2. Material Accounting Policies
2.1 Basis of Preparation
These financial statements are prepared in accordance with Indian Accounting Standards (Ind
AS) notified under Companies (Indian Accounting Standards) Rules 2015, read with Section 133
of Companies Act 2013.
These financial statements have been prepared on historical cost basis, except for certain
financial instruments which are measured at fair value at the end of each reporting period, as
explained in the accounting policies below. Historical cost is generally based on the fair value of
the consideration given in exchange for goods and services. Fair value is the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.
2.2 Summary of Material Accounting Policies
2.2.1 Use of Estimates
The preparation of financial statements in conformity with Ind AS recognition and measurement
principles and, in particular, making the critical accounting judgments require the use of estimates
and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.
Management reviews its estimates on an ongoing basis using currently available information.
Changes in facts and circumstances or obtaining new information or more experience may result
in revised estimates, and actual results could differ from those estimates.
2.2.2 Classification of Assets and Liabilities as Current or Non-Current
The Company presents current and non-current assets, and current and non-current liabilities, as
separate classifications in its statement of financial position on the basis of realization of assets.
An asset is classified as current when it is:
• expected to be realized or intended to be sold or consumed in the normal operating cycle, or
• held primarily for the purpose of trading, or
• expected to be realized within twelve months after the reporting period, or
• cash or cash equivalent unless restricted from being exchanged or used to settle a liability for
at least twelve months after the reporting period
A liability is classified as current when:
• it is expected to be settled in the normal operating cycle, or
• it is held primarily for the purpose of trading, or
• it is due to be settled within twelve months after the reporting period, or
• there is no unconditional right to defer the settlement of the liability for at least twelve months
after the reporting period
All other assets and liabilities are classified as non-current. Deferred tax assets and liabilities are
classified as non-current assets and liabilities.
2.2.3 Business combination and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition
is measured as the aggregate of the consideration transferred measured at acquisition date
fair value and the amount of any non-controlling interests in the acquiree. For each business
combination, the Company elects whether to measure the non-controlling interests in the acquiree
at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-
related costs are expensed as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized
at their acquisition date fair values. For this purpose, the liabilities assumed include contingent
liabilities representing present obligation and they are measured at their acquisition fair values
irrespective of the fact that outflow of resources embodying economic benefits is not probable.
However, the following assets and liabilities acquired in a business combination are measured at
the basis indicated below:
Deferred tax assets or liabilities, and the assets or liabilities related to employee benefit
arrangements are recognized and measured in accordance with Ind AS 12 Income Tax and Ind
AS 19 Employee Benefits respectively.
When the Company acquires a business, it assesses the financial assets and liabilities assumed
for appropriate classification and designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition date. This includes the separation of
embedded derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, any previously held equity interest is re-measured
at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss or OCI,
as appropriate. Any contingent consideration to be transferred by the acquirer is recognised at
fair value at the acquisition date. Contingent consideration classified as an asset or liability that
is a financial instrument and within the scope of Ind AS 109 Financial Instruments, is measured
at fair value with changes in fair value recognised in profit or loss. If the contingent consideration
is not within the scope of Ind AS 109, it is measured in accordance with the appropriate Ind AS.
Contingent consideration that is classified as equity is not re-measured at subsequent reporting
dates and subsequent its settlement is accounted for within equity.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration
transferred and the amount recognized for non-controlling interests, and any previous interest
held, over the net 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.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Company cash-generating units that are expected to
benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are
assigned to those units.
Cash generating unit to which goodwill has been allocated is tested for impairment annually,
or more frequently when there is an indication that the unit may be impaired. If the recoverable
amount of the cash generating unit is less than its carrying amount, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the
other assets of the unit pro rata based on the carrying amount of each asset in the unit.
