2. Material accounting policies
1. Statement of compliance and basis of
preparation
These standalone financial statements have been
prepared in accordance with Indian Accounting
Standards (Ind AS) as per the Companies (Indian
Accounting Standards) Rules, 2015 notified
under Section 133 of Companies Act, 2013,
(the 'Act') and other relevant provisions of the
Act. Accounting policies have been consistently
applied except where a newly issued accounting
standard is initially adopted or a revision to the
existing accounting standard requires a change
in the accounting policy hitherto in use.
2. Basis of measurement
The standalone financial statements have been
prepared on the historical cost basis except for
the following items:
The Company classifies an asset as current asset
when:
- it expects to realise the asset, or intends to
sell or consume it, in its normal operating
cycle;
- i t holds the asset primarily for the purpose
of trading;
- i t expects to realise the asset within twelve
months after the reporting period; or
- the asset is cash or a cash equivalent unless
the asset is restricted from being exchanged
or used to settle a liability for at least twelve
months after the reporting period.
All other assets are classified as non-current.
A liability is classified as current when -
- i t expects to settle the liability in its normal
operating cycle;
- it holds the liability primarily for the purpose
of trading;
- the liability is due to be settled within twelve
months after the reporting period; or
- it does not have an unconditional right to
defer settlement of the liability for at least
twelve months after the reporting period.
Terms of a liability that could, at the option of
the counterparty, result in its settlement by
the issue of equity instruments do not affect its
classification.
All other liabilities are classified as non-current
The operating cycle is the time between the
acquisition of assets for processing and their
realisation in cash or cash equivalents. The
Company has ascertained its operating cycle as
twelve months for the purpose of current and
non-current classification of assets and liabilities."
3. Use of estimates and Judgements
The preparation of the standalone financial
statements in conformity with accounting
principles generally accepted in India requires
the management to make judgements, estimates
and assumptions as considered in the reported
amount of assets and liabilities as of the Balance
Sheet date, reported amount of revenues
and expenses for the year and disclosure of
contingent liabilities as of the Balance Sheet
date. These estimates, judgement and associated
assumptions are based on historical experience
and other factors that are considered to be
relevant. Actual results may differ from these
estimates.
Although these estimates are based on the
management's best knowledge of current events
and actions, uncertainty about the assumptions
and estimates may result in outcomes requiring
a material adjustment to the carrying amount of
assets or liabilities in future periods.
The estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the
period in which the estimate is revised if the
revision affects only that period, or in the period
of the revision and future periods if the revision
affects both current and future periods.
3.1 Judgements
I nformation about judgments made in applying
accounting policies that have the most significant
effects on the amounts recognized in the
standalone financial statements. is included in
the notes;
- Note 5, 22 and 42 - Right-of-use assets and
lease liabilities
- Note 7 - Impairment testing for investments
at amortised cost
3.2 Assumptions and estimation uncertainties
Information about assumptions and estimation
uncertainties that may have a significant risk of
causing a material adjustment to the carrying
amounts of assets and liabilities are as follows;
3.2.1 Fair value measurements and valuation
processes
In estimating the fair value of an asset
or a liability, the Company uses market-
observable data to the extent it is available.
Where Level 1 inputs are not available, the
Company engages third party qualified
valuers to perform the valuation. The
management works closely with the
qualified external valuers to establish the
appropriate valuation techniques and inputs
to the model.
3.2.2 Impairment of investments
The Company tests whether any of its
investments have suffered any impairment
on an annual basis. The recoverable value of
the investment is determined based on fair
value less cost to sell which require the use
of assumptions.
3.2.3 Taxation
Tax expense is calculated using applicable
tax rate and laws that have been enacted
or substantively enacted. Uncertainties
exist with respect to the interpretation of
complex tax regulations, changes in tax
laws and the amount and timing of future
taxable income. In arriving at taxable profit
and all tax bases of assets and liabilities,
the Company determines the taxability
based on tax enactments, relevant judicial
pronouncements and tax expert opinions,
and makes appropriate provisions which
includes an estimation of the likely expected
outcome of any open tax assessments /
litigations. Deferred income tax assets are
recognized to the extent that it is probable
that future taxable income will be available.
