2.3 Summary of Material Accounting Policies
a) Property, Plant and Equipment
Property, plant and equipment at their initial recognition
are stated at their cost of acquisition. On transition to
Ind AS, the Company had elected to measure all of its
property, plant and equipment at the previous GAAP
carrying value (deemed cost). The cost comprises
purchase price, borrowing cost, if capitalization criteria are
met and directly attributable cost of bringing the asset to
its working condition for the intended use. An impairment
loss is recognized where applicable, when the carrying
value of tangible assets of cash generating unit exceed its
recoverable value or value in use, whichever is higher.
Subsequent costs are included in the asset's carrying
amount or recognised as a separate asset, as appropriate,
only when 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. The carrying
amount of the replaced component is derecognised when
replaced. All other repairs and maintenance are charged
to the statement of profit and loss during the reporting
period in which they are incurred, if any.
Capital work in progress is stated at cost, net of
accumulated impairment loss, if any.
The Company, based on technical assessment made by
technical expert and management estimate, depreciates
certain items of property plant and equipment over
estimated useful lives which are different from the useful
life prescribed in Schedule II to the Companies Act, 2013.
The management believes that these estimated useful
lives are realistic and reflect fair approximation of the
period over which the assets are likely to be used.
The management believes that these estimated useful
lives are realistic and reflect fair approximation of the
period over which the assets are likely to be used.
The Company depreciates its Property, plant and
equipment under straight line method over the useful life
of assets. When significant parts of plant and equipment
are required to be replaced at intervals, the Company
depreciates them separately based on their specific useful
lives.
An item of property, plant and equipment and any
significant part initially recognised is derecognised upon
disposal or when no future economic benefits are expected
from its use or disposal. Depreciation for assets purchased
/ sold during the year is proportionately charged. Any gain
or loss arising on de-recognition of the asset (calculated as
the difference between the net disposal proceeds and the
carrying amount of the asset) is included in the income
statement when the asset is derecognised.
The residual values, useful lives and methods of
depreciation of property, plant and equipment are
reviewed at each financial year end and adjusted
prospectively, if appropriate.
The Company buys old / new machines and puts them
on trial run for manufacturing high precision engineered
products until the output reaches the desired level of
precision. Losses on account of such trial run (net of sale
proceeds / realisable value of the output during trial
run phase) are capitalised with the cost of underlying
machines which is considered as a necessary cost for
bringing the machines to their desired level of operation
from quality standpoint.
Advances paid towards the acquisition of property, plant
and equipment outstanding at each balance sheet date
are classified as'Capital Advances' under other non-current
assets and the cost of property, plant and equipment not
ready to use are disclosed under 'Capital Work-in-progress'
b) Intangible assets
Intangible assets have a finite useful life and are stated at
cost less accumulated amortisation, impairment loss, if
any.
Computer Software for internal use, which is primarily
acquired from third party vendors, is capitalised.
Subsequent costs associated with maintaining such
software are recognised as expense as incurred. Cost of
software includes license fees and cost of implementation
/ system integration services, where applicable.
An intangible asset is derecognised upon disposal (i.e., at
the date the recipient obtains control) or when no future
economic benefits are expected from its use or disposal.
Any gain or loss arising upon derecognition of the asset
(calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included
in the P&L when the asset is derecognised.
Goodwill is initially measured at cost, being the excess of
the aggregate of the consideration transferred over the
fair value of net identifiable assets acquired and liabilities
assumed. Consideration transferred includes the fair
values of the assets transferred, liabilities incurred by the
Company to the previous owners of the acquiree, and
equity interests issued by the Company.
After initial recognition, goodwill is measured at cost
less any accumulated impairment losses, if any. For the
purpose of impairment testing, goodwill acquired in
a business combination is, from the acquisition date,
allocated to each of the Company's cash-generating
units that are expected to benefit from the combination,
irrespective of whether other assets or liabilities of the
acquire are assigned to those units.
A cash generating unit to which goodwill has been
allocated is tested for impairment annually or 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 statement of profit and loss. An impairment
loss recognised for goodwill is not reversed in subsequent
periods.
c) Impairment of non-financial assets
The Company assesses at each reporting date whether
there is an indication that an asset may be impaired. If any
indication exists, 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's (CGU)
fair value less costs of disposal and its value in use. The
recoverable amount is determined for an individual asset,
unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups
of assets. Where the carrying amount of an asset or CGU
exceeds its recoverable amount, the asset is considered
impaired and is 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 net selling price, recent market transactions
are taken into account, if available. If no such transactions
can be identified, an appropriate valuation model is used.