Any impairment loss for goodwill is recognised in profit or loss. An impairment loss recognised
for goodwill is not reversed in subsequent periods. Where goodwill has been allocated to a cash¬
generating unit and part of the operation within that unit is disposed of, the goodwill associated
with the disposed operation is included in the carrying amount of the operation when determining
the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the
relative values of the disposed operation and the portion of the cash-generating unit retained.
If the initial accounting for a business combination is incomplete by the end of the reporting period
in which the combination occurs, the Company reports provisional amounts for the items for
which the accounting is incomplete.
Those provisional amounts are adjusted through goodwill during the measurement period, or
additional assets or liabilities are recognized, to reflect new information obtained about facts and
circumstances that existed at the acquisition date that, if known, would have affected the amounts
recognized at that date. These adjustments are called as measurement period adjustments. The
measurement period does not exceed one year from the acquisition date.
2.2.4 Revenue Recognition
The Company derives revenues primarily from sale of mobile handsets and mobile accessories.
Sale of Products:
Revenue from sale of goods is recognized when control of the products is being sold is transferred
to our customer and when there are no longer any fulfilled obligations. The performance obligations
in our contracts are fulfilled at the time of dispatch, delivery or upon formal customer acceptance
depending on customer terms.
Revenue is measured on the basis of contracted price, after deduction of any trade discounts,
volume rebates and any taxes or duties collected on behalf of the Government such as goods and
services tax, etc. Accumulated experience is used to estimate the provision for such discounts
and rebates. Revenue is only recognized to the extent that it is highly probable a significant
reversal will not occur.
Our customers have the contractual right to return goods only when authorized by the Company.
An estimate is made of the goods that will be returned and a liability is recognized for this amount
using a best estimate based on accumulated experience.
The Company uses the percentage-of-completion method in accounting for its fixed price
contracts. The use of percentage-of-completion method required the Company to estimate the
efforts or costs expended to date as a proportion of the total efforts or costs to be expended.
Efforts or costs expended have been used to measure progress towards completion as there
is direct relationship between input and productivity. Provision for estimated losses, if any, on
uncompleted contracts are recorded in the period in which such losses become probable based
on the expected contract estimates at the reporting period.
2.2.5 Interest Income
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 gross carrying amount of the financial
asset. When calculating the effective rate, the company estimates the expected cash flows
by considering all the contractual terms of the financial instrument (for example, prepayment,
extension) but does not consider the expected credit losses, interest income is included in other
income in the standalone financial statement of profit and loss.
2.2.6 Property, Plant and Equipment
Property, plant and equipment is recorded at cost less accumulated depreciation and impairment.
Cost includes all related costs directly attributable to the acquisition or construction of the asset.
Each part of an item of property, plant and equipment with a cost that is significant in relation to
the total cost of the item is depreciated separately using written down value method.
Major improvements, which add to productive capacity or extend the life of an asset, are capitalized,
while repairs and maintenance are expensed as incurred. Where a property, plant and equipment
comprises major components having different useful lives, these components are accounted for
as separate items. The depreciation expense is recognized in the statement of profit or loss in the
expense category consistent with the function of the property, plant and equipment.
Depreciation is provided for property, plant and equipment on written down value basis so as to
expense the written down value over their estimated useful lives based on a technical evaluation.
The estimated useful lives and residual values are reviewed at the end of each reporting period,
with the effect of any change in estimate accounted for on a prospective basis.
The estimated useful lives are as mentioned below:
Gains or losses arising from de-recognition of a property, plant and equipment 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.
The residual values and useful lives of property, plant and equipment are reviewed at each
reporting date and adjusted if expectations differ from previous estimates. Depreciation methods
applied to property, plant and equipment are reviewed at each reporting date and changed if there
has been a significant change in the expected pattern of consumption of the future economic
benefits embodied in the asset.
2.2.7 Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost. Following initial
recognition, intangible assets are carried at cost less accumulated amortization and accumulated
impairment losses, if any. Internally generated intangible assets, excluding capitalized development
costs, are not capitalized and expenditure is recognized in the statement of profit or loss when it
is incurred.