3.2.4 Defined benefit plans
The cost of defined benefit plans are
determined using actuarial valuations.
The actuarial valuation involves making
assumptions about discount rates, future
salary increases and attrition rates. Due
to the long-term nature of these plans,
such estimates are subject to significant
uncertainty.
4. Measurement of fair values
A number of the Company's accounting policies
and disclosures require the measurement of
fair values, for both financial and non-financial
assets and liabilities. The Company has an
established control framework with respect to
the measurement of fair values.
Fair values are categorised into different levels in
a fair value hierarchy based on the inputs used in
the valuation techniques as follows.
- Level 1: quoted prices (unadjusted) in active
markets for identical assets or liabilities.
- Level 2: inputs other than quoted prices
included in Level 1 that are observable for
the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
- Level 3: inputs for the asset or liability that
are not based on observable market data
(unobservable inputs)."
When measuring the fair value of an asset or a
liability, the Company uses observable market
data as far as possible. If the inputs used to
measure the fair value of an asset or a liability
fall into different levels of the fair value hierarchy,
then the fair value measurement is categorised
in its entirety in the same level of the fair value
hierarchy as the lowest level input that is
significant to the entire measurement.
The Company recognises transfers between
levels of the fair value hierarchy at the end of the
reporting period during which the change has
occurred.
5. Financial Instruments
i. Initial recognition
Trade receivables are initially recognised when
they are originated. All other financial assets and
financial liabilities are initially recognised when
the Company becomes a party to the contractual
provisions of the instrument.
A financial asset (except trade receivables
without significant financing component) or
financial liability is initially measured at fair
value plus, for an item not at fair value through
profit and loss (FVTPL), transaction costs that are
directly attributable to its acquisition or issue.
Trade receivables (without significant financing
component) are measured at transaction price as
per Ind AS 115.
ii. Classification and subsequent measurement
Financial assets
On initial recognition, a financial asset is classified
as measured at
- amortised cost;
- Fair value through OCI - debt investment;
- Fair value through OCI - equity investment;
or
- Fair value through profit and loss
Financial assets are not reclassified subsequent
to their initial recognition, except if and in the
period the Company changes its business model
for managing financial assets.
A financial asset is measured at amortised cost if
it meets both of the following conditions and is
not designated as at FVTPL:
- t he asset is held within a business model
whose objective is to hold assets to collect
contractual cash flows; and
- the contractual terms of the financial asset
give rise on specified dates to cash flows that
are solely payments of principal and interest
on the principal amount outstanding.
A debt investment is measured at FVOCI if it
meets both of the following conditions and is not
designated as at FVTPL:
- t he asset is held within a business model
whose objective is achieved by both
collecting contractual cash flows and selling
financial assets; and
- t he contractual terms of the financial asset
give rise on specified dates to cash flows that
are solely payments of principal and interest
on the principal amount outstanding.
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 (designated
as FVOCI - equity investment). This election is
made on an investment-by-investment basis.
All financial assets not classified as measured at
amortised cost or FVOCI as described above are
measured at FVTPL. This includes all derivative
financial assets. On initial recognition, the
Company may irrevocably designate a financial
asset that otherwise meets the requirements to
be measured at amortised cost or at FVOCI as
at FVTPL if doing so eliminates or significantly
reduces an accounting mismatch that would
otherwise arise.
