3. Summary of material accounting policies
3.1 Basis of measurement
The standalone financial statements have been prepared under the historical cost convention on the accrual basis, except for
the following assets and liabilities which have been measured fair value:
- Property, Plant & Equipment (at fair value as deemed cost as at 1 April 2016);
- Financial assets and liabilities except certain investments, Loans and borrowings carried at amortised cost;
- Defined benefit plans - plan assets measured at fair value;
- Share based payments
The Standalone financial statements are presented in Indian Rupees which is the Company’s functional and presentation
currency and all amounts are rounded to the nearest crores and two decimals thereof, except otherwise stated.
3.2 Fair value measurements
The Company measures financial instruments at fair value which is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between independent 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 standalone financial statements are categorised
within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value
measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or
indirectly observable; and
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available
to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
For assets and liabilities that are recognised in the balance sheet at fair value on a recurring basis, the Company determines
whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level
input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
3.3 Revenue recognition
Revenue is recognized upon transfer of control of promised goods or services to customers at an amount that reflects the
consideration to which the Company is expected to be entitled to in exchange for those goods or services. Revenue towards
satisfaction of a performance obligation is measured at the amount of transaction price allocated to that performance obligation
as per contractually agreed terms with the customers. The transaction price of goods sold and services rendered is net of
various discounts and incentive schemes offered by the Company as part of the contract. Revenue is recorded provided the
recovery of consideration is probable and determinable. As the period between the date on which the Company transfers the
promised goods to the customer and the date on which the customer pays for these goods is generally one year or less, no
financing components are considered.
a) Sale of goods:
Revenue from the sale of manufactured and traded goods products is recognised upon transfer of control of products to
the customers. The performance obligation in case of sale of product is satisfied at a point in time i.e., when the material
is shipped to the customer or on delivery to the customer, as may be specified in the contract. It is measured at transaction
price (net of variable consideration on account of various discounts and schemes offered by the Company as part of the
contract) allocated to that performance obligation. This variable consideration is estimated based on the expected value
of outflow. Revenue (net of variable consideration) is recognised only to the extent that it is highly probable that the
amount will not be subject to significant reversal when uncertainty relating to its recognition is resolved.
b) Services rendered:
Revenue from services is recognised over time by measuring progress towards satisfaction of performance obligation for
the services rendered. The Company uses output method for measurement of revenue as it provides a faithful depiction
of the transfer of goods and services to the customer.
Advance from customers is recognised under other liabilities and released to revenue on satisfaction of performance
obligation.
c) Other operating income - Export incentives:
Export Incentives under various schemes are accounted in the year of export.
3.4 Other Income
Interest Income
Interest income from debt instruments is recognised using the effective interest rate method. The effective interest rate is the
rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the gross carrying
amount of a financial asset. When calculating the effective interest rate, the Company estimates the expected cash flows by
considering all the contractual terms of the financial instrument but does not consider the expected credit losses.
Dividend Income
Dividend income from investments is recognised when the Company’s right to receive dividend is established.
3.5 Inventories
Inventories are valued as follows:
a) Raw materials, components, stores and spares: At lower of cost and net realisable value. Cost of inventory comprises
all costs of purchases, duties, taxes (other than those subsequently recoverable from tax authorities) and all other costs
incurred in bringing the inventory to their present location and condition and is determined on a weighted average cost
basis.
However, materials and other items held for use in the 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.
b) Work-in-progress: At lower of cost and net realisable value. Cost for this purpose includes material, labour and appropriate
allocation of overheads including depreciation. Cost is determined on a weighted average basis.
c) intermediate goods/ Finished goods:
i. Self-manufactured - At lower of cost and net realisable value. Cost for this purpose includes material, labour and
appropriate allocation of overheads. Cost is determined on a weighted average cost basis.
ii. Traded - At lower of cost and net realisable value. Cost of inventory comprises all costs of purchases, duties, taxes
(other than those subsequently recoverable from tax authorities) and all other costs incurred in bringing the inventory
to their present location and condition and is determined on a weighted average cost basis.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and
estimated costs necessary to make the sale.
Obsolete, defective, unprocessable and slow/ non-moving stocks are duly provided for and valued at net realisable value.
