3. Material Accounting Policies Information
a. Foreign currency
i. Functional currency
The Company's financial statements are
presented in INR, which is also the Company's
functional currency.
ii. Foreign currency transactions
Transactions in foreign currencies are translated
into INR, the functional currency of the
Company, at the exchange rates at the dates
of the transactions or an average rate if the
average rate approximates the actual rate at the
date of the transaction.
Monetary assets and liabilities denominated
in foreign currencies are translated into the
functional currency at the exchange rate at
the reporting date. Non-monetary assets
and liabilities that are measured at fair value
in a foreign currency are translated into the
functional currency at the exchange rate when
the fair value was determined. Non-monetary
assets and liabilities that are measured based
on historical cost in a foreign currency are
translated at the exchange rate at the date of
the transaction.
b. Financial instruments
i. Recognition and initial measurement
Trade receivables and debt securities issued are
initially recognised when they are originated.
All other financial assets and financial liabilities
are initially recognised when the Company
becomes a party to the contractual provisions
of the instrument.
A financial asset or financial liability is initially
measured at fair value plus, for an item not
at fair value through profit and loss (FVTPL),
transaction costs that are directly attributable
to its acquisition or issue. However, trade
receivables that do not contain a significant
financing component are measured at
transaction price.
ii. Classification and subsequent measurement
Financial assets:
On initial recognition, a financial asset is
classified as measured at
• Amortised cost;
• Fair value through Other Comprehensive
Income (FVOCI) - debt
• Fair Value through Other Comprehensive
Income (FVOCI) - equity investment; or
• FVTPL
Financial assets are not reclassified subsequent
to their initial recognition, except if and in the
period the Company changes its business
model for managing financial assets.
A financial asset is measured at amortised cost
if it meets both of the following conditions and
is not designated as FVTPL:
• the asset is held within a business model
whose objective is to hold assets to collect
contractual cash flows; and
• the contractual terms of the financial
asset give rise on specified dates to
cash flows that are solely payments of
principal and interest on the principal
amount outstanding.
A debt investment is measured at FVOCI if it
meets both of the following conditions and is
not designated as FVTPL:
• the asset is held within a business model
whose objective is achieved by both
collecting contractual cash flows and
selling financial assets; and
• the contractual terms of the financial
asset give rise on specified dates to
cash flows that are solely payments of
principal and interest on the principal
amount outstanding.
All financial assets not classified as measured at
amortised cost or FVOCI as described above are
measured at FVTPL. On initial recognition, the
Company may irrevocably designate a financial
asset that otherwise meets the requirements to
be measured at amortised cost or at FVOCI as
at FVTPL if doing so eliminates or significantly
reduces an accounting mismatch that would
otherwise arise.
Financial assets: Business model assessment
The Company makes an assessment of the
objective of the business model in which
a financial asset is held at a portfolio level
because this best reflects the way the business
is managed and information is provided to
management, for instance the stated policies
and objectives for the portfolio, frequency,
volume and timing of sales of financial assets
in prior periods, the reasons for such sales and
expectations about future sales activity.
Transfers of financial assets to third parties
in transactions that do not qualify for
derecognition are not considered sales for
this purpose, consistent with the Company's
continuing recognition of the assets.
Financial assets that are held for trading or are
managed and whose performance is evaluated
on a fair value basis are measured at FVTPL.
Financial assets: Assessment whether
contractual cash flows are solely payments of
principal and Interest.
For the purposes of this assessment, 'principal'
is defined as the fair value of the financial asset
on initial recognition. 'Interest' is defined as
consideration for the time value of money and
for the credit risk associated with the principal
amount outstanding during a particular period
of time and for other basic lending risks and
costs (e.g. liquidity risk and administrative costs),
as well as a profit margin.
In assessing whether the contractual cash flows
are solely payments of principal and interest, the
Company considers the contractual terms of
the instrument. This includes assessing whether
the financial asset contains a contractual term
that could change the timing or amount of
contractual cash flows such that it would not
meet this condition. In making this assessment,
the Company considers:
• contingent events that would change the
amount or timing of cash flows;
• terms that may adjust the contractual
coupon rate, including variable
interest rate features;
• prepayment and extension features; and
Basis the above classification criteria, Company's
investments are classified as below:-
• Investments in government and other
bonds have been classified as FVOCI.
• Investments in Mutual funds have been
classified as FVTPL.
Financial assets: Subsequent measurement
and gains and losses
Financial assets at FVTPL
These assets are subsequently measured at
fair value. Net gains and losses, including any
interest or dividend income, are recognised in
profit or loss.