Financial assets - Business model assessment
The Company makes an assessment of the
objective of the business model in which a
financial asset is held at portfolio level because
this best reflects the way the business is managed
and information is provided to management. The
information considered includes:
- the stated policies and objectives for
the portfolio and the operation of those
policies in practice. These include whether
management's strategy focuses on earning
contractual interest income, maintaining
a particular interest rate profile, matching
the duration of the financial assets to the
duration of any related liabilities or expected
cash outflows or realising cash flows through
the sale of the assets;
- how the performance of the portfolio is
evaluated and reported to the Company's
management
- the risks that affect the performance of the
business model (and the financial assets
held within that business model) and how
those risks are managed
- how managers of the business are
compensated - e.g. whether compensation
is based on the fair value of the assets
managed or the contractual cash flows
collected; and
- the frequency, volume and timing of sales of
financial assets in prior periods, the reasons
for such sales and expectations about future
sales activity.
Transfers of financial assets to third parties in
transactions that do not qualify for derecognition
are not considered sales for this purpose,
consistent with the Company's continuing
recognition of the assets.
Financial assets that are held for trading or are
managed and whose performance is evaluated
on a fair value basis are measured at FVTPL.
Financial assets: Assessment whether contractual
cash flows are solely payments of principal and
interest
For the purposes of this assessment, 'principal'
is defined as the fair value of the financial asset
on initial recognition. 'Interest' is defined as
consideration for the time value of money and
for the credit risk associated with the principal
amount outstanding during a particular period of
time and for other basic lending risks and costs
(e.g. liquidity risk and administrative costs), as
well as a profit margin.
I n assessing whether the contractual cash flows
are solely payments of principal and interest,
the Company considers the contractual terms of
the instrument. This includes assessing whether
the financial asset contains a contractual term
that could change the timing or amount of
contractual cash flows such that it would not
meet this condition. In making this assessment,
the Company considers:
- contingent events that would change the
amount or timing of cash flows;
- terms that may adjust the contractual
coupon rate, including variable interest rate
features;
- prepayment and extension features; and
- terms that limit the Company's claim to
cash flows from specified assets (e.g.
non-recourse features).
A prepayment feature is consistent with the solely
payments of principal and interest criterion if the
prepayment amount substantially represents
unpaid amounts of principal and interest, which
may include reasonable compensation for early
termination of the contract. Additionally, for a
financial asset acquired at a discount or premium
to its contractual par amount, a feature that
permits or requires prepayment at an amount
that substantially represents the contractual par
amount plus accrued (but unpaid) contractual
interest (which may also include reasonable
compensation for early termination) is treated
as consistent with this criterion if the fair value of
the prepayment feature is insignificant at initial
recognition.
Financial liabilities: Classification, subsequent
measurement and gains and losses
Financial liabilities are classified as measured
at amortised cost or FVTPL. A financial liability
is classified as at FVTPL if it is classified as
held-for-trading, or it is a derivative or it is
designated as such on initial recognition.
Financial liabilities at FVTPL are measured at
fair value and net gains and losses, including
any interest expense, are recognised in profit or
loss. Other financial liabilities are subsequently
measured at amortised cost using the effective
interest method. Interest expense and foreign
exchange gains and losses are recognised in
profit or loss. Any gain or loss on derecognition is
also recognised in profit or loss.
iii. Derecognition
Financial assets
The Company derecognises a financial asset
when the contractual rights to the cash flows
from the financial asset expire, or it transfers the
rights to receive the contractual cash flows in a
transaction in which substantially all of the risks
and rewards of ownership of the financial asset
are transferred or in which the Company neither
transfers nor retains substantially all of the risks
and rewards of ownership and does not retain
control of the financial asset.
If the Company enters into transactions whereby
it transfers assets recognised on its balance
sheet, but retains either all or substantially all of
the risks and rewards of the transferred assets,
the transferred assets are not derecognised.
Financial liabilities
The Company derecognises a financial liability
when its contractual obligations are discharged
or cancelled, or expire.
The Company also derecognises a financial
liability when its terms are modified and the cash
flows under the modified terms are substantially
different. In this case, a new financial liability
based on the modified terms is recognised at
fair value. The difference between the carrying
amount of the financial liability extinguished and
the new financial liability with modified terms is
recognised in profit or loss.
iv. Offsetting
Financial assets and financial liabilities are
offset and the net amount presented in
the balance sheet when, and only when,
the Company currently has a legally
enforceable right to set off the amounts and
it intends either to settle them on a net basis
or to realise the asset and settle the liability
simultaneously.
