3. The Summary of material accounting policies
The accounting policies, as set out in the following
paragraphs of this note, have been consistently
applied to all the years presented in these Standalone
Financial Statements.
a) Revenue from contract with customers
The Company derives revenue primarily from
following services:
Revenue from payment services
• Payment services include revenue from Commission
income from sale of recharge, utility payment, bill
payments, merchant payments and other services
through wallet.
Revenue from financial services
• Revenue from share in interest income, processing
fee, activations fee, late fee and other such incomes
on account of servicing of loans products through
lending partners (Digital Financial Services).
The Company recognises revenue from contracts with
customers when it satisfies a performance obligation
by transferring promised service to a customer. The
revenue is recognised to the extent of transaction
price allocated to the performance obligation satisfied.
Performance obligation is satisfied upon transfer of
control of service to a customer.
Transaction price is the amount of consideration to
which the Company expects to be entitled in exchange
for transferring good or service to a customer excluding
taxes or duties collected on behalf on Government.
An entity estimates the transaction price at contract
inception, including any variable consideration, and
updates the estimate each reporting year for any
changes in circumstances.
Variable consideration such as discounts, volume-based
incentives, any payments made to a customer (unless
the payment is for a distinct good or service received
from the customer) is estimated using the expected
value method or most likely amount as appropriate in
a given circumstance. An entity includes estimates of
variable consideration in the transaction price only to the
extent that it is highly probable that a significant reversal
in the amount of cumulative revenue recognised will not
occur when the uncertainty associated with the variable
consideration is resolved.
The Company provides incentives to its users in various
forms including cashbacks and supercash. Cashbacks
and supercash given to users where the Company
recover a convenience fee are classified as reduction of
revenue. However, when these incentives offered to the
users are higher than the income earned from the users,
the excess (i.e., the incentive given to a user less income
earned from the users) on an individual transaction basis
is classified under business promotion expenses.
Where the Company acts as an agent for selling goods or
services, only the commission income is included within
revenue. Typically, the Company has a right to payment
before or at the point that services are delivered. Cash
received before the services are delivered is recognised
as a contract liability. The amount of consideration
does not contain a significant financing component as
payment terms are less than one year.
The Company's contracts with customers may
include multiple performance obligations. For such
arrangements, the Company allocate revenues to each
performance obligation based on its relative standalone
selling price. The Company generally determine
standalone selling prices based on the prices charged
to customers or using expected cost-plus margin.
The Company has contracts with customers to provide
technology platform services, in the form of service of
design, development, operation and maintenance of
technology-based products, one-time integration, setup
and technology fee, etc. either independently or bundled
with merchants, transaction processing and loan
processing services. The Company typically contracts
with financial institutions and merchant aggregators.
Contracts stipulate the types of services and articulate
how fees will be incurred and calculated.
Commission income from sale of recharge, utility
payment, bill payments and merchant payments:
The Company facilitates recharge of talk time, utility
payment, bill payments, merchant payments and earns
commission for the respective services. Commission
income is recognized when the control of services is
transferred to the customer i.e. when the services have
been provided by the Company.
Such commission is generally determined as a percentage
of monetary value of transactions processed or gross
merchandise value. The Company typically contracts
with merchants, financial institutions, or affiliates of
those parties. Contracts stipulate the types of services
and articulate how fees will be incurred and calculated.
Commission income is recognized based on the value of
transaction at the time the transactions are processed.
Amount received by the Company pending settlement
are disclosed as payable to the merchants under other
financial liabilities.
Commission from wallet services:
Commission on money transfer represents the amount
earned from the users in the form of commission on
the withdrawal/addition of money by the users from/to
their wallet accounts. Commission on money transfer is
recognised on satisfaction of the associated performance
obligation i.e. on transfer of money, and basis the
standard agreement entered with the respective users.
Revenue from share in interest income, processing fee,
late fee and other such incomes on account of servicing
of loans products through lending partners:
Share in interest income (net) is earned on the loans
to users by respective lending partners. This income
is shared by the Company as per terms of agreement
with service providers and accounted on accrual
basis. Processing fees is recognised on satisfaction of
associated performance obligation i.e. on sourcing of
customers for lending partners and when amount of
loan or credit is transferred to the user's wallet based on
standard agreements entered with the respective lending
partners. Late fee for customer defaults i.e. delayed
payment of instalment of loan product, is recognised
as revenue on receipt of payment from customer. Other
such incomes on account of loan facilitation services,
collection, monitoring etc. is recognised in line with the
year of service obligation.