Financial assets at amortised cost
These assets are subsequently measured at
amortised cost using the effective interest
method. The amortised cost is reduced by
impairment losses. Interest income, foreign
exchange gains and losses and impairment are
recognised in profit or loss. Any gain or loss on
derecognition is recognised in profit or loss.
Debt investments at FVOCI
These assets are subsequently measured at
fair value. Interest income under the effective
interest method, foreign exchange gains and
losses and impairment are recognised in
profit or loss. Other net gains and losses are
recognised in OCI. On derecognition, gains and
losses accumulated in OCI are reclassified to
profit or loss.
Equity investments at FVOCI
These assets are subsequently measured at fair
value. Dividends are recognized as income in
Statement of profit or loss unless the dividend
clearly represents a recovery of part of the cost
of the investment. Other net gains and losses
are recognised in OCI and are not reclassified to
Statement of profit or loss.
Financial liabilities: Classification, subsequent
measurement and gains and losses
Financial liabilities are classified as measured at
amortised cost or FVTPL. A financial liability is
classified as at FVTPL if it is classified as held-
for-trading, or it is a derivative or it is designated
as such on initial recognition. Financial liabilities
at FVTPL are measured at fair value and
net gains and losses, including any interest
expense, are recognised in profit or loss. Other
financial liabilities are subsequently measured
at amortised cost using the effective interest
method. Interest expense and foreign exchange
gains and losses are recognised in profit or
loss. Any gain or loss on derecognition is also
recognised in profit or loss.
iii. Derecognition
Financial assets
The Company derecognises a financial asset
when the contractual rights to the cash flows
from the financial asset expire, or it transfers
the rights to receive the contractual cash flows
in a transaction in which substantially all of the
risks and rewards of ownership of the financial
asset are transferred or in which the Company
neither transfers nor retains substantially all of
the risks and rewards of ownership and does not
retain control of the financial asset.
If the Company enters into transactions whereby
it transfers assets recognised on its balance
sheet, but retains either all or substantially all of
the risks and rewards of the transferred assets,
the transferred assets are not derecognised.
Financial liabilities
The Company derecognises a financial liability
when its contractual obligations are discharged
or cancelled, or expire.
The Company also derecognises a financial
liability when its terms are modified and the
cash flows under the modified terms are
substantially different. In this case, a new
financial liability based on the modified terms is
recognised at fair value. The difference between
the carrying amount of the financial liability
extinguished and the new financial liability with
modified terms is recognised in profit or loss.
iv. Offsetting
Financial assets and financial liabilities are offset
and the net amount presented in the balance
sheet when, and only when, the Company
currently has a legally enforceable right to set
off the amounts and it intends either to settle
them on a net basis or to realise the asset and
settle the liability simultaneously.
v. Derivatives and Embedded derivatives
Derivatives are initially measured at fair value.
Subsequent to initial recognition, derivatives are
measured at fair value, and changes therein are
generally recognised in profit or loss.
Embedded derivatives are separated from the
host contract and accounted for separately if
the host contract is not a financial asset and
certain criteria are met.
c. Property, plant and equipment
i. Recognition and measurement
Items of property, plant and equipment are
measured at cost less accumulated depreciation
and accumulated impairment losses, if any.
Cost of an item of property, plant and equipment
comprises its purchase price, including import
duties and non-refundable purchase taxes,
after deducting trade discounts and rebates,
any directly attributable cost of bringing the
item to its working condition for its intended
use and estimated costs of dismantling and
removing the item and restoring the site on
which it is located.
The cost of a self-constructed item of property,
plant and equipment comprises the cost of
materials and direct labor, any other costs directly
attributable to bringing the item to working
condition for its intended use, and estimated
costs of dismantling and removing the item
and restoring the site on which it is located.
If significant parts of an item of property, plant
and equipment have different useful lives, then
they are accounted for as separate items (major
components) of property, plant and equipment.
Any gain or loss on disposal of an item of
property, plant and equipment is recognised in
Statement of profit or loss.
Advances paid towards the acquisition of
property, plant and equipment outstanding
at each Balance Sheet date is classified as
capital advances under other non-current
assets and the cost of assets not ready to use
before such date are disclosed under 'Capital
work-in-progress.
ii. Subsequent expenditure
Subsequent expenditure is capitalised only if it
is probable that the future economic benefits
associated with the expenditure will flow
to the Company.
iii. Depreciation
Depreciation is calculated on cost of items
of property, plant and equipment less their
estimated residual values over their estimated
useful lives using the straight-line method, and
is generally recognised in the statement of profit
and loss. Assets acquired under finance leases
are depreciated over the shorter of the lease
term and their useful lives unless it is reasonably
certain that the Company will obtain ownership
by the end of the lease term. Freehold land is
not depreciated.