The Company bases its impairment calculation on detailed
budgets and forecast calculations which are prepared
separately for each of the Company's cash-generating units
to which the individual assets are allocated. Impairment
losses of continuing operations, including impairment on
inventories, are recognised in the Statement of Profit and
Loss. For assets, an assessment is made at each reporting
date to determine whether there is an indication that
previously recognised impairment losses no longer exist
or have decreased. If such indication exists, the Company
estimates the asset's or CGU's recoverable amount. A
previously recognised impairment loss is reversed only
if there has been a change in the assumptions used to
determine the asset's recoverable amount since the last
impairment loss was recognised. The reversal is limited so
that the carrying amount of the asset does not exceed its
recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had
no impairment loss been recognised for the asset in prior
years.
Such reversal is recognised in the Statement of Profit and
Loss. Intangible assets with indefinite useful lives are
tested for impairment annually at the CGU level, as
appropriate, and when circumstances indicate that the
carrying value may be impaired. After impairment,
depreciation is provided on the revised carrying amount
of the asset over its remaining useful life.
The Company assesses where climate risks could have a
significant impact, such as the introduction of emission-
reduction legislation that may increase manufacturing
costs. These risks in relation to climate-related matters are
included as key assumptions where they materially impact
the measure of recoverable amount. These assumptions
have been included in the cash-flow forecasts in assessing
value-in-use amounts.
d) Revenue Recognition
Revenue from contracts with customers is recognised
when control of the goods or services are transferred to
the customer at an amount that reflects the consideration
to which the Company expects to be entitled in exchange
for those goods or services. Revenue towards satisfaction
of a performance obligation is measured at the amount of
transaction price (net of variable consideration) allocated
to that performance obligation. The transaction price
of goods sold or services rendered is net of variable
consideration on account of returns, discounts, volume
rebates, goods and service tax excluding amount collected
on behalf of third parties. The Company has concluded
that it is the principal in all of its revenue arrangements
since it is the primary obligor as it has pricing latitude and
is also exposed to inventory and credit risks.
The Company recognises revenue when the amount of
revenue can be reliably measured, it is probable that future
economic benefits will flow to the Company regardless
of when the payment is being made and specific criteria
have been met for each of the Company's activities as
described below.
Sale of Products
Revenue from sale of products is recognized when
the Company transfers the control of goods to the
customer and the amount of revenue can be measured
reliably and recovery of consideration is probable. The
Company considers whether there are other promises in
the contract that are separate performance obligations
to which a portion of the transaction price needs to
be allocated. In determining the transaction price, the
Company considers the effects of variable consideration,
the existence of significant financing component, non¬
cash considerations and consideration payable to the
customer (if any). In case of export sales, the control gets
transferred to the customer on the date of bill of lading /
date of discharge from port as applicable except in cases
where the Company itself is the consignee.
In case of domestic sales, the control gets transferred to
the customers on delivery of goods to the transporter
except in cases where the Company it self is the consignee.
Export incentives
Exports entitlements are recognised when the right to
receive credit as per the terms of the schemes is established
in respect of the exports made by the Company and when
there is no significant uncertainty regarding the ultimate
collection of the relevant export proceeds.
Interest Income
For all debt instruments 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 gross carrying amount of the financial
asset or to the amortised cost of a financial liability. Interest
income is included in finance income in the statement of
profit and loss.
Dividend Income
Revenue is recognised when the Company's right to
receive the payment is established, which is generally
when shareholders approve the dividend.
Die design and preparation charges
Revenues from die design and preparation charges are
recognized on approval of die designs by the Customers.
Foreign exchange difference on operating assets and
liabilities
Exchange differences arising on operating items (such as
trade payables, trade receivables, forward contracts on
receivables) including realised exchange difference are
classified as other operating income.
Contract balances
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. However, trade receivables do not contain a
significant financing component and are measured at
transaction price.
The Company transfers certain trade receivables
under discounting arrangements with banks/financial
institutions. The Company de-recognises such trade
receivables on transfer wherein it involves non-recourse
arrangements. Where the trade receivables are transferred
under a recourse arrangement, such trade receivables are
not derecognised and the proceeds received from banks
are shown as borrowings.