3.6 Property, plant and equipment and capital work-in-progress
a. Measurement at recognition
Property, plant and equipment and capital work-in progress are stated at cost, net of accumulated depreciation and
accumulated impairment losses, if any.
Cost comprises the purchase price, borrowing costs if capitalisation criteria are met and any directly attributable cost of
bringing the asset to its working condition for the intended use. Any trade discounts and rebates are deducted in arriving
at the purchase price. The cost of an item of property, plant and equipment shall be recognised as an asset if, and only if:
a) it is probable that future economic benefits associated with the item will flow to the entity; and
b) the cost of the item can be measured reliably.
Subsequent expenditure related to an item of property, plant and equipment is added to its book value only if it increased
the future benefits from the existing asset beyond its previously assessed standard of performance. All other expenses on
existing assets, including day-to-day repair and maintenance expenditure and cost of replacing parts, are charged to the
Standalone Statement of Profit and Loss for the period during which such expenses are incurred. Expenditure directly
relating to construction activity is capitalised. Indirect expenditure incurred during construction period is capitalised as a
part of indirect construction cost to the extent the expenditure is related to construction or is incidental thereto. Other
indirect costs incurred during the construction periods which are not related to construction activity nor are incidental
thereto are charged to the Standalone Statement of Profit and Loss.
The Company had elected to use fair value as the deemed cost for Property, Plant, and Equipment at the date of transition
to Ind AS. The revaluation surplus arising from this election is credited to the revaluation reserve within equity. In cases
where a revaluation decrease or impairment loss has previously been recognized in profit or loss, any subsequent revaluation
increase is first credited to profit or loss to the extent of the previously recognized loss. The remaining portion of the
revaluation increase is recognized in other comprehensive income. Downward revaluations are recognized based on
appraisal or impairment testing. The decrease is charged to other comprehensive income to the extent of any revaluation
surplus in equity related to the asset. Any remaining decrease is recognized in profit or loss. Upon disposal of the asset,
any revaluation surplus remaining in equity is transferred to retained earnings.
Capital work-in-progress includes cost of property, plant and equipment under installation/under development, other
expenditure (including trial run / test run expenditures) during construction / erection period (net of income) pending
allocation/capitalization as at the balance sheet date.
Advances given towards acquisition of fixed assets outstanding at each balance sheet date are disclosed as Other Non¬
Current Assets.
b. Derecognition
An item of property, plant and equipment and any significant part initially recognised is de-recognised upon disposal or
when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the
asset (calculated as the difference between the net disposal proceeds or amount of security deposit adjusted and the
carrying amount of the asset) is included in the Standalone Statement of Profit and Loss when the asset is de-recognised.
c. Depreciation
Depreciation on each part of an item / component of PPE is provided on pro-rata basis using the Straight-Line Method
based on the expected useful life of the asset and is charged to the Standalone Statement of Profit and Loss as per the
requirement of Schedule II of the Companies Act, 2013. The estimated useful life has been assessed based on technical
evaluation, taking into account the nature of the asset and the estimated usage basis management’s best judgement of
economic benefits from those classes of assets.
*The useful life assessed by the Management is different than those indicated in Schedule II to the Companies Act, 2013
Depreciation is charged on fair valued amount less estimated salvage value. Freehold land is not depreciated. Leasehold
improvements is amortised on a straight-line basis over the remaining period of lease.
The useful lives, residual values of each part of an item of property, plant and equipment and the depreciation methods
are reviewed at the end of each financial year. If any of these expectations differ from previous estimates, such change is
accounted for as a change in an accounting estimate.
3.7 intangible Assets
a. Measurement at recognition
Intangible assets are recognised when it is probable that the expected future economic benefits that are attributable to the
asset will flow to the entity and cost of assets can be measured reliably. Intangible assets acquired separately are measured
on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortisation
and accumulated impairment loss, if any. Expenditure on the research phase of internally generated intangibles is recognised
as an expense as incurred. Costs that are directly attributable to a project’s development phase are recognised as
intangible assets provided, they meet the recognition requirements. Capitalised development costs are recorded as
intangible assets and amortised from the point at which the asset is available for use. Development costs not meeting
these criteria for capitalisation are expensed as incurred.
b. Amortisation
Intangible Assets with finite lives are amortized over the estimated useful economic life on straight line method.