The useful lives of intangible assets are assessed as finite. Intangible assets are amortized over
their useful economic lives and assessed for impairment whenever there is an indication that
the intangible asset may be impaired. The amortization period and the amortization method are
reviewed at least at the end of each reporting period. Changes in the expected useful life or the
expected pattern of consumption of future economic benefits embodied in the asset are accounted
for by changing the amortization period or method, as appropriate, and are treated as changes in
accounting estimates. The amortization expense is recognized in the statement of profit or loss in
the expense category consistent with the function of the intangible assets.
Gains or losses arising from de-recognition 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.
Research and Development (R&D)
It involves specific guidelines for recognizing, measuring, and disclosing research and development
costs as per the guidance of Ind AS -38 Intangible asset. Key aspects of the policy are:
a) Research Phase
Expenditure on research (or on the research phase of an internal project) shall be recognized
as an expense when it is incurred. Research costs cannot be capitalized as an intangible
asset. Research activities are original and planned investigation undertaken with the prospect
of gaining new scientific or technical knowledge and understanding.
b) Development Phase
An intangible asset arising from the development (or from the development phase of an
internal project) shall be recognized if, and only if, an entity can demonstrate all of the
following:
1. Technical Feasibility: The technical feasibility of completing the intangible asset so
that it will be available for use or sale.
2. Intention to Complete: The intention to complete the intangible asset and use or sell
it.
3. Ability to Use or Sell: The ability to use or sell the intangible asset.
4. Future Economic Benefits: How the intangible asset will generate probable future
economic benefits. Among other things, the entity can demonstrate the existence of
a market for the output of the intangible asset or the intangible asset itself or, if it is
to be used internally, the usefulness of the intangible asset.
5. Availability of Resources: The availability of adequate technical, financial, and
other resources to complete the development and to use or sell the intangible asset.
6. Ability to Measure Expenditure Reliably: The ability to measure reliably the
expenditure attributable to the intangible asset during its development.
If these conditions are not met, development expenditure should be recognized as an expense
when it is incurred.
2.2.8 Investment property
Recognition and Measurement
Investment properties are properties (land or buildings or both) held to earn rentals or for capital
appreciation or both, rather than for:
• Use in the production or supply of goods or services or for administrative purposes, or
• Sale in the ordinary course of business
Investment properties are measured initially at cost, including transaction costs. The cost of
a purchased investment property comprises its purchase price and any directly attributable
expenditure (such as professional fees for legal services, property transfer taxes, and other
transaction costs).
Subsequent Measurement
After initial recognition, investment properties are measured at cost less accumulated depreciation
and any accumulated impairment losses. The Company uses the cost model for subsequent
measurement as prescribed by Ind AS 40.
Depreciation
Depreciation on investment property is provided on a straight-line basis over the estimated useful
life. The useful lives and residual values are reviewed at each reporting date and adjusted, if
necessary. The useful life of buildings is determined based on the period over which they are
expected to be available for use by the Company.
Transfers
Transfers to or from investment property are made when, and only when, there is a change in use,
evidenced by:
• Commencement of owner-occupation, for a transfer from investment property to owner-
occupied property;
• Commencement of development with a view to sale, for a transfer from investment property
to inventories;
• End of owner-occupation, for a transfer from owner-occupied property to investment property;
or
• Commencement of an operating lease to another party, for a transfer from inventories to
investment property.
Disposal
An investment property is derecognized on disposal or when the investment property is
permanently withdrawn from use and no future economic benefits are expected from its disposal.
Any gain or loss arising on derecognition of the property (calculated as the difference between
the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the
period in which the property is derecognized.
Fair Value Disclosure
The fair value of investment properties in the financial statements (based on valuation by an
independent valuer who holds a recognised and relevant professional qualification and has recent
experience in the location and category of the investment property being valued) for the fair value
disclosure as encouraged by Ind AS 40 has not been undertaken by the company.
