3. Summary of material accounting policies
This note provides a list of the material accounting policies
adopted in the preparation of these standalone financial
statements. These policies have been consistently applied
to all the years presented, unless otherwise stated. The
following are the material accounting policies as
applicable to the Company:
3.1 Foreign currency translation
Initial recognition
Foreign currency transactions are recorded in the reporting
currency, by applying to the foreign currency amount the
exchange rate between the reporting currency and the
foreign currency at the date of the transaction.
Conversion
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. Non-monetary items, which are measured at
fair value or other similar valuation denominated in a
foreign currency, are translated using the exchange rate
at the date when such value was determined.
Exchange differences
Exchange differences arising on the settlement of
monetary items or on reporting monetary items of
Company 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 except
those arising from investments in non-integral operations.
3.2 Taxes
Tax expense comprises of current and deferred tax.
The income tax expense or credit for the period is the tax
payable on the current period's taxable income based on
the applicable income tax rate adjusted by changes in
deferred tax assets and liabilities attributable to temporary
differences and to unused tax losses.
The current income tax charge is calculated on the basis
of the tax laws enacted or substantively enacted at the
end of the reporting period. Management periodically
evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate
on the basis of amounts expected to be paid to the tax
authorities.
Deferred income tax is provided in full, using the liability
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 determined using tax rates (and laws) that
have been enacted or substantially enacted by the end
of the reporting period and are expected to apply when
the related deferred income tax asset is realised or the
deferred income tax liability is settled.
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 assets and liabilities are offset when there is
a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to
the same taxation authority. Current tax assets and tax
liabilities are offset where the entity has a legally
enforceable right to offset and intends either to settle on
a net basis, or to realise the asset and settle the liability
simultaneously.
Current and deferred tax is recognised in the standalone
statement of profit and loss, except to the extent that it
relates to items recognised in other comprehensive income
or directly in equity. 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
the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to
be recovered.
3.3 Financial instruments:
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or
equity instrument of another entity.
i. Financial assets
Initial recognition and measurement
All financial assets are recognised initially at fair value
plus, in the case of financial assets not recorded at fair
value through profit and loss, transaction costs that are
attributable to the acquisition of the financial asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets
are classified as:
• Debt instruments assets at amortised cost
• Equity instrument measured at fair value through
profit or loss (FVTPL)
When assets are measured at fair value, gains and losses
are either recognised entirely in the standalone statement
of profit and loss (i.e. fair value through profit and loss), or
recognised in other comprehensive income (i.e. fair value
through other comprehensive income).
Debt instruments at amortised cost
A debt instrument is measured at amortised cost (net of
any write down for impairment) if both the following
conditions are met:
• the asset is held to collect the contractual cash flows
(rather than to sell the instrument prior to its contractual
maturity to realise its fair value changes), and
• the contractual terms of the financial asset give rise
on specified dates to cash flows that are solely
payments of principal and interest ("SPPI") on the
principal amount outstanding.
Such financial assets are subsequently measured at
amortised cost using the effective interest rate (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 EIR amortisation
is included in finance income in the profit and loss. The
losses arising from impairment are recognised standalone
statement of profit and loss. This category generally
applies to trade and other receivables
Financial assets at fair value through OCI (FVTOCI)
A financial asset that meets the following two conditions
is measured at fair value through OCI unless the asset is
designated at fair value through profit and loss under fair
value option.
• The financial asset is held both to collect contractual
cash flows and to sell.
• 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.
Instruments included within the FVTOCI category are
measured initially as well as at each reporting date at fair
value. Fair value movements are recognized in OCI.
However, the Company recognizes interest income,
impairment losses & reversals and foreign exchange gain
or loss in the Profit and Loss. On derecognition of the
asset, cumulative gain or loss previously recognised in
OCI is reclassified from the equity to Profit and Loss.
Interest earned whilst holding FVTOCI debt instrument is
reported as interest income using the EIR method.
Financial assets at fair value through profit and loss
(FVTPL)
FVTPL is a residual category for company's investment
instruments. Any instruments which does not meet the
criteria for categorization as at amortized cost or as
FVTOCI, is classified as at FVTPL.