Contract balance
Trade receivables
A receivable represents the Company's right to an
amount of consideration that is unconditional (i.e., only
the passage of time is required before payment of the
consideration is due). Refer to accounting policies of
financial assets in note 3 (k) Financial instruments.
Contract liabilities
A contract liability is the obligation to transfer goods
or services to a customer for which the Company has
received consideration (or an amount of consideration is
due) from the customer. If a customer pays consideration
before the Company transfers goods or services to the
customer, a contract liability is recognised when the
payment is made, or the payment is due (whichever
is earlier). The Company recognises contract liability
for consideration received in respect of unsatisfied
performance obligations and reports these amounts as
“Deferred revenue” or “Advance from customers” in the
balance sheet. Provisions for customer incentives are
also reported as contract liabilities.
b) Government Incentives
Government incentives are recognised at their fair value
when there is a reasonable assurance that the incentives
will be received and all attached conditions will be complied
with. When the incentives relates to an expense item, it
is deferred and recognised as income in the standalone
statement of profit and loss on a systematic basis over
the periods necessary to match the related costs, which
they are intended to compensate. In case the incentives is
specifically identifiable against a particular expense item,
it is netted off from related expense. When the incentives
relates to an asset or a non-monetary item, it is recognised
as deferred income under liabilities and is recognised as
income in the standalone statement of profit and loss on
a straight line basis over the expected useful life of the
related asset or a non-monetary item. Such incentives
income is presented as other operating revenue, under
revenue from operations, in the standalone statement of
profit and loss.
c) Leases
The Company's leased assets primarily consist of leases
for office space. The Company assesses whether a
contract contains a lease, at inception of a contract. A
contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a
period of time in exchange for consideration. To assess
whether a contract conveys the right to control the use
of an identified asset, the Company assesses whether: (i)
the contract involves the use of an identified asset (ii) the
Company has substantially all of the economic benefits
from use of the asset through the period of the lease and
(iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the
Company recognizes a right-of-use asset (“ROU”) and a
corresponding lease liability for all lease arrangements in
which it is a lessee, except for leases with a term of twelve
months or less (short-term leases) and low value leases.
For these short-term and low value leases, the Company
recognizes the lease payments as an operating expense
on a straight-line basis over the term of the lease.
Certain lease arrangements include the options to
extend or terminate the lease before the end of the lease
term. ROU assets and lease liabilities includes periods
covered by extension options when it is reasonably
certain that they will be exercised and includes periods
covered by termination options when it is reasonably
certain that they will not be exercised.
The right-of-use assets are initially recognized at cost,
which comprises the initial amount of the lease liability
adjusted for any lease payments made at or prior to the
commencement date of the lease plus any initial direct
costs less any lease incentives. They are subsequently
measured at cost less accumulated depreciation and
impairment losses. Right-of-use assets are depreciated
from the commencement date on a straight-line basis
over the shorter of the lease term and useful life of the
underlying asset unless the lease transfers ownership
of the underlying asset to the Company by the end
of the lease term or the cost of the right-of-use asset
reflect that the Company exercise a purchase option.
The Company applies Ind AS 36 to determine whether
a ROU asset is impaired and accounts for any identified
impairment loss as described in the accounting policy
below on “Impairment of non-financial assets”.
The lease liability is initially measured at amortized cost
at the present value of the future lease payments that
are not paid at the commencement date. The lease
payments are discounted using the interest rate implicit
in the lease or, if not readily determinable, using the
Company's incremental borrowing rates. Lease liabilities
are remeasured with a corresponding adjustment to
the related right of use asset (or in profit or loss if the
carrying amount of the right-of-use asset has been
reduced to zero) if the Company changes its assessment
if whether it will exercise an extension or a termination or
a purchase option.
The interest cost on lease liability (computed using
effective interest method), is expensed in the statement
of profit and loss.
The Company accounts for each lease component
within the contract as a lease separately from non-lease
components of the contract in accordance with Ind AS
116 and allocates the consideration in the contract to
each lease component on the basis of the relative stand¬
alone price of the lease component and the aggregate
stand-alone price of the non-lease components.