Impairment
The Company assesses at each reporting date whether there is any indication that an investment
property may be impaired. If any such indication exists, the Company estimates the recoverable
amount of the investment property. An impairment loss is recognized for the amount by which the
carrying amount of the investment property exceeds its recoverable amount.
Presentation and Disclosure
Investment properties are presented as a separate line item in the balance sheet. Detailed
disclosures about investment properties are made in accordance with Ind AS 40, including the
amounts recognized in profit or loss, restrictions on the realizability of investment property, and
contractual obligations to purchase, construct, or develop investment properties or for repairs,
maintenance, or enhancements.
2.2.9 Impairment of Assets
The Company assesses at each reporting date whether there is an indication that an asset may
be impaired. If any indication exists, or when annual impairment testing for an asset is required,
the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the
higher of an asset’s or Cash Generating Unit (CGU)’s fair value less costs of disposal and its
value in use. It is determined for an individual asset, unless the asset does not generate cash
inflows that are largely independent of those from other assets or company of assets. Where the
carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset. In determining fair value less costs of disposal, recent market
transactions are taken into account. If no such transactions can be identified, an appropriate
valuation model is used. These calculations are corroborated by valuation multiples, quoted
share prices for publicly traded companies or other available fair value indicators.
The Company bases its impairment calculation on detailed budgets and forecasts which are
prepared separately for each of the Company’s CGU to which the individual assets are allocated.
These budgets and forecast calculations are generally covering a period of five years. A long-term
growth rate is calculated and applied to project future cash flows after the fifth year.
Impairment losses are recognized in the statement of profit or loss in those expense categories
consistent with the function of the impaired asset.
2.2.1U 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.
i. Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as financial assets at fair value
through profit or loss, fair value through OCI or at amortized cost as appropriate. The
Company determines the classification of its financial assets at initial recognition.
All financial assets are recognised initially at fair value plus, in the case of assets not at
fair value through profit or loss, transaction costs that are attributable to the acquisition of
the financial asset.
The Company has the following financial assets in its statement of financial position
• Investments
• Cash
• Bank Balances
• Trade Receivables
• Loans
Subsequent measurement
The subsequent measurement of financial assets depends on their classification as
described below:
Financial assets at FVTPL or FVTOCI
Financial assets at fair value through profit or loss include financial assets held for trading
and financial assets designated upon initial recognition at fair value through profit or loss.
Financial assets are classified as held-for-trading if they are acquired for the purpose of
selling or repurchasing in the near term. Financial assets at fair value through profit and
loss are carried in the statement of financial position at fair value with net changes in fair
value presented as finance income (positive net changes in fair value) or finance costs
(negative net changes in fair value) in the statement of profit or loss. The Company has
not designated any financial assets upon initial recognition as at fair value through profit
or loss.
If the company decides to classify an equity instrument as at FVTOCI, then all fair value
changes on the instrument, excluding dividends, are recognized in the OCI. There is no
recycling of the amounts from OCI to P&L, even on sale of investment. However, the
company may transfer the cumulative gain or loss within equity.
Financial assets at amortised cost
This category is the most relevant to the Company. All Trade and Other Receivables,
Loans and Advances fall under this category. After initial measurement, such financial
assets are subsequently measured at amortised cost using the effective interest rate
(EIR) method, less impairment. Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that are an integral part of the EIR.
The EIR amortisation is included in finance income in the statement of profit or loss. The
losses arising from impairment are recognised in the statement of profit or loss in finance
costs for loans and in cost of sales or other operating expenses for receivables. This
category generally applies to trade and other receivables.
De-recognition
A financial asset (or, where applicable, a part of a financial asset or part of a company of
similar financial assets) is derecognised when:
• The rights to receive cash flows from the asset have expired, or
• The Company has transferred its rights to receive cash flows from the asset or has
assumed an obligation to pay the received cash flows in full without material delay
to a third party under a ‘pass-through’ arrangement, and eitherthe Company has
transferred substantially all the risks and rewards of the asset or transferred control
of the asset.