The amortisation expense on intangible assets with finite lives is recognized in the Standalone Statement of Profit and
Loss. The estimated useful life of intangible assets as per management is mentioned below:
The amortisation period and the amortisation method for an intangible asset with finite useful life is reviewed at the end of
each financial year.
c. Derecognition
The carrying amount of an intangible asset is derecognised on disposal or when no future economic benefits are expected
from its use or disposal. The gain or loss arising from the derecognition of an intangible asset is measured as the difference
between the net disposal proceeds and the carrying amount of the intangible asset and is recognized in the Standalone
Statement of Profit and Loss when the asset is derecognised.
1 investment in subsidiaries
An investor, regardless of the nature of its involvement with an entity (the investee), shall determine whether it is a parent by
assessing whether it controls the investee. An investor controls an investee when it is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
Thus, an investor controls an investee if and only if the investor has all the following:
a) power over the investee;
b) exposure, or rights, to variable returns from its involvement with the investee; and
c) the ability to use its power over the investee to affect the amount of the investor’s returns
The Company has elected to recognise its investments in subsidiaries at cost in accordance with the option available in Ind AS
27, ‘Separate Financial Statements’.
Investment carried at cost is tested for impairment as per Ind AS 36.
3.9 Leases
The Company as a lessee
The Company enters into an arrangement for lease of land, buildings and equipment. Such arrangements are generally for a
fixed period but may have extension or termination options. In accordance with Ind AS 116 - Leases, at inception of the
contract, the Company assesses whether a contract is, or contains a lease. A lease is defined as ‘a contract, or part of a
contract, that conveys the right to control the use an asset (the underlying 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:
a) The contract involves the use of an identified asset - this may be specified explicitly or implicitly, and should be physically
distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution
right, then the asset is not identified;
b) The Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period
of use; and
c) The Company assesses whether it has the right to direct ‘how and for what purpose’ the asset is used throughout the
period of use. At inception or on reassessment of a contract that contains a lease component, the Company allocates the
consideration in the contract to each lease component on the basis of their relative stand-alone prices. However, for the
leases of land and buildings in which it is a lessee, the Company has elected not to separate non-lease components and
account for the lease and non-lease components as a single lease component.
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 measured at cost less any accumulated depreciation, accumulated impairment losses
(unless such right of use assets fulfils the requirements of Ind AS 40 - Investment Property and is accounted for as there
under), if any and adjusted for any re-measurement of the lease liability. The right-of-use asset is depreciated using the
straight-line method from the commencement date over the shorter of lease term or useful life of right-of-use asset. Right-of-
use asset are tested for impairment whenever there is any indication that their carrying amounts may not be recoverable.
Impairment loss, if any, is recognised in the Standalone Statement of Profit and Loss.
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, 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 following:
a) Fixed payments, including in-substance fixed payments;
b) Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the
commencement date;
c) Amounts expected to be payable under a residual value guarantee; and
d) The 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.
The lease liability is measured at amortised cost using the effective interest rate method. It is remeasured when there is a
change in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of
the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether
it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding
adjustment is made to the carrying amount of the right-of-use asset, or is recorded in standalone profit or loss if the carrying
amount of the right-of-use asset has been reduced to zero, as the case may be.
The Company presents right-of-use assets that do not meet the definition of investment property and lease liabilities as a
separate line item in the standalone financial statements of the Company.
The Company has elected not to apply the requirements of Ind AS 116 - Leases to short-term leases of all assets that have a
lease term of 12 months or less and leases for which the underlying asset is of low value. The lease payments associated with
these leases are recognised as an expense on a straight-line basis over the lease term.