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). Contract
liabilities are recognised as revenue when the Company
performs under the contract.
e) Government Grants
Government grants are recognised where there is
reasonable assurance that the grant will be received and all
attached conditions will be complied with. When the grant
relates to an expense item, it is recognised as income on a
systematic basis over the periods that the related costs, for
which it is intended to compensate, are expensed. When
the grant relates to an asset in the form of the duty benefit
availed under Export Promotion Capital Goods (EPCG)
scheme, it is accounted for as Government grant and its
amortised on the basis of fulfilment of underlying export
obligations. Also refer note 23.
Government grants such as for export benefit scheme
and other grants, for which related costs are recognised
as expense, are recognised in the Statement of Profit and
Loss on matching principle.
Government grants such as for GST Subsidy are recorded
at fair value and are recognised in the Statement of Profit
and Loss as an when due.
The Company considers government grant as part of
it's operations and hence considered as other operating
revenues.
f) Inventories
Inventories are valued at the lower of cost and net
realisable value after providing for obsolescence, if any.
Costs incurred in bringing each product to its present
location and conditions are accounted for as follows:
(i) Raw materials, Stores and Spares: These are valued
at lower of cost and net realisable value. However,
material and other items held for use in production
of inventories are not written down below cost if the
finished products in which they will be incorporated
are expected to be sold at or above cost. Cost includes
cost of purchase and other costs incurred in bringing
the inventories to their present location and condition.
Cost is determined on weighted average method.
(ii) Finished goods and work in progress: These are
valued at lower of cost and net realisable value. Cost
includes cost of direct materials and labour and a
proportion of manufacturing overheads based on the
normal operating capacity. Cost of finished goods also
includes excise duty. Cost is determined on weighted
average method.
(iii) Scrap: Scrap is valued at Net Realisable Value.
Net realisable value is the estimated selling price in
the ordinary course of business, less estimated costs
of completion and the estimated costs necessary to
make the sale.
g) Leases
The Company assesses at contract inception whether a
contract is, or contains, a lease. A contract is, or contains,
a lease if it conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration.
Company as a Lessee
i) Right-of-use assets
The Company recognises right-of-use assets at the
commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use
assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted
for any remeasurement of lease liabilities. The cost
of right-of-use assets includes the amount of lease
liabilities recognised, initial direct costs incurred, and
lease payments made at or before the commencement
date less any lease incentives received. Right-of-use
assets are depreciated on a straight-line basis over
the shorter of the lease term and the estimated useful
lives of the assets, as follows:
Plant and machinery 3 to 5 years
If ownership of the right-of-use asset transfers to the
Company at the end of the lease term or the cost
reflects the exercise of a purchase option, depreciation
is calculated using the estimated useful life of the
asset.
ii) Lease Liabilities
At the commencement date of the lease, the Company
recognises lease liabilities measured at the present
value of lease payments to be made over the lease
term. The lease payments include fixed payments
(including in substance fixed payments) less any lease
incentives receivable, variable lease payments that
depend on an index or a rate, and amounts expected
to be paid under residual value guarantees.
In calculating the present value of lease payments,
the Company uses its incremental borrowing rate at
the lease commencement date because the interest
rate implicit in the lease is not readily determinable.
After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest
and reduced for the lease payments made. In addition,
the carrying amount of lease liabilities is remeasured
if there is a modification, a change in the lease term,
a change in the lease payments (e.g., changes to
future payments resulting from a change in an index
or rate used to determine such lease payments) or a
change in the assessment of an option to purchase the
underlying asset.
iii) Short-term leases and leases of low-value assets
The Company applies the short-term lease recognition
exemption to its short-term leases of machinery and
equipment (i.e., those leases that have a lease term of
12 months or less from the commencement date and
do not contain a purchase option).
Company as a Lessor
Leases in which the Company does not transfer
substantially all the risks and rewards of ownership of
an asset are classified as operating leases. Rental income
arising is accounted for on a straight-line basis over the
lease terms. Initial direct costs incurred in negotiating and
arranging an operating lease are added to the carrying
amount of the leased asset, i.e., asset given on lease, and
recognised over the lease term on the same basis as rental
income. Contingent rents are recognised as revenue in the
period in which they are earned.