6. Property, plant and equipment
Items of property, plant and equipment are
carried at cost, which includes capitalised
borrowing costs, less accumulated depreciation
and impairment losses, if any. The cost comprises
its purchase price net of any trade discounts
and rebates, including any import duties and
other taxes (other than those subsequently
recoverable from the tax authorities) and any
directly attributable expenditure on making the
asset ready for its intended use. 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.
Transition to Ind AS
On transition to Ind AS, the Company has elected
to continue with the carrying value of all of its
property, plant and equipment recognised as
at April 01, 2016 measured as per the previous
GAAP, and use that carrying value as the deemed
cost of such property, plant and equipment.
Capital work-in-progress: Assets which are not
yet ready for their intended use are carried at
cost comprising direct cost, related incidental
expenses and attributable interest (in case of
qualifying assets).
Depreciation on property, plant and equipment
has been provided on the straight-line method
on the basis of estimated useful life determined
based on technical advice, taking into account
the nature of the asset, the estimated usage
of the asset, the operating conditions of the
asset, past history of replacement, anticipated
technological changes, manufacturers warranties
and maintenance support, etc. The estimated
useful lives of property, plant and equipment are
as follows:
Freehold land is not depreciated.
Depreciation method, useful lives and residual
values are reviewed at the end of each financial
year.
On property, plant and equipment added/
(disposed off) during the year, depreciation is
provided from/(upto) the month on which the
asset is ready for use/(disposed off). Any gain or
loss on disposal of an item of property, plant and
equipment is recognised in statement of profit
and loss.
7. Other intangible assets
Intangible assets are carried at cost less
accumulated amortisation and impairment losses,
if any. The cost of an intangible asset comprises
its purchase price, including any import duties
and other taxes (other than those subsequently
recoverable from the tax authorities) and any
directly attributable expenditure on making
the asset ready for its intended use and net of
any trade discounts and rebates. Subsequent
expenditure is capitalised only when it increases
the future economic benefits embodied in the
specific asset to which it relates and the cost
can be measured reliably. Internally generated
intangibles, excluding capitalised development
costs, are not capitalised and the related
expenditure is reflected in profit or loss in which
the expenditure is incurred. The amortisation
expense on intangible assets is recognised in
the statement of profit or loss. 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 are
measured as the difference between the net
disposal proceeds and the carrying amount of
the asset and are recognised in the statement of
profit and loss when the asset is derecognised.
Amortisation method, useful lives and residual
values are reviewed at the end of each financial
year and adjusted if appropriate. Other intangible
assets which comprise of Software license has a
useful life not exceeding 5 years. (Schedule II : 5
years)
Transition to Ind AS
On transition to Ind AS, the Company has elected
to continue with the carrying value of all of its
intangible assets recognised as at April 1, 2016
measured as per the previous GAAP, and use
that carrying value as the deemed cost of such
intangible assets.
8. Impairment
i. Impairment of financial instruments
The Company recognises loss allowances
for expected credit losses on financial assets
measured at amortised cost.
At each reporting date, the Company assesses
whether financial assets carried at amortised
cost are credit-impaired. A financial asset is
'credit-impaired' when one or more events that
have a detrimental impact on the estimated future
cash flows of the financial asset have occurred.
The Company measures loss allowances at an
amount equal to lifetime expected credit losses,
except for debt securities and bank balances for
which credit risk (i.e. the risk of default occurring
over the expected life of the financial instrument)
has not increased significantly since initial
recognition.
Loss allowances for trade receivables are
measured at an amount equal to lifetime
expected credit losses.
Lifetime expected credit losses are the credit
losses that result from all possible default events
over the expected life of a financial instrument.
