic
benefits associated with the transaction
will flow to the Company and amount of
revenue can be measured reliably.

II) Rental income

Rental income arising from operating leases
and investment property are accounted as
per their respective terms of contract.

III) Incentive Income

Export Promotion Capital Goods (‘EPCG’)
scheme allows import of capital goods at zero
customs duty subject to an export obligation
of upto six times of customs duty saved on
capital goods imported under EPCG scheme,
to be fulfilled in six years reckoned from
authorisation issue date. The Company has
been availing the benefit and importing capital
goods under the scheme at zero customs
duty. The Company has accounted for the
benefits received in accordance with Ind
AS 20 - Accounting for Government Grants
and Disclosure of Government Assistance’.
The benefit (savings of customs duty
equivalent to non-cenvatable portion)
obtained from the Government has been
treated as a Government grant, which has
been accounted for as Deferred government
grant for Export Promotion Capital Good
(‘EPCG’) Licence under other non-current
liabilities and recognised as a cost of
property, plant and equipment. The deferred
benefit is credited to Statement of Profit and
Loss on a pro-rata basis as and when the
export obligation is fulfilled.

IV) Other income(a) Interest income

I nterest income is recognised on a time
proportion basis taking into account the
amount outstanding and the applicable
effective interest rate. Interest income
is included under the head “Other
income” in the Statement of Profit and
Loss.

(b) Income from construction services

Company provides ancillary support
services to certain Partner Healthcare
Facilities (“PHFs”) which involve

construction of the medical facilities.
The Company primarily earns income
from PHFs under a revenue sharing
agreement over the contract duration.

(c) Dividend

Dividend Income is recognised when the
right to receive payment is established.

i. Inventories

Inventories comprise drugs, consumables and
implants which are valued at lower of cost and
net realizable value. Cost includes the cost
of purchase, duties, taxes (other than those
recoverable from tax authorities) and other costs
incurred in bringing the inventories to their present
location and condition. Cost is determined on First
In First Out (“FIFO”) basis.

Net realizable value is the estimated selling price
in the ordinary course of business, less estimated
costs of completion and necessary to make the
sale.

j. Grants

Grants are recognised when there is reasonable
assurance that the grant will be received and all
the conditions attached with them will be complied
with. When the grant relates to an expense item,
it is recognised as income on a systematic basis
over the periods that the related costs, for which
it is intended to compensate, are expensed. When
the grant relates to an asset, it is recognised as

(a) i ncome in equal amounts over the expected
useful life of the asset, or

(b) i ncome in proportion to the fulfilment of its
obligations, wherever applicable.

k. Taxation

Tax expense comprises deferred tax and current
tax expenses. Income tax expense is recognised
in Statement of Profit and Loss except when
they relate to items that are recognised in other
comprehensive income or directly in equity, in
which case, the current and deferred tax are also
recognised in other comprehensive income or
directly in equity, respectively, depending on the
recognition of underlying transaction.

Current tax

Current tax assets and liabilities are measured at
the amount expected to be recovered from or paid

to the taxation authorities in accordance with the
Income Tax Act, 1961 and the Income Computation
and Disclosure Standards (“ICDS”) enacted in India
by using tax rates and tax laws that are enacted or
substantively enacted, at the reporting date.

Management periodically evaluates positions
taken in the tax returns with respect to situations
in which applicable tax regulations are subject to
interpretation and establishes provisions where
appropriate.

Deferred tax

Deferred tax is provided using the Balance Sheet
approach on temporary differences between
the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes
at the reporting date.

Deferred tax liabilities are recognised for all taxable
temporary differences, except in circumstances
where recognition is exempt under Ind AS 12
‘Income Taxes’. Deferred tax assets are recognised
for all deductible temporary differences, the carry
forward of unused tax credits and any unused tax
losses. Deferred tax assets are recognised to the
extent that it is probable that future taxable profit
will be available against which the deductible
temporary differences, and the carry forward of
unused tax credits and unused tax losses can
be utilized, except when the deferred tax asset
relating to the deductible temporary difference
arises from the initial recognition of an asset
or liability in a transaction that is not a business
combination and, at the time of the transaction,
affects neither the accounting profit nor taxable
profit or loss.

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 asset to be utilized.
Unrecognised 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
period when the asset is realized 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 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.

Goods and Services Tax (‘GST’) paid on acquisi¬
tion of assets or on incurring expenses

Expenses and assets are recognised net of the
amount of GST paid, except:

(a) When the tax incurred on a purchase of assets
or expenses/services is not recoverable from
the taxation authority, in which case, the
tax paid is recognised as part of the cost
of acquisition of the asset or as part of the
expense item, as applicable.

(b) When receivables and payables are stated
with the amount of tax included, the net
amount of tax recoverable from, or payable
to, the taxation authority is included as part
of other current/non-current assets/liabilities
in the Balance Sheet.

l. Non-current assets held for sale and discontinued

operations

The Company classifies non-current assets held
for sale if their carrying amounts will be recovered
principally through a sale transaction rather than
through continuing use. Such assets held for sale
are measured at the lower of carrying amount and
the fair value less cost to sell. Further, property,
plant and equipment and intangible assets are not
depreciated or amortized once they are classified
as held for sale. Assets and liabilities classified as
held for sale are presented separately from other
items in the Balance Sheet.