3.10 Employee benefits
a. Contribution to provident and other funds
Retirement benefit in the form of provident fund is a defined contribution scheme. The Company has no obligation, other
than the contribution payable to the provident fund. The Company recognises contribution payable to the provident fund
scheme as an expense, when an employee renders the related service. If the contribution payable to the scheme for
service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme
is recognised as a liability after deducting the contribution already paid. If the contribution already paid exceeds the
contribution due for services received before the balance sheet date, then excess is recognised as an asset to the extent
that the pre-payment will lead to, for example, a reduction in future payment or a cash refund.
b. Gratuity
Gratuity is a defined benefit scheme. The cost of providing benefits under the defined benefit plan is determined using the
projected unit credit method. The Company recognises termination benefit as a liability and an expense when the Company
has a present obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the termination
benefits fall due more than twelve months after the balance sheet date, they are measured at present value of future cash
flows using the discount rate determined by reference to market yields at the balance sheet date on government bonds.
Re-measurements, comprising actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in
net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on
the net defined benefit liability), are recognised immediately in the standalone balance sheet with a corresponding debit
or credit to retained earnings through Standalone Other Comprehensive Income (“OCI”) in the period in which they occur.
Re-measurements are not reclassified to standalone profit or loss in subsequent periods.
Past service costs are recognised in Standalone Statement of Profit and Loss on the earlier of:
• The date of the plan amendment or curtailment, and
• The date that the Company recognises related restructuring cost
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset.
The Company recognises the following changes in the net defined benefit obligation as an expense in the Standalone
Statement of Profit and Loss:
• Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine
settlements; and
• Net interest expense or income
c. Compensated absences (other long term employee benefits)
The Company treats accumulated leave expected to be carried forward beyond twelve months, as long-term employee
benefit which are computed based on the actuarial valuation using the projected unit credit method at the period end.
Actuarial gains/losses are immediately taken to the Standalone Statement of Profit and Loss and are not deferred. The
Company presents the leave as a current liability in the standalone balance sheet to the extent it does not have an
unconditional right to defer its settlement for twelve months after the reporting date. Where Company has the unconditional
legal and contractual right to defer the settlement for a period beyond twelve months, the balance is presented as a non¬
current liability.
Accumulated leave, which is expected to be utilized within the next twelve months, is treated as short term employee
benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a
result of the unused entitlement that has accumulated at the reporting date.
All other employee benefits payable/available within twelve months of rendering the service are classified as short-term
employee benefits. Benefits such as salaries, wages, bonus, etc. are recognised in the Standalone Statement of Profit
and Loss in the period in which the employee renders the related service.
3.11 Share-based payments
Employees of the Company receive remuneration in the form of share-based payments, whereby employees render services
as consideration for equity instruments which are classified as equity-settled transactions.
The cost of equity-settled transactions is determined by the fair value at the date of grant using an appropriate valuation
model. That cost is recognised as an employee benefit expense with a corresponding increase in ‘Share option outstanding
account’ in other equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative
expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the
vesting period has expired and the Company’s best estimate of the number of equity instruments that will ultimately vest.
Service and non-market performance conditions are not taken into account when determining the grant date fair value of
awards, but the likelihood of the conditions being met is assessed as part of the Company’s best estimate of the number of
equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any
other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting
conditions.
Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there
are also service and/or performance conditions.
No expense is recognised for awards that do not ultimately vest because non-market performance and/or service conditions
have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective
of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are
satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognised is the expense had the terms had
not been modified, if the original terms of the award are met. An additional expense is recognised for any modification that
increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured
at the date of modification. Where an award is cancelled by the Company or by the counterparty, any remaining element of the
fair value of the award is expensed immediately through the Standalone Statement of Profit and Loss.
3.12 Foreign currency transactions and translations
Transactions in foreign currencies are initially recorded in the functional currency, by applying to the foreign currency amount
the exchange rate between the functional currency and the foreign currency at the date of the transaction.
Foreign currency monetary items are reported using the closing rate. 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.
Exchange differences arising on the settlement of monetary items or on restatement of the Company’s monetary items at rates
different from those at which they were initially recorded during the year, or reported in previous standalone financial statements,
are recognised as income or as expenses in the year in which they arise.
3.13 Borrowing costs
Borrowing costs are interest and other costs (including exchange differences relating to foreign currency borrowings to the
extent that they are regarded as an adjustment to interest costs) incurred in connection with the borrowing of funds.