Leases are classified as finance leases when substantially
all of the risks and rewards of ownership transfer from
the Company to the lessee. Amounts due from lessees
under finance leases are recorded as receivables at the
Company's net investment in the leases. Finance lease
income is allocated to accounting periods so as to reflect
a constant periodic rate of return on the net investment
outstanding in respect of the lease.
Finance Lease Receivable
Leases are classified as finance lease whenever the terms
of the lease transfer substantially all the risks and rewards
incidental to ownership to the lessee. All other leases are
classified as operating lease. Amount due from lessees
under finance leases are recorded as receivables at the
Company's net investment in the leases. Finance lease
income is allocated to accounting periods so as to reflect
a constant periodic rate of return on the net investment
outstanding in respect of the lease. The Company
recognises lease payments received under operating
leases as income on a straight-line basis over the lease
term.
h) 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.
Financial Assets
Initial recognition and measurement:
The Company recognizes a financial asset in its Balance
Sheet when it becomes party to the contractual provisions
of the instrument. Financial assets are initially measured
at fair value other than Trade Receivables which are
measured at Transaction Price (other than trade receivables
containing significant financing component). Transaction
costs that are directly attributable to the acquisition or
issue of financial assets and financial liabilities (other than
financial assets at fair value through profit or loss) are
added to or deducted from the fair value of the financial
assets, as appropriate. For financial assets at fair value
through profit or loss, directly attributable transaction
costs are immediately recognised in the Statement of
Profit and Loss.
Subsequent measurement:
For subsequent measurement, the Company classifies a
financial asset in accordance with the below criteria:
i. The Company's business model for managing the
financial asset and
ii. The contractual cash flow characteristics of the
financial asset.
Based on the above criteria, the Company classifies its
financial assets into the following categories:
i. Financial assets measured at amortized cost
ii. Financial assets measured at fair value through other
comprehensive income (FVTOCI)
iii. Financial assets measured at fair value through profit
or loss (FVTPL)
i. Financial assets measured at amortized cost:
A financial asset is measured at the amortized cost if
both the following conditions are met:
a) The Company's business model objective for
managing the financial asset is to hold financial
assets in order to collect contractual cash flows,
and
b) The contractual terms of the financial asset give
rise on specified dates the right to receive cash
flows that are solely payments of principal and
interest on the principal amount outstanding.
This category applies to cash and bank balances,
trade receivables, loans and other financial assets
of the Company (Refer Note 40 for further details).
Such financial assets are subsequently measured at
amortized cost using the effective interest method and
are subject to impairment as per the accounting policy
applicable to 'Impairment of financial assets' Under
the effective interest method, the future cash receipts
are exactly discounted to the initial recognition value
using the effective interest rate. The cumulative
amortization using the effective interest method
of the difference between the initial recognition
amount and the maturity amount is added to the
initial recognition value (net of principal repayments,
if any) of the financial asset over the relevant period
of the financial asset to arrive at the amortized cost
at each reporting date. The corresponding effect of
the amortization under effective interest method is
recognized as interest income over the relevant period
of the financial asset. The same is included under other
income in the Statement of Profit and Loss.
The amortized cost of a financial asset is also adjusted
for loss allowance, if any.
ii. Financial assets measured at FVTOCI:
A financial asset is measured at FVTOCI if both of the
following conditions are met:
a) The Company's business model objective for
managing the financial asset is achieved both by
collecting contractual cash flows and selling the
financial assets, and
b) The contractual terms of the financial asset give
rise on specified dates the right to receive cash
flows that are solely payments of principal and
interest on the principal amount outstanding.
Upon initial recognition, the Company can elect to
classify irrevocably its equity investments as equity
instruments designated at fair value through OCI
when they meet the definition of equity under Ind
AS 32 Financial Instruments: Presentation for the
issuer and are not held for trading. The classification
is determined on an instrument-by-instrument basis.
Equity investment which are held for trading and
contingent consideration recognised by an acquirer in
a business combination to which Ind AS 103 applies
are classified as at FVTPL.
Gains and losses on these financial assets are never
recycled to profit or loss. Dividends are recognised as
other income in the P&L when the right of payment
has been established, except when the Company
benefits from such proceeds as a recovery of part of
the cost of the financial asset, in which case, such gains
are recorded in OCI. Equity instruments designated at
fair value through OCI are not subject to impairment
assessment.