The estimated useful lives of items of property,
plant and equipment for the current and
comparative periods are as follows:
Depreciation method, useful lives and residual
values are reviewed at each financial year-end
and adjusted if appropriate.
Depreciation on addition (disposal) is provided
on a pro-rata basis i.e. from (upto) the date on
which asset is ready for use (disposed off).
’Leasehold improvements are depreciated
over the period of the lease term of the
respective property.
Leasehold land is amortised over the lease
period of 90 years.
“Based on an internal technical assessment,
the management believes that the useful lives
as given above best represents the period over
which management expects to use its assets.
Hence, the useful life is different from the useful
life as prescribed under Part C of Schedule II of
Companies Act, 2013.
d. Intangible assets
Recognition and measurement
Intangible assets that are acquired by the
Company are measured initially at cost. After initial
recognition, an intangible asset is carried at its cost
less accumulated amortisation and accumulated
impairment loss, if any.
Subsequent expenditure
Subsequent expenditure is capitalised only when
it increases the future economic benefits from the
specific asset to which it relates.
Amortization
Intangible assets of the Company represents
computer software and AI Platform , are amortized
using the straight-line method over the estimated
useful life or the tenure of the respective software
license, whichever is lower. The amortization period
and the amortization method are reviewed at
least at each financial year end. If the expected
useful life of the asset is significantly different from
previous estimates, the amortization period is
changed accordingly.
The estimated useful lives of Intangible Assets for the
current and comparative periods are as follows:
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 or loss when the asset
is derecognized.
e. Impairment
In accordance with Ind AS 109, the Company applies
expected credit loss (ECL) model for measurement
and recognition of impairment loss on the following
financial assets and credit risk exposure:
a. Financial assets that are debt instruments,
and are measured at amortised cost e.g., loans,
debt securities, deposits, trade receivables
and bank balance
b. Financial assets that are debt instruments and
are measured as at FVTOCI
c. Lease receivables under Ind AS 116
d. Trade receivables or any contractual right to
receive cash or another financial asset that
result from transactions that are within the
scope of Ind AS 115
e. Loan commitments which are not
measured as at FVTPL
f. Financial guarantee contracts which are not
measured as at FVTPL
The Company follows 'simplified approach' for
recognition of impairment loss allowance on:
• Trade receivables or contract revenue
receivables; and
• All lease receivables resulting from
transactions within the scope of Ind AS 116
The application of simplified approach does
not require the Company to track changes in
credit risk. Rather, it recognises impairment
loss allowance based on lifetime ECLs at each
reporting date, right from its initial recognition.
For recognition of impairment loss on other
financial assets and risk exposure, the Company
determines that whether there has been a
significant increase in the credit risk since initial
recognition. If credit risk has not increased
significantly, 12-month ECL is used to provide
for impairment loss. However, if credit risk has
increased significantly, lifetime ECL is used.
If, in a subsequent period, credit quality of the
instrument improves such that there is no
longer a significant increase in credit risk since
initial recognition, then the entity reverts to
recognising impairment loss allowance based
on 12-month ECL.
Lifetime ECL are the expected credit losses
resulting from all possible default events over
the expected life of a financial instrument.
The 12-month ECL is a portion of the lifetime
ECL which results from default events that
are possible within 12 months after the
reporting date.
ECL is the difference between all contractual
cash flows that are due to the Company in
accordance with the contract and all the cash
flows that the entity expects to receive (i.e., all
cash shortfalls), discounted at the original EIR.
ECL impairment loss allowance (or reversal)
recognized during the period is recognized
as income/ expense in the statement of profit
and loss (P&L). This amount is reflected under
the head 'other expenses' in the P&L. The
balance sheet presentation for various financial
instruments is described below:
• Financial assets measured as at amortised
cost, contractual revenue receivables
and lease receivables: ECL is presented
as an allowance, i.e., as an integral part of
the measurement of those assets in the
balance sheet. The allowance reduces the
net carrying amount. Until the asset meets
write-off criteria, the Company does not
reduce impairment allowance from the
gross carrying amount.
• Loan commitments and financial
guarantee contracts: ECL is presented as
a provision in the balance sheet, i.e. as a
liability. Debt instruments measured at
FVTOCI: For debt instruments measured
at FVOCI, the expected credit losses do
not reduce the carrying amount in the
balance sheet, which remains at fair
value. Instead, an amount equal to the
allowance that would arise if the asset was
measured at amortised cost is recognised
in other comprehensive income as the
"accumulated impairment amount”.