Lease liability and ROU asset have been separately
presented in the Balance Sheet and lease payments
have been classified as financing cash flows.
d) Cash and cash equivalents
Cash comprises cash on hand and demand deposits with
banks. Cash equivalents are short-term balances (with
an original maturity of three months or less from the date
of acquisition), highly liquid investments that are readily
convertible into known amounts of cash and which are
subject to insignificant risk of changes in value.
e) Foreign currency transactions and translations
The functional currency of the Company is Indian Rupees
which represents the currency of the primary economic
environment in which it operates.
Transactions in currencies other than the Company's
functional currency (foreign currencies) are recognised
at the rates of exchange prevailing at the dates of the
transactions. At the end of each reporting year, monetary
items denominated in foreign currencies are translated
using mean exchange rate prevailing on the last day of
the reporting year. 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.
Treatment of exchange differences
Exchange differences on monetary items are recognised
in the Profit or Loss in the year in which they arise.
f) Employee benefits
Employee benefits include provident fund, employee
state insurance scheme, gratuity, compensated
absences and other incentives to employees.
Post-employment and termination benefit costs
Payments to defined contribution benefit plans (i.e.
provident fund and employee state insurance scheme)
are recognised as an expense when employees have
rendered service entitling them to the contributions.
For defined benefit plans, the cost of providing benefits
is determined using the projected unit credit method,
with actuarial valuations being carried out at the
end of each annual reporting year. Remeasurement,
comprises actuarial gains and losses which is reflected
immediately in the balance sheet with a charge or credit
recognised in other comprehensive income in the year
in which they occur. Remeasurement recognised in
other comprehensive income is reflected immediately in
retained earnings and is not reclassified to profit or loss.
Past service cost is recognised in profit or loss in the
year of a plan amendment. Net interest is calculated by
applying the discount rate at the beginning of the year to
the net defined benefit liability or asset. Defined benefit
costs are categorised as follows:
• service cost (including current service cost,
past service cost, as well as gains and losses on
curtailments and settlements);
• net interest expense or income; and
• remeasurement
Short-term and other long-term employee benefits
A liability is recognised for short-term employee benefits
accruing to employees in respect of salaries, annual
leave and sick leave, performance incentives etc. in the
year the related service is rendered at the undiscounted
amount of the benefits expected to be paid in exchange
for that service.
Liabilities recognised in respect of short-term employee
benefits are measured at the undiscounted amount of
the benefits expected to be paid in exchange for the
related service.
Accumulated leave, which is expected to be utilized
within the next twelve months, is treated as short-term
employee benefit.
The Company measures the expected cost of such
absences as the additional amount that it expects
to pay as a result of the unused entitlement that has
accumulated at the reporting date.
The Company treats accumulated leave expected to
be carried forward beyond twelve months, as long¬
term employee benefit for measurement purposes.
Such long-term compensated absences are provided
for based on the actuarial valuation using the projected
unit credit method at the year-end. Actuarial gain/loss
are immediately taken to the statement of profit and
loss and are not deferred. The Company presents the
entire leave as a current liability in the balance sheet,
since it does not have an unconditional right to defer its
settlement for twelve months after the reporting date.
g) Share-based payments
Employees of the Company also receive remuneration
in the form of share-based payment transactions under
Company's Employee stock option plan (ESOP)-2014.
Equity-settled transactions
The grant date fair value of equity settled share-based
payment awards granted to employees is recognised
as an employee expense, with a corresponding
increase in equity, over the period that the employees
unconditionally become entitled to the awards. The
amount recognised as expense is based on the estimate
of the number of awards for which the related service
conditions are expected to be met, such that the amount
ultimately recognised as an expense is based on the
number of awards that do meet the related service
conditions at the vesting date.
h) Taxation
Income tax expense comprises current and deferred tax.
It is recognised in profit or loss except to the extent that
it relates to a business combination, or items recognised
directly in equity or in Other comprehensive income.
The Company has determined that interest and
penalties related to income taxes, including uncertain
tax treatments, do not meet the definition of income
taxes, and therefore accounted for them under Ind AS 37
Provisions, Contingent Liabilities and Contingent Assets.
Current tax
Current tax comprises the expected tax payable or
receivable on the taxable income or loss for the year and
any adjustment to the tax payable or receivable in respect
of previous years. The amount of current tax payable or
receivable is the best estimate of the tax amount expected
to be paid or received that reflects uncertainty related to
income taxes, if any. It is measured using tax rates enacted
or substantively enacted at the reporting date.