On Derecognition of such financial assets, cumulative
gain or loss previously recognized in OCI is not
reclassified from the equity to Statement of Profit
and Loss. However, the Company may transfer such
cumulative gain or loss into retained earnings within
equity.
iii. Financial assets measured at FVTPL:
Financial assets in this category are those that are
held for trading and have been either designated
by management upon initial recognition or are
mandatorily required to be measured at fair value
under Ind AS 109 i.e. they do not meet the criteria for
classification as measured at amortised cost or FVOCI.
Management only designates an instrument at FVTPL
upon initial recognition, if the designation eliminates,
or significantly reduces, the inconsistent treatment
that would otherwise arise from measuring the assets
or liabilities or recognising gains or losses on them on
a different basis. Such designation is determined on an
instrument-by-instrument basis.
Financial assets at fair value through profit or loss
are carried in the balance sheet at fair value with net
changes in fair value recognised in the statement of
profit and loss.
Interest earned on instruments designated at FVTPL
is accrued in interest income, using the EIR, taking
into account any discount/ premium and qualifying
transaction costs being an integral part of instrument.
Interest earned on assets mandatorily required to be
measured at FVTPL is recorded using the contractual
interest rate.
This is a residual category applied to all other
investments of the Company excluding investments
in subsidiary companies (Refer Note 40 for further
details). Such financial assets are subsequently
measured at fair value at each reporting date. Fair
value changes are recognized in the Statement of
Profit and Loss.
De-recognition:
A financial asset or, where applicable, a part of a
financial asset or part of a group of similar financial
assets is derecognized i.e. removed from the
Company's Balance Sheet when any of the following
occurs:
i. The contractual rights to cash flows from the
financial asset expires; or
ii. The Company transfers its contractual rights to
receive cash flows of the financial asset and has
substantially transferred all the risks and rewards
of ownership of the financial asset;
iii. The Company retains the contractual rights to
receive cash flows but assumes a contractual
obligation to pay the cash flows without material
delay to one or more recipients under a 'pass¬
through' arrangement (thereby substantially
transferring all the risks and rewards of ownership
of the financial asset);
iv. The Company neither transfers nor retains
substantially all risk and rewards of ownership and
does not retain control over the financial asset.
When the Company has transferred its rights to
receive cash flows from an asset or has entered into
a pass-through arrangement, it evaluates if and to
what extent it has retained the risks and rewards
of ownership. When it has neither transferred nor
retained substantially all of the risks and rewards of the
financial asset, but retains control of the financial asset,
the Company continues to recognize such financial
asset to the extent of its continuing involvement
in the financial asset. In that case, the Company
also recognizes an associated liability. The financial
asset and the associated liability are measured on a
basis that reflects the rights and obligations that the
Company has retained.
On Derecognition of a financial asset (except as
mentioned in (ii) above for financial assets measured
at FVTOCI) difference between the carrying amount
and the consideration received is recognized in the
Statement of Profit and Loss.
Impairment of financial assets:
The Company assesses on a forward looking basis
the expected credit losses associated with its assets
which are not fair valued through profit or loss. The
impairment methodology applied depends on whether
there has been a significant increase in credit risk. Note
41A details how the Company determines whether
there has been a significant increase in credit risk.
For trade receivables only, the Company applies the
simplified approach permitted by Ind AS 109, 'Financial
Instruments', which requires expected lifetime losses to be
recognised from initial recognition of the receivables.
For financial assets (apart from trade receivables that do
not constitute of financing transaction) whose credit risk
has not significantly increased since initial recognition,
loss allowance equal to twelve months expected credit
losses is recognised. Loss allowance equal to the lifetime
expected credit losses is recognised if the credit risk of
the financial asset has significantly increased since initial
recognition.
Financial LiabilitiesInitial recognition, measurement and presentation
Financial liabilities are initially measured at fair value.
Transaction costs that are directly attributable to the
acquisition or issue of financial liabilities (other than
financial liabilities at fair value through profit or loss) are
deducted from the fair value of the financial liabilities, as
appropriate. For financial liabilities at fair value through
profit or loss, directly attributable transaction costs are
immediately recognised in the Statement of Profit and
Loss.
Subsequent measurement:
All financial liabilities of the Company are subsequently
measured at amortized cost using the effective interest
method (except derivative financial instruments) (Refer
Note 40 for further details).