Impairment of Financial Assets
The objective of the company in recognising the impairment allowance is to recognise
lifetime expected credit losses for all financial instruments for which there have been
significant increases in credit risk since initial recognition — whether assessed on an
individual or collective basis - considering all reasonable and supportable information,
including that which is forward-looking.
Credit Losses are 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 (i.e. all cash shortfalls), discounted at the original effective interest rate (or
credit-adjusted effective interest rate for purchased or originated credit-impaired financial
assets). Expected Credit Losses are the weighted average of credit losses with the
respective risks of a default occurring as the weights.
The Company recognises a loss allowance for expected credit losses on a financial asset
that is measured at amortized cost at each reporting date, at an amount equal to the
lifetime expected credit losses if the credit risk on that financial instrument has increased
significantly since initial recognition. When making the assessment, the company uses the
change in the risk of a default occurring over the expected life of the financial instrument
instead of the change in the amount of expected credit losses. To make that assessment,
the company compares the risk of a default occurring on the financial instrument as at
the reporting date with the risk of a default occurring on the financial instrument as at the
date of initial recognition and consider reasonable and supportable information, that is
available without undue cost or effort, that is indicative of significant increases in credit
risk since initial recognition. The Company assumes that the credit risk on a financial
instrument has not increased significantly since initial recognition if it is determined to
have low credit risk at the reporting date.
If, at the reporting date, the credit risk on a 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 expected credit losses. For Trade
receivables the company always measure the loss allowance at an amount equal to
lifetime expected credit losses.
Evidence of impairment may include indications that the debtors or a company of debtors
is experiencing significant financial difficulty, default or delinquency in interest or principal
payments, the probability that they will enter bankruptcy or other financial reorganisation
and where observable data indicate that there is a measurable decrease in the estimated
future cash flows, such as changes in arrears or economic conditions that correlate with
defaults.
For financial assets carried at amortised cost, the Company first assesses whether
impairment exists individually for financial assets that are individually significant,
or collectively for financial assets that are not individually significant. If the Company
determines that no objective evidence of impairment exists for an individually assessed
financial asset, whether significant or not, it includes the asset in a company of financial
assets with similar credit risk characteristics and collectively assesses them for impairment.
Assets that are individually assessed for impairment and for which an impairment loss is,
or continues to be, recognised are not included in a collective assessment of impairment.
The Company measures expected credit losses of a financial instrument in a way that
reflects an unbiased and probability-weighted amount that is determined by evaluating a
range of possible outcomes, the time value of money; and the reasonable and supportable
information that is available without undue cost or effort at the reporting date about past
events, current conditions and forecasts of future economic conditions.
The carrying amount of the asset is reduced through the use of an allowance account
and the amount of the loss is recognised in the statement of profit or loss. Interest income
continues to be accrued on the gross carrying amount using the effective rate of interest
unless the financial instrument is credit-impaired in which case the interest income is
recognised on reduced carrying amount. The interest income is recorded as part of
finance revenue in the statement of profit or loss.
Loans, together with the associated allowance are written off when there is no realistic
prospect of future recovery and all collateral has been realised or has been transferred
to the Company. If, in a subsequent year, the amount of the estimated impairment
loss increases or decreases because of an event occurring after the impairment was
recognised, the previously recognised impairment loss is increased or reduced by
adjusting the allowance account. If a write-off is later recovered, the recovery is credited
to profit or loss.
ii. Financial Liabilities
The Company has the following financial liabilities in its statement of financial position
• Lease liability
• Trade payables
• Other financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value
through profit or loss, loans and borrowings, payables, or as derivatives designated as
hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and
borrowings and payables, net of directly attributable transaction costs.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as follows:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held-for-
trading and financial liabilities designated upon initial recognition as at fair value through
profit or loss.