All investments included within the FVTPL category are
measured at fair value with all changes recognized in the
Profit and Loss
In addition, the company may elect to designate an
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').
Equity investments
All equity investments in scope of Ind AS 109 are
measured at fair value. Equity instruments which are held
for trading are classified as at FVTPL. For all other equity
instruments, the Company may make an irrevocable
election to present in other comprehensive income
subsequent changes in the fair value. The Company has
not made any such election. This classification is made
on initial recognition and is irrevocable.
If the Company decides to classify an equity instrument
as at FVOCI, then all fair value changes on the instrument,
excluding dividends, are recognized in the OCI. There is
no recycling of the amounts from OCI to P&L, even on
sale of investment, However, the Company may transfer
the cumulative gain or loss within equity.
Equity instruments included within the FVTPL category
are measured at fair value with all changes recognized in
the P&L.
Equity investment in subsidiary are measured at cost.
Derecognition
When the Company has transferred its rights to receive
cash flows from the asset or has assumed an obligation to
pay the received cash flows in full without material delay
to a third party under a 'pass-through' arrangement? it
evaluates if and to what extent it has retained the risks
and rewards of ownership.
A financial asset (or, where applicable, a part of a financial
asset or part of a Company of similar financial assets) is
primarily derecognised when:
• The rights to receive cash flows from the asset have
expired, or
• Based on above evaluation, either
(a) the Company has transferred substantially all the risks
and rewards of the asset, or
(b) the Company has neither transferred nor retained
substantially all the risks and rewards of the asset, but
has transferred control of the asset.
When it has neither transferred nor retained substantially
all of the risks and rewards of the asset, nor transferred
control of the asset, the Company continues to recognise
the transferred asset to the extent of the Company's
continuing involvement. In that case, the Company also
recognises an associated liability. The transferred asset
and the associated liability are measured on a bases that
reflect the rights and obligations that the Company has
retained.
Continuing involvement that takes the form of a guarantee
over the transferred asset is measured at the lower of the
original carrying amount of the asset and the maximum
amount of consideration that the Company could be
required to repay.
Impairment of financial assets
The Company assesses at each date of balance sheet
whether a financial asset or a group of financial assets is
impaired. Ind AS 109 ('Financial instruments') requires
expected credit losses to be measured through a loss
allowance. The Company recognizes lifetime expected
losses for all contract assets and / or all trade receivables
that do not constitute a financing transaction. For all
other financial assets, expected credit losses are measured
at an amount equal to the 12-month expected credit
losses or at an amount equal to the life time expected
credit losses if the credit risk on the financial asset has
increased significantly since initial recognition.
ii. Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition,
as financial liabilities at fair value through profit and loss
or at amortised cost, as appropriate.
All financial liabilities are recognised initially at fair value
and, in the case of loans and borrowings, net of directly
attributable transaction costs.
The Company's financial liabilities include trade
payables and other payables.
Subsequent measurement
The measurement of financial liabilities depends on their
classification, as described below:
Financial liabilities at amortised cost
After initial recognition, interest-bearing loans and
borrowings and other payables are subsequently measured
at amortised cost using the EIR method. Gains and losses
are recognised in 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 EIR amortisation is
included as finance costs in the standalone statement of
profit and loss.
Derecognition
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
derecognition 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.
iii. Offsetting of financial instruments
Financial assets and financial liabilities are offset and
the net amount is reported in the 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.
iv. Reclassification of financial assets
The Company determines classification of financial assets
and liabilities on initial recognition. After initial
recognition, no reclassification is made for financial assets
which are equity instruments and financial liabilities. For
financial assets which are debt instruments, a
reclassification is made only if there is a change in the
business model for managing those assets. Changes to
the business model are expected to be infrequent. The
Company's senior management determines change in
the business model as a result of external or internal
changes which are significant to the Company's
operations. Such changes are evident to external parties.
A change in the business model occurs when the Company
either begins or ceases to perform an activity that is
significant to its operations. If the Company reclassifies
financial assets, it applies the reclassification prospectively
from the reclassification date which is the first day of the
immediately next reporting period following the change
in business model. The Company does not restate any
previously recognised gains, losses (including impairment
gains or losses) or interest.
|