Under the effective interest method, the future cash
payments are exactly discounted to the initial recognition
value using the effective interest rate. The cumulative
amortization using the effective interest method of the
difference between the initial recognition amount and
the maturity amount is added to the initial recognition
value (net of principal repayments, if any) of the financial
liability over the relevant period of the financial liability to
arrive at the amortized cost at each reporting date. The
corresponding effect of the amortization under effective
interest method is recognized as interest expense over
the relevant period of the financial liability. The same is
included under finance cost in the Statement of Profit and
Loss.
Derecognition:
A financial liability is derecognized when the obligation
under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another
from the same lender on substantially different terms, or
the terms of an existing liability are substantially modified,
such an exchange or modification is treated as the
derecognition of the original liability and the recognition
of a new liability. The difference between the carrying
amount of the financial liability derecognized and the
consideration paid is recognized in the Statement of Profit
and Loss.
Derivative Financial Instruments:
Derivative Instruments are initially recognised at fair value
on the date a derivative contract is entered into and are
subsequently re measured to their fair value at the end of
each reporting period, with changes arising on operating
items including forward contracts on receivables included
in 'Other Operating Income'/'Other Expenses'
i) Fair Value Measurement
The Company measures financial instruments at fair
value in accordance with the accounting policies
mentioned above. Fair value is the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the
measurement date. The fair value measurement is based
on the presumption that the transaction to sell the asset
or transfer the liability takes place either:
- In the principal market for the asset or liability, or
- In the absence of a principal market, in the most
advantageous market for the asset or liability.
All assets and liabilities for which fair value is measured
or disclosed in the financial statements are categorized
within the fair value hierarchy that categorizes into
three levels, described as follows: the inputs to valuation
techniques used to measure value. The fair value hierarchy
gives the highest priority to quoted prices in active
markets for identical assets or liabilities (Level 1 inputs)
and the lowest priority to unobservable inputs (Level 3
inputs).
Level 1 — quoted (unadjusted) market prices in active
markets for identical assets or liabilities
Level 2 — inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly or indirectly
Level 3 — inputs that are unobservable for the asset or
liability
For assets and liabilities that are recognized in the financial
statements at fair value on a recurring basis, the Company
determines whether transfers have occurred between
levels in the hierarchy by re-assessing categorization at
the end of each reporting period and discloses the same.
j) Investment in Subsidiary Companies and joint
ventures
A subsidiary is an entity that is controlled by another
entity. Investment in subsidiaries are carried at cost or
at deemed cost as considered on the date of transition
to Ind- AS less provision for impairment loss, if any. The
details of such investments are given in Note 7.
A joint venture is a type of joint arrangement whereby
the parties that have joint control of the arrangement
have rights to the net assets of the joint venture. Joint
control is the contractually agreed sharing of control of
an arrangement, which exists only when decisions about
the relevant activities require unanimous consent of the
parties sharing control.
The Company's investments in its subsidiaries, associates
and joint ventures are accounted at cost less impairment,
if any.
Impairment of investments
The Company reviews its carrying value of investments
carried at cost annually, or more frequently when there
is indication for impairment. If the recoverable amount
is less than its carrying amount, the impairment loss is
recorded in the Statement of Profit and Loss.
When an impairment loss subsequently reverses, the
carrying amount of the Investment is increased to the
revised estimate of its recoverable amount, so that the
increased carrying amount does not exceed the cost of the
Investment. A reversal of an impairment loss is recognised
immediately in Statement of Profit or Loss.
k) Foreign Currency Transactions and Balances
Initial Recognition:
On initial recognition, transactions in foreign currencies
entered into by the Company are recorded in the
functional currency (i.e. Indian Rupees), by applying to the
foreign currency amount, the spot exchange rate between
the functional currency and the foreign currency at the
date of the transaction.
Measurement of foreign currency items at reporting
date:
Foreign currency transactions are translated into the
functional currency using the exchange rates at the
dates of the transactions. The gains or losses resulting
from such translations are recognized in the Statement
of Profit and Loss and classified in the same line item
as the underlying transaction reported as Foreign
exchange difference on operating/non-operating assets
and liabilities, net. At the year end, monetary assets and
liabilities denominated in foreign currencies are restated
at the year end exchange rates. Non-monetary assets
and non-monetary liabilities denominated in a foreign
currency are measured at historical cost are translated at
the exchange rate prevalent at the date of the transaction.