The Company does not have any purchased
or originated credit-impaired (POCI) financial
assets, i.e., financial assets which are credit
impaired on purchase/ origination.
Impairment of Non-financial assets
The carrying amounts of assets are reviewed at
each reporting date if there is any indication of
impairment based on internal/external factors.
An impairment loss is recognized wherever the
carrying amount of an asset (or cash generating
unit) exceeds its recoverable amount. The
recoverable amount is the greater of the asset's
(or cash generating unit's) net selling price
and value in use. 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 risks specific to the
asset (or cash generating unit).
An impairment loss is reversed if there has been
a change in the estimates used to determine
the recoverable amount. An impairment loss
is reversed only to the extent that the asset's
carrying amount does not exceed the carrying
amount that would have been determined
net of depreciation or amortisation, if no
impairment loss had been recognized.
f. Employee benefits
i. Short-term employee benefits
Short-term employee benefit obligations are
measured on an undiscounted basis and are
expensed as the related service is provided. A
liability is recognised for the amount expected
to be paid, if the Company has a present legal
or constructive obligation to pay this amount
as a result of past service provided by the
employee, and the amount of obligation can be
estimated reliably.
ii. Share-based payment transactions
The grant date fair value of equity settled
share-based payment awards granted to
employees of the Company and subsidiaries
of the Company is recognised as an employee
expense and deemed investment, with a
corresponding increase in equity, over the
period that the employees unconditionally
become entitled to the awards. The amount
recognised as expense/deemed investment is
based on the estimate of the number of awards
for which the related service and non-market
vesting conditions are expected to be met, such
that the amount ultimately recognised as an
expense/dement investment is based on the
number of awards that do meet the related
service and non-market vesting conditions at
the vesting date. For share-based payment
awards with non-vesting conditions, the grant
date fair value of the share-based payment is
measured to reflect such conditions and there
is no true-up for differences between expected
and actual outcomes.
iii. Defined contribution plans
A defined contribution plan is a post¬
employment benefit plan under which an entity
pays fixed contributions into a separate entity
and will have no legal or constructive obligation
to pay further amounts. The Company makes
specified monthly contributions towards
Government administered provident fund
scheme. Obligations for contributions to
defined contribution plans are recognized as an
employee benefit expense in profit or loss in the
periods during which the related services are
rendered by employees.
Prepaid contributions are recognised as an asset
to the extent that a cash refund or a reduction in
future payments is available.
iv. Defined benefit plans
A defined benefit plan is a post-employment
benefit plan other than a defined contribution
plan. The Company's gratuity scheme is a
defined benefit plan. The present value of
obligations under such defined benefit plans
are determined based on actuarial valuation
carried out by an independent actuary using
the Projected Unit Credit Method, which
recognizes each period of service as giving
rise to an additional unit of employee benefit
entitlement and measures each unit separately
to build up the final obligation.
The obligation is measured at the present value
of estimated future cash flows. The discount
rates used for determining the present value
of obligation under defined benefit plans, are
based on the market yields on government
securities as at the balance sheet date, having
maturity period approximating to the terms of
related obligations
Remeasurement gains and losses arising
from experience adjustments and changes
in actuarial assumptions are recognized
in the period in which they occur, directly
in other comprehensive income and are
never reclassified to profit or loss. Changes
in the present value of the defined benefit
obligation resulting from plan amendments or
curtailments are recognized immediately in the
profit or loss as past service cost.
v. Other long-term employee benefits
The Company's net obligation in respect of
long-term employee benefits other than post¬
employment benefits is the amount of future
benefit that employees have earned in return
for their service in the current and prior periods;
that benefit is discounted to determine its
present value, and the fair value of any related
assets is deducted.
The employees can carry-forward a portion
of the unutilized accrued compensated
absences and utilize it in future service periods
or receive cash compensation on termination
of employment. Since the compensated
absences do not fall due wholly within twelve
months after the end of the period in which the
employees render the related service and are
also not expected to be utilized wholly within
twelve months after the end of such period, the
benefit is classified as a long-term employee
benefit. The Company records an obligation
for such compensated absences in the period
in which the employee renders the services
that increase this entitlement. The obligation
is measured on the basis of independent
actuarial valuation using the projected unit
credit method. Re measurements as a result
of experience adjustments and changes
in actuarial assumptions are recognized in
the profit or loss
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