The Company follows the simplified approach
permitted by Ind AS 109 Financial Instruments
for recognition of impairment of loss allowance.
The application of simplified approach does not
require the company to track changes in credit
risk. The Company calculates the expected credit
losses on trade receivables using a provision
matrix on the basis of its historical credit loss
experience.
The maximum period considered when
estimating expected credit losses is the maximum
contractual period over which the Company is
exposed to credit risk.
When determining whether the credit risk of
a financial asset has increased significantly
since initial recognition and when estimating
expected credit losses, the Company considers
reasonable and supportable information that
is relevant and available without undue cost
or effort. This includes both quantitative and
qualitative information and analysis, based on the
Company's historical experience and informed
credit assessment and including forward-looking
information.
The Company considers a financial asset to be in
default when:
- the recipient is unlikely to pay its credit
obligations to the Company in full, without
recourse by the Company to actions such as
realising security (if any is held); or
- the financial asset is more than 180/270 days
past due for domestic/ export receivables."
Measurement of expected credit losses
Expected credit losses are a probability-weighted
estimate of credit losses. Credit losses are
measured as the present value of all cash
shortfalls (i.e. the difference between the cash
flows due to the Company in accordance with
the contract and the cash flows that the Company
expects to receive).
Presentation of allowance for expected credit
losses in the balance sheet
Loss allowances for financial assets measured
at amortised cost are deducted from the gross
carrying amount of the assets. For debt securities
at FVOCI, the loss allowance is charged to profit
or loss and is recognised in OCI.
Write-off
The gross carrying amount of a financial asset is
written off (either partially or in full) to the extent
that there is no realistic prospect of recovery.
This is generally the case when the Company
determines that the debtor does not have
assets or sources of income that could generate
sufficient cash flows to repay the amounts subject
to the write-off. However, financial assets that are
written off could still be subject to enforcement
activities in order to comply with the Company's
procedures for recovery of amounts due.
ii. I mpairment of property, plant and equipment
and other intangible assets
At the end of each reporting period, the
Company reviews the carrying amounts of
its property, plant and equipment and other
intangible assets to determine whether there is
any indication that those assets have suffered an
impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in
order to determine the extent of the impairment
loss (if any). When it is not possible to estimate
the recoverable amount of an individual asset,
the Company estimates the recoverable amount
of the cash-generating unit to which the asset
belongs. When a reasonable and consistent basis
of allocation can be identified, corporate assets
are also allocated to individual cash-generating
units.
Recoverable amount is the higher of fair value less
costs of disposal and value in use. In assessing
value in use, the estimated future cash flows are
discounted to their present value using a pre¬
tax discount rate that reflects current market
assessments of the time value of money and the
risks specific to the asset (or cash-generating
unit) for which the estimates of future cash flows
have not been adjusted.
I f the recoverable amount of an asset (or cash¬
generating unit) is estimated to be less than its
carrying amount, the carrying amount of the
asset (or cash-generating unit) is reduced to
its recoverable amount. An impairment loss is
recognised immediately in the statement of profit
and loss.
If the recoverable amount of the cash-generating
unit is less than the carrying value of the unit, the
impairment loss is allocated first to reduce the
carrying value of any goodwill allocated to the
unit and then to the other assets of the unit in
proportion to the carrying value of each asset in
the unit.
When an impairment loss subsequently reverses
(other than goodwill), the carrying amount of the
asset (or a cash-generating unit) is increased to
the revised estimate of its recoverable amount,
so that the increased carrying amount does not
exceed the carrying amount that would have
been determined had no impairment loss been
recognised for the asset (or cash-generating unit)
in prior years. A reversal of an impairment loss is
recognised immediately in the statement of profit
and loss.
9. Borrowings and borrowing costs
Borrowings are recognised initially at fair value,
net of transaction costs incurred. Borrowings
are subsequently stated at amortised cost.