A discontinued operation is a ‘component’ of the
Company business that represents a separate line
of business that has been disposed off or is held
for sale, or is a subsidiary acquired exclusively with
a view to resale. Classification as a discontinued
operation occurs upon the earlier of disposal
or when the operation meets the criteria to be
classified as held for sale. The Company considers
the guidance in “Ind AS 105 Non-current Assets
Held for Sale and Discontinued Operations” to
assess whether a divestment asset would qualify
the definition of ‘component’ prior to classification
into discontinued operation.

m. Borrowing costs

Borrowing costs comprise interest and other costs
incurred by the Company in connection with the
borrowing of funds, including finance charges in
respect of leases. Such costs are recognised in
the Statement of Profit and Loss using the Effective
Interest Rate (“EIR”) method.

Borrowing costs that are directly attributable to the
acquisition or construction of a qualifying asset,
being an 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 that
asset. All other borrowing costs are recognised in
the Statement of Profit and Loss within borrowing
costs in the period in which they are incurred.

n. Leases

The Company assesses at contract inception
whether a contract is, or contains, a lease. A
contract is, or contains, a lease if the contract
conveys the right to control the use of an identified
asset for an agreed time period in exchange for
consideration.

As a lessee

The Company applies a single recognition and
measurement approach for all leases, except
for short-term leases and leases of low-value
assets. The Company recognises lease liabilities
in respect of lease payments to lessors and right-
of-use assets representing its right to use the
underlying assets.

The Company determines the lease term as the
non-cancellable period of the lease together with
any periods subject to extension or termination
options, where it is reasonably certain that
such options will be exercised or not exercised,
respectively. In assessing whether the Company is
reasonably certain to exercise an option to extend
a lease, or not to exercise an option to terminate
a lease, it considers all relevant facts and
circumstances that create an economic incentive
for the Company to exercise the option to do so.
The lease term in future periods is reassessed
to ensure that the lease term reflects the current
economic circumstances.

The Company recognises right-of-use assets at the
commencement date of the lease (i.e., the date the
underlying asset is available for use). At inception,
the right-of-use asset is measured at the initial
amount of the lease liability, adjusted for lease

payments made at or before the commencement
date and reduced by any lease incentives received.
This amount is increased by initial direct costs
incurred by the lessee for obtaining the lease and
the lessee’s estimate of costs to dismantle, remove
or restore the underlying asset or site. The right-
of-use asset is subsequently measured at cost
less any accumulated depreciation, accumulated
impairment losses, if any and adjusted for any
remeasurement of the lease liability. The right-
of-use asset is depreciated using the straight-line
method from the commencement date over the
shorter of lease term or useful life of right-of-use
asset as mentioned below. Right-of-use assets
are tested for impairment whenever there is any
indication that their carrying amounts may not be
recoverable. Impairment loss, if any, is recognised
in the Statement of Profit and Loss.

At the commencement of the lease, the Company
recognises lease liabilities measured at the
present value of lease payments to be made over
the lease term. The lease payments comprise fixed
payments (including in substance fixed payments)
less any lease incentives receivable, variable lease
payments that depend on an index or a rate, and
amounts expected to be paid under residual value
guarantees. The lease payments also include the
exercise price of a purchase option reasonably
certain to be exercised by the Company and
payments of penalties for terminating the lease,
if the lease term reflects the Company exercising
the option to terminate. Variable lease payments
that do not depend on an index or a rate are
recognised as expenses (unless they are incurred
to produce inventories) in the period in which
the event or condition that triggers the payment
occurs.

In calculating the present value of lease payments,
the Company uses its incremental borrowing rate
at the lease commencement date because the
interest rate implicit in the lease is not readily
determinable. After the commencement date, the
amount of lease liabilities is increased to reflect
the accretion of interest and reduced for the lease
payments made. In addition, the carrying amount
of lease liabilities is remeasured if there is any
modification in terms of the lease (e.g., changes
to future payments resulting from a change in
an index or rate used to determine such lease
payments) or a change in the assessment of an
option to purchase the underlying asset.

Short term leases and lease of low value assets

The Company applies the recognition exemptions
to its short term leases of property. i.e. those leases
that have a lease term of twelve months or less
and lease of low value assets. For these leases
the Company recognises lease payments as an
operating expense on a straight line basis over
the term of the lease. This expense is presented
within ‘Other expense’ in Statement of Profit and
Loss.

As a lessor

Leases in which the Company does not transfer
substantially all the risks and rewards of
ownership of an asset are classified as operating
leases. Where the Company is a lessor under an
operating lease, the asset is capitalized under
investment property and depreciated over its
useful economic life. Payments received under
operating leases are recognised in the Statement
of Profit and Loss on a straight line basis over the
term of the lease.