Current tax assets and liabilities are offset only if there
is a legally enforceable right to set off the recognised
amounts, and it is intended to realise the asset and settle
the liability on a net basis or simultaneously.
Deferred tax
Deferred tax is recognised in respect of temporary
differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the
corresponding amounts used for taxation purposes.
Deferred tax is also recognised in respect of carried
forward tax losses and tax credits. Deferred tax is not
recognised for:
- temporary differences on the initial recognition of
assets or liabilities in a transaction that
a) is not a business combination; and
b) at the time of transaction (i) affects neither
accounting nor taxable profit or loss and
(ii) does not give rise to equal taxable and
deductible temporary differences
- temporary differences related to investments in
subsidiaries, associates and joint arrangements to
the extent that the Company is able to control the
timing of the reversal of the temporary differences
and it is probable that they will not reverse in the
foreseeable future; and
- taxable temporary differences arising on the initial
recognition of goodwill.
Temporary differences in relation to a right-of-use asset
and a lease liability for a lease are regarded as separate
line items for the purpose of recognising deferred tax.
Deferred tax assets are recognised for unused tax
losses, unused tax credits and deductible temporary
differences to the extent that it is probable that future
taxable profits will be available against which they can
be used. Future taxable profits are determined based on
the reversal of relevant taxable temporary differences.
If the amount of taxable temporary differences is
insufficient to recognise a deferred tax asset in full, then
future taxable profits, adjusted for reversals of existing
temporary differences, are considered, based on the
business plans for company. Deferred tax assets are
reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax
benefit will be realised; such reductions are reversed
when the probability of future taxable profits improves.
Deferred tax is measured at the tax rates that are
expected to apply to the year when the asset is realised
or the liability is settled, based on the laws that have been
enacted or substantively enacted by the reporting date.
The measurement of deferred tax reflects the tax
consequences that would follow from the manner in
which the Company expects, at the reporting date, to
recover or settle the carrying amount of its assets and
liabilities. For this purpose, the carrying amount of
investment property measured at fair value is presumed
to be recovered through sale, and the Company has not
rebutted this presumption.
Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same
tax authority on the same taxable entity, or on different tax
entities, but they intend to settle current tax liabilities and
assets on a net basis or their tax assets and liabilities will be
realised simultaneously.
i) Property, plant and equipment
Property, plant and equipment are stated in the balance
sheet at cost less accumulated depreciation and
accumulated impairment losses. When significant parts of
property, plant and equipment are required to be replaced
at intervals, the Company depreciates then separately
based on their specific useful lives.
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 labour, 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. Cost includes, for qualifying assets, borrowing costs
capitalised in accordance with the Company's accounting
policy. Such properties are classified to the appropriate
categories of property, plant and equipment when completed
and ready for intended use. Depreciation of these assets, on
the same basis as other property assets, commences when
the assets are ready for their intended use.
The cost of an item of property, plant and equipment shall
be recognised as an asset if, and only if it is probable
that future economic benefits associated with the item
will flow to the Company and the cost of the item can be
measured reliably.
Subsequent expenditure is capitalised only if it is
probable that the future economic benefits associated
with the expenditure will flow to the Company and the
cost of the item can be measured reliably
Depreciation and amortisation
Depreciation is provided on the written down value
method. The estimated useful life of each asset as
prescribed under Schedule II of the Companies Act,
2013 are as depicted below:
Deprecation on addition to the property, plant and
equipment is provided on pro rata basis from the date
the assets are acquired/ installed. Deprecation on sale/
deduction of plant, property and equipment assets is
provided for upto the date of sale and deduction.
Plant and Machinery comprises Sound Box and
Electronic Data Capture “EDC” machines. With effect
from 1st October 2023, the company has changed the
useful life of Sound Box and EDC machines to 2 years.
The impact on account of above change in estimate is
considered for the current year.
The estimated useful lives, residual values and
depreciation method are reviewed at the end of each
reporting year, with the effect of any changes in estimate
accounted for on a prospective basis.
An item of property, plant and equipment is derecognised
upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset.