Any difference between the proceeds (net of
transaction costs) and the redemption value is
recognised in the statement of profit and loss over
the period of the borrowings using the effective
interest rate method. Borrowings are classified
as current liabilities unless the Company has an
unconditional right to defer settlement of the
liability for at least 12 months after the reporting
date.
Borrowing costs are interest and other costs
incurred in connection with the borrowing of
funds.
Borrowing costs directly attributable to the
acquisition, construction or production of
qualifying assets, which are assets that necessarily
take a substantial period of time to get ready
for their intended use are added to the cost of
those assets, until such time as the assets are
substantially ready for their intended use. All
other borrowing costs are recognised in profit or
loss in the period in which they are incurred.
10. Leases
The Company's lease asset classes primarily
consist of leases for building, IT assets and
vehicles. 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 includes the options
to extend or terminate the lease before the end
of the lease term. ROU assets and lease liabilities
includes these options when it is reasonably
certain that they will 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 reflects that the
Company will exercise a purchase option. In that
case the right-of-use asset will be depreciated
over the useful life of the underlying asset, which
is determined on the same basis as those of
property, plant 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. Right
of use assets are evaluated for recoverability
whenever events or changes in circumstances
indicate that their carrying amounts may not
be recoverable. For the purpose of impairment
testing, the recoverable amount (i.e. the higher
of the fair value less cost to sell and the value-in¬
use) is determined on an individual asset basis
unless the asset does not generate cash flows
that are largely independent of those from other
assets. In such cases, the recoverable amount is
determined for the Cash Generating Unit (CGU)
to which the asset belongs.
The lease liability is initially measured at amortized
cost at the present value of the future lease
payments. The lease payments are discounted
using the interest rate implicit in the lease or, if
not readily determinable, using the incremental
borrowing rates
Lease payments included in the measurement of
the lease liability comprise the following:
- fixed payments, including in-substance
fixed payments;
- variable lease payments that depend on an
index or a rate, initially measured using the
index or rate as at the commencement date;
- amounts expected to be payable under a
residual value guarantee; and
- exercise price under a purchase option
that the Company is reasonably certain to
exercise, lease payments in an optional
renewal period if the Company is reasonably
certain to exercise an extension option, and
penalties for early termination of a lease
unless the Company is reasonably certain
not to terminate early."
Lease liability and ROU asset have been
separately presented and lease payments have
been classified as financing cash flows.
11. 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.
12. Cash flow statement
Cash flows from operating activities are reported
using the indirect method, whereby profit / (loss)
is adjusted for the effects of transactions of non¬
cash nature and any deferrals or accruals of past
or future cash receipts or payments. The cash
flows from operating, investing and financing
activities of the Company are segregated.
13. Foreign currency transactions and translations
(i) Functional and presentation currency
Items included in the financial statements of
the Company are measured using the currency
of the primary economic environment in which
the entity operates ('the functional currency').
The financial statements are presented in Indian
Rupee (INR), which is the Company's functional
and presentation currency.
(ii) Transactions and balances
In preparing the standalone financial statements,
transactions in currencies other than the entity's
functional currency (foreign currencies) are
recognised at the rates of exchange prevailing at
the dates of the transactions. As at the reporting
date, non-monetary items which are carried in
terms of historical cost denominated in a foreign
currency are reported using the exchange rate
at the date of the transaction. All non-monetary
items which are carried at fair value or other
similar valuation denominated in a foreign
currency are reported using the exchange rates
that existed when the values were determined. All
monetary assets and liabilities in foreign currency
are reinstated at the end of accounting period.
Exchange differences are recognised in profit or
loss, except exchange differences arising from
the translation of the following items which are
recognised in OCI:
- equity investments at fair value through OCI
(FVOCI);
- qualifying cash flow hedges to the extent
that the hedges are effective."
14. Revenue recognition
The Company derives revenues primarily
from rendering management and information
technology services to the subsidiaries and
joint venture / associate entities and from
Trade Mark fee in accordance with the terms
of the agreements with the Company entities.