Borrowing costs attributable to acquisition or construction of qualifying asset that necessarily take a substantial period of time
to get ready for their intended use is worked out on the basis of attributable of funds out of project specific loans and/or other
borrowings to the extent identifiable with the qualifying asset and is capitalized with the cost of qualifying asset, using the
effective interest method. Other borrowing costs are recognised as an expense in the period in which they are incurred.
3.14 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. It is recognised in standalone profit or loss except to the extent that it relates to items recognised directly in equity
or in other comprehensive income.
a. Current income tax
Current income tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income-
tax Act, 1961 and rules thereunder. Current income tax assets and liabilities are measured at the amount expected to be
recovered from or paid to 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 OCI 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.
While determining the tax provisions, the Company assesses whether each uncertain tax position is to be considered
separately or together with one or more uncertain tax positions depending upon the nature and circumstances of each
uncertain tax position. The Company offsets current tax assets and current tax liabilities, where it has a legally enforceable
right to set off the recognised amounts and where it intends either to settle on a net basis, or to realise the asset and
liability simultaneously.
Minimum Alternate tax (MAT) credit is recognized as an asset only when and to the extent there is convincing evidence
that the Company will pay normal income tax during the specified period.
b. Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities
and their book bases. Deferred tax liabilities are recognised for all temporary differences, the carry forward of unused tax
credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit
will be available against which the deductible temporary differences, and the carry forward of unused tax credits and
unused tax losses can be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to
apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted at the reporting date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are
recognised in correlation to the underlying transaction either in OCI or directly in equity.
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 (including on unabsorbed losses) are re-assessed at each reporting date and are recognised to the
extent that it has become probable that there is reasonable certainty with convincing evidence of future taxable profits.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
3.15 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker, who is responsible for allocating resources and assessing performance of the operating segments. The business
activities of the Company predominantly fall within a single operating segment, i.e., manufacturing and sale of paints.
Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the standalone
financial statements, thus there are no additional disclosures to be provided under Ind AS 108 ‘Segment Reporting’.
3.16 Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to Equity Shareholders by the
weighted average number of equity shares outstanding during the period.
For the purpose of calculating diluted Earnings per Share, the net profit or loss for the period attributable to Equity Shareholders
and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential
equity shares.
3.17 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, bank balance, short-term deposits with original maturities of three months
or less and other short-term highly liquid investments that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
For the purpose of presentation in the standalone statement of cash flows, cash and cash equivalents includes cash on hand,
deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three
months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes
in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the standalone balance
sheet.
3.18 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.
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. When 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 Company’s or other available fair value indicators.
The Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately
for each of the Company’s CGUs to which the individual assets are allocated. These budgets and forecast calculations
generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future
cash flows after the fifth year. To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts,
the Company extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years,
unless an increasing rate can be justified. In any case, this growth rate does not exceed the long-term average growth rate for
the products, industries, or country or countries in which the entity operates, or for the market in which the asset is used.
Impairment losses of continuing operations, including impairment on inventories, are recognised in the Standalone Statement
of Profit and Loss.
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 Standalone Statement of Profit and Loss unless the asset is carried at a revalued amount, in which case, the reversal is
treated as a revaluation increase.
3.19 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
All financial assets are recognised initially at fair value, in the case of financial assets not recorded at fair value through profit
or loss (“FVTPL”), transaction costs that are attributable to the acquisition of the financial asset, except for trade receivables
which are initially measured at transaction price.
For purposes of subsequent measurement, financial assets are classified as follows:
a. Debt instruments at amortised cost
A ‘debt instrument’ is measured at the amortised cost where the asset is held within a business model whose objective is
to hold assets for collecting contractual cash flows; and contractual terms of the asset give rise to cash flows on specified
dates that are solely payments of principal and interest.
After initial measurement, such financial assets are subsequently measured at amortised cost using the EIR method.
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 interest income from these financial assets is included in finance income in the standalone
statement of Profit and Loss. The losses arising from impairment are recognised in the standalone statement of Profit and
Loss. This category generally applies to trade and other receivables.
b. Debt instruments at fair value through other comprehensive income
Assets that are held for collection of contractual cashflows and for selling the financial assets, where the cash flow
represent solely payments of principal and interest, are measured at fair value through other comprehensive income
(“FVOCI”). The Company has not designated any debt instrument in this category.
c. Debt instruments at fair value through profit or loss
Fair Value Through Profit or Loss (“FVTPL”) is a residual category for debt instruments. Any debt instrument, which does
not meet the criteria for categorisation as at amortized cost or as FVTOCI, is classified as at FVTPL.