The gain or loss arising on the disposal or retirement of an
asset is determined as the difference between the sales
proceeds and the carrying amount of the asset and is
recognised in profit or loss.
j) Intangible assets
Intangible assets with finite useful lives that are acquired
separately are carried at cost less accumulated amortisation
and accumulated impairment losses, if any. Amortisation
is recognised on a straight-line basis over their estimated
useful lives determined based on technical assessment of
internal experts. The estimated useful life and amortisation
An intangible asset is derecognised on disposal, or when
no future economic benefits are expected from use or
disposal. Gains or losses arising from derecognition of
an intangible asset, measured as the difference between
the net disposal proceeds and the carrying amount of
the asset, and are recognised in profit or loss when the
asset is derecognised.
k) Financial instruments
A financial instrument is any contract that gives rise to
a financial asset of one entity and a financial liability or
equity instrument of another entity. Trade receivables
and debt securities issued are initially recognised when
they are originated. All other financial assets and financial
liabilities are recognised when a Company becomes a
party to the contractual provisions of the instruments.
Financial assets (unless it is a trade receivable without a
significant financing component) and financial liabilities
are initially measured at fair value. Transaction costs
that are directly attributable to the acquisition or issue
of financial assets and financial liabilities (other than
financial assets and financial liabilities at fair value
through profit or loss are added to or deducted from the
fair value of the financial assets or financial liabilities,
as appropriate, on initial recognition. Transaction costs
directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss
are recognised immediately in profit or loss. A trade
receivable without a significant financing component is
initially measured at the transaction price.
Financial assets
All recognised financial assets are subsequently
measured in their entirety at either amortised cost
or fair value, depending on the classification of the
financial assets.
Classification of financial instruments
For purposes of subsequent measurement, financial
assets are classified in four categories:
• Financial asset at amortised cost
• Debt instruments at fair value through other
comprehensive income (FVTOCI)
• Debt instruments, derivatives and equity instruments
at fair value through profit or loss (FVTPL)
• Equity instruments measured at fair value through
other comprehensive income (FVTOCI)
A financial asset that meet the following conditions
are subsequently measured at amortised cost (except
for financial asset that are designated as at fair value
through profit or loss on initial recognition):
• the asset is held within a business model whose
objective is to hold assets in order to collect
contractual cash flows; and
• the contractual terms of the instrument give rise
on specified dates to cash flows that are solely
payments of principal and interest on the principal
amount outstanding.
Debt instruments that meet the following conditions
are subsequently measured at fair value through other
comprehensive income (except for debt instruments that
are designated as at fair value through profit or loss on
initial recognition):
• the asset is held within a business model whose
objective is achieved both by collecting contractual
cash flows and selling financial assets; and
• the contractual terms of the instrument give rise
on specified dates to cash flows that are solely
payments of principal and interest on the principal
amount outstanding.
On initial recognition of an equity investment that is not
held for trading, the Company may irrevocably elect
to present subsequent changes in the investment's
fair value in OCI. This election is made on an
investment-by-investment basis.
All financial assets not classified as measured at Debt
instruments that do not meet the amortised cost criteria
or FVTOCI criteria (see above) are measured at FVTPL.
In addition, debt instruments financial assets that meet
the amortised cost criteria or the FVTOCI criteria may
irrevocably be but are designated as at FVTPL are measured
at FVTPL if doing so eliminates or significantly reduces an
accounting mismatch that would otherwise arise.
Impairment of financial assets
The Company applies the expected credit loss model
for recognising impairment loss on financial assets
measured at amortised cost, debt instruments, trade
receivables, other contractual rights to receive cash
or other financial asset and financial guarantees not
designated as at FVTPL. The amount of expected credit
losses is updated at each reporting date to reflect
changes in credit risk since initial recognition of the
respective financial instrument.
The Company always recognises lifetime expected
credit losses (ECL) for trade receivables. The expected
credit losses on these financial assets are estimated
using a provision matrix based on the Company's
historical credit loss experience, adjusted for factors that
are specific to the debtors, general economic conditions
and an assessment of both the current as well as the
forecast direction of conditions at the reporting date,
including time value of money where appropriate.
For measurement of loss allowance in case of financial
guarantee contracts, the Company recognises lifetime
ECL when there has been a significant increase in credit
risk since initial recognition. However, if the credit risk on
the financial instrument has not increased significantly
since initial recognition, the Company measures the
loss allowance for that financial instrument at an amount
equal to 12-month ECL.
Lifetime ECL represents the expected credit losses
that will result from all possible default events over
the expected life of a financial instrument. In contrast,
12-month ECL represents the portion of lifetime ECL that
is expected to result from default events on a financial
instrument that are possible within 12 months after the
reporting date.