The related revenue and expense are recognized using
the same exchange rate. The exchange differences arising
from settlement of foreign currency transactions and the
year end restatement are recognised in profit and loss.
l) Income Taxes
Tax expense is the aggregate amount included in the
determination of profit or loss for the period in respect of
current tax and deferred tax.
Current Income tax:
Tax expense comprises current and deferred tax. Current
income-tax is measured at the amount expected to be
paid to or recovered from the taxation authorities. The tax
rates and tax laws used to compute the amount are those
that are enacted or substantively enacted, at the reporting
date.
Current income tax relating to items recognised outside
profit or loss is recognised outside profit or loss (either
in other comprehensive income or in equity). Current
tax items are recognised in correlation to the underlying
transaction either in OCI or directly in equity. Management
periodically evaluates positions taken in the tax returns
with respect to situations in which applicable tax
regulations are subject to interpretation and establishes
provisions where appropriate.
Deferred tax:
Deferred income tax is provided, using the Balance sheet
method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in
the standalone financial statements. Deferred income tax
is not accounted for if it arises from initial recognition of
an asset or liability in a transaction, that is not a business
combination, that at the time of the transaction affects
neither accounting profit/ loss nor taxable profit (tax loss).
Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantially enacted by
the end of the reporting period.
Deferred tax assets are recognised for all deductible
temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to
utilise those temporary differences and losses.
Deferred tax liabilities are recognized for all taxable
temporary differences, except in two cases:
• When they arise from the initial recognition of
goodwill or certain assets or liabilities in non¬
business combination transactions that do not affect
accounting or taxable profit and do not create equal
taxable and deductible temporary differences.
• When they relate to investments in subsidiaries,
associates, or joint ventures, and the entity can
control the timing of reversal and it is unlikely that the
differences will reverse in the foreseeable future.
Current and deferred tax is recognised in statement of
profit and loss, except to the extent that it relates to items
recognised in other comprehensive income or directly in
equity, if any. In this case, the tax is also recognised in other
comprehensive income or directly in equity, respectively.
The carrying amount of deferred tax assets is reviewed at
each reporting date and reduced to the extent that it is
no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be
utilised. Unrecognised deferred tax assets are re-assessed
at each reporting date and are recognised to the extent
that it has become probable that future taxable profits will
allow the deferred tax asset to be recovered.
Minimum alternate tax (MAT) paid in a year is charged
to the statement of profit and loss as current tax for the
year. The deferred tax asset is recognised for MAT credit
available only to the extent that it is probable that the
Company will pay normal income tax during the specified
period, i.e., the period for which MAT credit is allowed
to be carried forward. In the year in which the Company
recognizes MAT credit as an asset, it is created by way of
credit to the statement of profit and loss and shown as
part of deferred tax assets. The Company reviews the "MAT
credit entitlement" asset at each reporting date and writes
down the asset to the extent that it is no longer probable
that it will pay normal tax during the specified period.
In assessing the recoverability of deferred tax assets,
the Company relies on the same forecast assumptions
used elsewhere in the financial statements and in other
management reports, which, among other things, reflect
the potential impact of climate-related development on
the business, such as increased cost of production as a
result of measures to reduce carbon emission.
Goods and Services Tax (GST) / value added taxes paid
on acquisition of assets or on incurring expenses.
Expenses and assets are recognised net of the amount
of GST/ value added taxes paid, except:
i. When the tax incurred on a purchase of assets or
services is not recoverable from the taxation authority,
in which case, the tax paid is recognised as part of
the cost of acquisition of the asset or as part of the
expense item, as applicable;
ii. When receivables and payables are stated with the
amount of tax included
The net amount of tax recoverable from, or payable to,
the taxation authority is included as part of other current/
non-current assets/ liabilities in the balance sheet.
Presentation of current and deferred tax:
The Company offsets current tax assets and current tax
liabilities, where it has a legally enforceable right to set
off the recognized amounts and where it intends either to
settle on a net basis, or to realize the asset and settle the
liability simultaneously. In case of deferred tax assets and
deferred tax liabilities, the same are offset if the Company
has a legally enforceable right to set off corresponding
current tax assets against current tax liabilities and the
deferred tax assets and deferred tax liabilities relate to
income taxes levied by the same tax authority on the
Company.
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