Financial liabilities are classified as held-for-trading if they are acquired for the purpose
of selling in the near term. Gains or losses on liabilities held-for-trading are recognised
in the statement of profit or loss. Financial liabilities designated upon initial recognition at
fair value through profit or loss are designated at the initial date of recognition, and only
if the criteria in Ind AS109 are satisfied. The Company has not designated any financial
liabilities as at fair value through profit or loss.
Financial liabilities at amortised cost
This is the category most relevant to the Company. After initial recognition, financial
liabilities are subsequently measured at amortised cost using the effective interest rate
method. Gains and losses are recognised in the statement of profit or loss when the
liabilities are derecognised as well as through the effective interest rate method (EIR)
amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition
and fees or costs that are an integral part of the EIR. The EIR amortisation is included in
finance costs in the statement of profit or loss.
This category generally applies to notes payable, short-term loans and overdrafts.
iii. Offsetting of financial instruments
Financial assets and financial liabilities are offset with the net amount reported in the
consolidated statement of financial position only if there is a current enforceable legal
right to offset the recognised amounts and an intent to settle on a net basis, or to realise
the assets and settle the liabilities simultaneously.
iv. Fair Value of Financial Instruments
Fair Value is the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date. The fair
values of the financial instruments are not materially different at the reporting date.
2.2.11 Cash and Bank Balances
Cash and Bank Balances in the statement of financial position comprise cash at banks and on
hand and fixed deposits with banks, which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash at
bank and on hand and short-term deposits with original maturity of less than 3 months, net of
outstanding bank overdrafts as they are considered an integral part of the Company’s cash
management.
2.2.12 Leases
Company as a lessee
The Company recognises a right-of-use asset and a lease liability at the lease commencement
date. The right of-use asset is initially measured at cost, which comprises the initial amount of the
lease liability adjusted for any lease payments made at or before the commencement date, plus
any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying
asset or to restore the underlying asset or the site on which it is located, less any lease incentives
received.
The right-of-use asset is subsequently depreciated using the straight-line method from the
commencement date to the shorter of the end of the useful life of the right of- use asset or the
end of the lease term. The estimated useful lives of right-of-use assets are determined on the
same basis as those of property and equipment. In addition, the right-of-use asset is periodically
reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease
liability.
The lease liability is initially measured at the present value of the lease payments that are not
paid at the commencement date, discounted using the interest rate implicit in the lease or, if that
rate cannot be readily determined, and the Company’s incremental borrowing rate. Generally, the
Company uses its incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the lease liability comprise the fixed payments,
including in substance fixed payments; the lease liability is measured at amortised cost using the
effective interest method.
The Company uses number of practical expedients when applying Ind AS 116: - Short-term
leases, leases of low-value assets and single discount rate.
The Company has elected not to recognise right-of-use assets and lease liabilities for short-term
leases that have a lease term of 12 months or less and leases of low value assets. The company
recognises the lease payments associated with these leases as an expense on a straight-line
basis over the lease term. The company applied a single discount rate to a portfolio of leases of
similar assets in similar economic environment with a similar end date.
The Company’s leases mainly comprise land and buildings and Plant and equipment. The
Company leases land and buildings for warehouse facilities. The Company also has leases for
equipment.
Company as lessor
Leases for which the Company is a lessor is classified as a finance or operating lease. Whenever
the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee,
the contract is classified as a finance lease. All other leases are classified as operating leases.
For operating leases, rental income is recognized on a straight line basis over the term of the
relevant lease.
2.2.13 Borrowing Cost
Borrowing costs consist of interest and other costs that an entity incurs in connection with
the borrowing of funds. Borrowing costs directly attributable to the acquisition, construction or
production of an asset that necessarily takes a substantial period of time to get ready for its
intended use or sale are capitalised as part of the cost of the respective asset. All other borrowing
costs are expensed in the period in which they occur.
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