(i) Significant increase in credit risk
For financial guarantee contracts, the date that
the Company becomes a party to the irrevocable
commitment is considered to be the date of initial
recognition for the purposes of assessing the
financial instrument for impairment. In assessing
whether there has been a significant increase in
the credit risk since initial recognition of a financial
guarantee contracts, the Company considers the
changes in the risk that the specified debtor will
default on the contract. In making this assessment,
the Company considers both quantitative and
qualitative information that is reasonable and
supportable, including historical experience and
forward-looking information that is available without
undue cost or effort.
The Company applies a three-stage approach to
measure ECL on financial guarantee contracts. The
underlying receivables of debtors migrate through
the following three stages based on the change in
credit quality since initial recognition.
Stage 1: 12-months ECL
For exposures where there has not been a significant
increase in credit risk since initial recognition and
that are not credit impaired upon origination, the
portion of the lifetime ECL associated with the
probability of default events occurring within the
next 12 months is recognized.
Exposures with days past due (DPD) less than or
equal to 30 days are classified as stage 1.
Stage 2: Lifetime ECL - not credit impaired
For credit exposures where there has been a
significant increase in credit risk since initial
recognition but that are not credit impaired, a
lifetime ECL is recognized. Exposures with DPD
equal to 31 days but less than or equal to 89 days
are classified as stage 2. At each reporting date,
the Company assesses whether there has been
a significant increase in credit risk for underlying
receivables of debtors since initial recognition by
comparing the risk of default occurring over the
expected life between the reporting date and the
date of initial recognition.
Stage 3: Lifetime ECL - credit impaired
Receivable of debtor is assessed as credit impaired
when one or more events that have a detrimental
impact on the estimated future cash flows of that
asset have occurred. For receivable of debtors
that have become credit impaired, a lifetime ECL is
recognized on principal outstanding as at year end.
Exposures with DPD equal to or more than 90 days
are classified as stage 3.
The definition of default for the purpose of
determining ECLs has been aligned to the Reserve
Bank of India definition of default, which considers
indicators that the debtor is unlikely to pay and
is no later than when the exposure is more than
90 days past due.
The measurement of all expected credit losses for
financial guarantee contracts held at the reporting
date are based on historical experience, current
conditions, and reasonable and supportable
forecasts. The measurement of ECL involves
increased complexity and judgement, including
estimation of PDs, LGD, a range of unbiased future
economic scenarios, estimation of expected lives
and estimation of EAD and assessing significant
increases in credit risk.
The Company regularly monitors the effectiveness
of the criteria used to identify whether there has
been a significant increase in credit risk and revises
them as appropriate to ensure that the criteria are
capable of identifying significant increase in credit
risk before the amount becomes past due.
(ii) Measurement and recognition of expected credit
losses
The measurement of expected credit losses is
a function of the probability of default, loss given
default (i.e. the magnitude of the loss if there
is a default) and the exposure at default. The
assessment of the probability of default and loss
given default is based on historical data adjusted
by forward-looking information as described above.
As for the exposure at default, for financial assets,
this is represented by the assets' gross carrying
amount at the reporting date; for financial guarantee
contracts, the exposure includes the amount drawn
down as at the reporting date, together with any
additional amounts expected to be drawn down
in the future by default date determined based on
historical trend, the Company's understanding of
the specific future financing needs of the debtors,
and other relevant forward-looking information.
For financial assets, the expected credit loss is
estimated as 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 Company expects to receive, discounted at
the original effective interest rate.
For a financial guarantee contract, as the Company
is required to make payments only in the event
of a default by the debtor in accordance with
the terms of the instrument that is guaranteed,
the expected loss allowance is the expected
payments to reimburse the holder for a credit loss
that it incurs less any amounts that the Company
expects to receive from the holder, the debtor or
any other party.
If the Company has measured the loss allowance
for a financial instrument at an amount equal to
lifetime ECL in the previous reporting year but
determines at the current reporting date that the
conditions for lifetime ECL are no longer met,
the Company measures the loss allowance at
an amount equal to 12-month ECL at the current
reporting date, except for assets for which the
simplified approach was used.
The Company recognises an impairment gain or
loss in profit or loss for all financial instruments
with a corresponding adjustment to their carrying
amount through a loss allowance account, except
for investments in debt instruments that are
measured at FVTOCI, for which the loss allowance
is recognised in other comprehensive income and
accumulated in a separate component of equity
wherein fair value changes are accumulated,
and does not reduce the carrying amount of the
financial asset in the balance sheet.