In addition, the Company may elect to designate a debt instrument which otherwise meets amortized cost or FVTOCI
criteria, as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition
inconsistency (referred to as ‘accounting mismatch’).
Debt instruments included within the FVTPL category are measured at fair value with all changes recognised in the
Standalone Statement of Profit and Loss. The Company has not designated any debt instrument in this category.
d. Equity instruments
All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and
contingent consideration recognised by an acquirer in a business combination to which Ind AS 103 ‘Business Combinations’
applies are Ind AS classified as at FVTPL. Equity instruments included within the FVTPL category are measured at fair
value with all changes recognised in the Standalone Statement of Profit and Loss.
For all other equity instruments, the Company may make an irrevocable election to present in other comprehensive
income subsequent changes in the fair values. The Company makes such election on an instrument-by-instrument basis.
The classification is made on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument as at FVTOCI, then all fair value changes on the instrument,
excluding dividends, are recognised in the OCI. There is no recycling of the amounts from OCI to profit or loss, even on
sale of investment. However, the Company may transfer the cumulative gain or loss within equity.
De-recognition
A financial asset is de-recognised when the contractual rights to receive cash flows from the asset have expired or the
Company has transferred its rights to receive the contractual cash flows from the asset in a transaction in which substantially
all the risks and rewards of ownership of the asset are transferred.
impairment of financial assets
The Company measures the Expected Credit Loss (“ECL”) associated with its assets based on historical trends, industry
practices and the general business environment in which it operates. The impairment methodology applied depends on whether
there has been a significant increase in credit risk. ECL impairment loss allowance (or reversal) recognised during the period
is recognised as income/ expense in the Standalone Statement of Profit and Loss under the head ‘other expenses’.
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. The Company’s financial liabilities include trade and other payables, loans and borrowings
including bank overdrafts and derivative financial instruments.
Utilisation of borrowings availed from banks and financial institutions
The borrowings obtained by the company from banks and financial institutions have been applied for the purposes for which
such loans was taken.
Trade and Other Payables
Trade and other payables represent liabilities for goods or services provided to the Company prior to the end of financial year
which are unpaid.
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in
standalone profit or loss over the period of the borrowings using the effective interest rate method. Borrowings are derecognised
from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference
between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration
paid, including any non-cash assets transferred or liabilities assumed, is recognised in standalone profit or loss.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
a. Financial liabilities at FVTPL
Financial liabilities at FVTPL 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 incurred
for the purpose of repurchasing in the near term.
This category includes derivative financial instruments entered into by the Company that are not designated as hedging
instruments in hedge relationships as defined by Ind AS 109.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at the
initial date of recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value
gains/ losses are recognised in the Standalone Statement of Profit and Loss, except for those attributable to changes in
own credit risk, which are recognised in Standalone OCI. These gains/ loss are not subsequently transferred to the
Standalone Statement of Profit and Loss.
b. Financial liabilities at amortised cost
After initial recognition, financial liabilities designated at amortised costs are subsequently measured at amortised cost
using the EIR method. Gains and losses are recognised in Standalone Statement of Profit and Loss when the liabilities
are derecognised as well as through the 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 amortisation is included as finance costs in the Standalone Statement of Profit and Loss.
De-recognition
A financial liability is derecognised 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 de-recognition of the original
liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Standalone
Statement of Profit and Loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the standalone balance sheet if there is a
currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise
the assets and settle the liabilities simultaneously.
Derivative financial instruments
Derivatives are initially recognised at fair value on the date of executing a derivative contract and are subsequently remeasured
to their fair value at the end of each reporting period. Derivatives are carried as financial assets when the fair value is positive
and as financial liabilities when the fair value is negative. Changes in the fair value of derivatives that are designated and
qualify as fair value hedges are recognised in the Standalone Statement of Profit and Loss immediately, together with any
changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
|