Revenue is recognized upon transfer of control
of promised services to customers (i.e. upon
rendering of services) at an amount that reflects
the consideration that the Company expects to
receive in exchange for those services.
Dividend Income
Dividend income is accounted when the right
to receive it is established (provided that it is
probable that the economic benefits will flow to
the Company and the amount of income can be
measured reliably).
Other income
Interest income is recognised using the effective
interest method. The 'effective interest rate' is the
rate that exactly discounts estimated future cash
payments or receipts through the expected life
of the financial instrument to:
- t he gross carrying amount of the financial
asset; or
- the amortised cost of the financial liability.
15. Employee benefits
Short-term employee benefits
Short-term employee benefit obligations are
measured on an undiscounted basis and are
expensed as the related service is provided. A
liability is recognised for the amount expected to
be paid, if the Company has a present legal or
constructive obligation to pay this amount as a
result of past service provided by the employee,
and the amount of obligation can be estimated
reliably.
Compensated absences
Accumulated compensated absences, which
are expected to be availed or encashed within
12 months from the end of the year are treated
as short term employee benefits. Those that are
expected to be encashed after 12 months from
the end of the year are treated as other long¬
term employee benefits. The obligation towards
the same is measured at the expected cost of
accumulating compensated absences as the
additional amount expected to be paid as a result
of the unused entitlement as at the year end.
The obligation is measured on the basis of an
annual independent actuarial valuation using the
projected unit credit method. Remeasurements
gains or losses are recognised in profit or loss in
the period in which they arise.
Defined benefit plans
Gratuity
A defined benefit plan is a post-employment
benefit plan other than a defined contribution
plan. The Company's net obligation in respect
of defined benefit plans is calculated separately
for each plan by estimating the amount of future
benefit that employees have earned in the current
and prior periods, discounting that amount and
deducting the fair value of any plan assets.
The Company provides for gratuity, a defined
benefit plan (the "Gratuity Plan") administered by
LIC covering eligible employees in accordance
with the Payment of Gratuity Act, 1972. The
Gratuity Plan provides a lump sum payment
to vested employees at upon resignation,
retirement, death, incapacitation or termination
of employment, of an amount based on the
respective employee's salary and the tenure
of employment. The Company's liability is
actuarially determined (using the Projected Unit
Credit method) at the end of each year. Actuarial
losses / gains are recognised in the other
comprehensive income in the year in which they
arise. Net interest expense and other expenses
related to defined benefit plans are recognised
in statement of profit and loss. Remeasurement
recognised in other comprehensive income is
reflected immediately in retained earnings and is
not reclassified to profit and loss.
When the benefits of a plan are changed or
when a plan is curtailed, the resulting change in
benefit that relates to past service ('past service
cost' or 'past service gain') or the gain or loss
on curtailment is recognised immediately in
statement of profit and loss. The Company
recognises gains and losses on the settlement
of a defined benefit plan when the settlement
occurs.
Defined contribution plans
Provident fund
A defined contribution plan is a post-employment
benefit plan under which an entity pays fixed
contributions into a separate entity and will have
no legal or constructive obligation to pay further
amounts. The Company makes specified monthly
contributions towards Government administered
provident fund scheme. Obligations for
contributions to defined contribution plans are
recognised as an employee benefit expense
in profit or loss in the periods during which the
related services are rendered by employees.
Superannuation fund
This is a defined contribution plan, where a portion
of the eligible employees' salary, as per the
choice exercised by the respective employees,
is contributed towards superannuation fund
administered by the Trustees and managed
by Life Insurance Corporation of India (LIC).
There are no further obligations for future
superannuation benefits other than the annual
contributions which is recognized as expense as
and when due.
16. Expenditure on Corporate Social Responsibility
(CSR)
The Company accounts the expenditure incurred
towards Corporate Social Responsibility as
required under the Act as a charge to the
statement of profit and loss. As at the balance
sheet date, an asset / liability is recognized for
the difference between the amount spent and
the amount required to be spent as per the
provisions of the Act.
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