Derecognition of financial assets
The Company derecognises a financial asset when the
contractual rights to the cash flows from the asset expire,
or when it transfers the financial asset and substantially
all the risks and rewards of ownership of the asset to
another party or when 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 neither transfers nor retains
substantially all the risks and rewards of ownership
and continues to control the transferred asset, the
Company recognises its retained interest in the asset
and an associated liability for amounts it may have to
pay. If the Company retains substantially all the risks and
rewards of ownership of a transferred financial asset,
the Company continues to recognise the financial asset
and also recognises a collateralised borrowing for the
proceeds received.
On derecognition of a financial asset in its entirety, the
difference between the asset's carrying amount and the
sum of the consideration received and receivable and
the cumulative gain or loss that had been recognised in
other comprehensive income and accumulated in equity
is recognised in profit or loss if such gain or loss would
have otherwise been recognised in profit or loss on
disposal of that financial asset.
Financial liabilities and equity instruments
Classification as debt or equity
Debt and equity instruments issued by the Company
are classified as either financial liabilities or as equity
in accordance with the substance of the contractual
arrangements and the definitions of a financial liability and
an equity instrument.
Equity instruments
An equity instrument is any contract that evidences
a residual interest in the assets of the Company after
deducting all of its liabilities. Equity instruments issued by
the Company are recognised at the proceeds received,
net of direct issue costs.
Financial liabilities
A financial liability is any liability that is:
(a) a contractual obligation:
(i) to deliver cash or another financial asset to
another entity; or
(ii) to exchange financial assets or financial
liabilities with another entity under
conditions that are potentially unfavourable
to the entity; or
(b) a contract that will or may be settled in the entity's
own equity instruments and is:
(i) a non-derivative for which the entity is or may
be obliged to deliver a variable number of the
entity's own equity instruments; or
(ii) a derivative that will or may be settled other
than by the exchange of a fixed amount of
cash or another financial asset for a fixed
number of the entity's own equity instruments.
All financial liabilities are subsequently measured
at amortised cost using the effective interest
method or at FVTPL.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when
the financial liability is either contingent consideration
recognised by the Company as an acquirer in a business
combination to which Ind AS 103 applies or is held for
trading or it is designated as at FVTPL.
Financial liabilities at FVTPL are stated at fair value,
with any gains or losses arising on remeasurement
recognised in profit or loss.
Financial liabilities subsequently measured at amortised
cost
Other financial liabilities are subsequently measured
at amortised cost at the end of subsequent accounting
year. The carrying amounts of financial liabilities that are
subsequently measured at amortised cost are determined
based on the effective interest method. Interest expense
that is not capitalised as part of costs of a qualifying asset
is included in the ‘Finance costs' line item.
The effective interest method is a method of calculating
the amortised cost of a financial liability and of allocating
interest expense over the relevant year. The effective
interest rate is the rate that exactly discounts estimated
future cash payments (including all fees and points paid
or received that form an integral part of the effective
interest rate, transaction costs and other premiums or
discounts) through the expected life of the financial
liability, or (where appropriate) a shorter period, to the
net carrying amount on initial recognition.
Financial guarantee contract liabilities
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 recognised initially as
a liability at fair value, 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
recognised less, when appropriate, the cumulative
amount of income recognised in accordance with the
principles of Ind AS 115.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and
only when, the Company's obligations are discharged,
cancelled or have expired. An exchange between with
a lender of debt instruments with substantially different
terms is accounted for as an extinguishment of the
original financial liability and the recognition of a new
financial liability. Similarly, a substantial modification
of the terms of an existing financial liability (whether
attributable to the financial difficulty of the debtor) is
accounted for as an extinguishment of the original
financial liability and the recognition of a new financial
liability. The difference between the carrying amount of
the financial liability derecognised and the consideration
paid and payable is recognised in profit or loss.
Interest income
For all financial assets measured at amortised cost,
interest income is recorded using the effective interest
rate (EIR). EIR is the rate that exactly discounts the
estimated future cash payments or receipts over the
expected life of the financial instrument or a shorter
period, where appropriate, to the net carrying amount of
the financial asset or to the amortised cost of a financial
liability. When calculating EIR, the Company estimates the
expected cash flows by considering all the contractual
terms of the financial instrument but does not consider
the expected credit losses. Interest income is included in
other income in the statement of profit and loss.
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