40. Summary of other accounting policies:
i) Rounding of amounts
All amounts disclosed in the standalone financial statements and notes have been rounded off to the nearest Lakhs as per the requirement of
Schedule III, unless otherwise stated.
ii) Investment in Joint Venture
Investment in joint venture is carried at cost less accumulated impairment losses, if any. Where an indication of impairment exists, the carrying
amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investment in joint venture, the
difference between net disposal proceeds and the carrying amounts are recognized in the Standalone Statement of Profit and Loss.
iii) Segment reporting
The Company is primarily in the business of manufacturing and sale of thermal products (Automotive and home air conditioning systems and
parts thereof).
The Board of Directors of the Company, which has been identified as being the chief operating decision maker (CODM), evaluates the Company's
performance, allocate resources based on the analysis of the various performance indicator of the Company as a single unit. Refer note 23 for
segment information presented.
iv) Foreign currency translation
Functional and presentation currency:
Items included in the Standalone Financial Statements are measured using the currency of the primary economic environment in which the entity
operates ('the functional currency'). The Standalone Financial Statements are presented in Indian rupee (INR), which is Company's functional
and presentation currency.
Transactions and balances:
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities
denominated in foreign currencies at year end exchange rates are recognized in profit or loss. Non-monetary assets and non-monetary liabilities
denominated in a foreign currency and measured at fair value are translated at the exchange rate prevalent at the date when the fair value was
determined. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at historical cost are translated
at the exchange rate prevalent at the date of the transaction.
Foreign exchange differences regarded as an adjustment to borrowing costs are presented in the Standalone Statement of Profit and Loss, within
finance costs. All other foreign exchange gains and losses are presented in the Standalone Statement of Profit and Loss on a net basis within
other income or other expenses.
v) Government grants
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the
Company will comply with all attached conditions. Note 11(d) provides further information on how the Company accounts for government grants.
vi) Income 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.
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 and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The Company measures
its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the
resolution of the uncertainty.
Deferred income tax is provided in full, using the liability method, on the temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the standalone financial statements. Deferred tax is not accounted for if it arises from initial recognition
of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting profit nor
taxable profit (tax loss). Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the
end of the reporting period and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability
is settled.
Deferred tax assets are recognized for all deductible temporary differences only if it is probable that future taxable amounts will be available to
utilize those temporary differences.
Deferred tax liabilities are not recognized for temporary differences between the carrying amount and tax bases of investments in subsidiary and
joint venture where the Company is able to control the timing of the reversal of the temporary differences and it is probable that the differences
will not reverse in the foreseeable future.
Deferred tax assets are not recognized for temporary differences between the carrying amount and tax bases of investments in subsidiary and
joint venture where it is not probable that the differences will reverse in the foreseeable future and taxable profit will not be available against
which the temporary difference can be utilized.
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 realize the asset and settle the liability simultaneously.
Current tax and deferred tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income
or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
vii) Leases
As a lessee
Assets and liabilities arising frowm a lease are initially measured on a present value basis. Lease liabilities includes the net present value of the
following lease payments:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable
• variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date
• amount expected to be payable by the Company under residual value guarantees
• the exercise price of a purchase option if the Company is reasonably certain to exercise that option; and
• payments of penalties for terminating the lease, if the lease term reflects the Company exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to
produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease liability,
• any lease payments made at or before the commencement date less any lease incentives received,
• any initial direct costs, and
• restoration costs.
As a lessor
Lease income from operating leases where the Company is lessor is recognised in income on a straight-line basis over the lease term. Initial
direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognised as expense over
the lease term on the same basis as lease income. The respective leased assets are included in Standalone Balance Sheet based on their nature.
Entity-specific details about the Company's leasing policy are provided in note 27.
viii) Impairment of property, plant and equipment and intangible assets
At the end of each reporting period, the Company reviews the carrying amounts of its property, plant and equipment and 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).
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 for which the estimates of future cash flows have not been adjusted.
ix) Cash and cash equivalents
For the purpose of presentation in the Statement of Cash Flows, cash and cash equivalents include 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.
x) Inventories
Raw material and spares, work in progress, stores and finished goods are stated at the lower of cost and net realizable value. Cost of raw
materials and spares and stores comprises cost of purchases. Cost of work-in-progress and finished goods comprises direct material, direct labour
and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity.
Costs of inventories also include all other costs incurred in bringing the inventories to their present location and condition. Costs of purchased
inventory are determined after deducting rebates and discounts. Net realizable value is the estimated selling price in the ordinary course of
business less the estimated costs of completion and the estimated costs necessary to make the sale.
Entity-specific details about inventories are provided in note 8.
xi) Investments and other financial assets
(i) Classification
The Company classifies its financial assets in the following measurement categories:
- those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss)
- those to be measured at amortised cost.
The classification depends on the entity's business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in
equity instruments that are not held for trading, this will depend on whether the Company has made an irrevocable election at the time of initial
recognition to account for the equity investment at FVOCI.
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.
(ii) Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade-date, being the date on which the Company commits to purchase
or sell the financial asset. Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or have
been transferred and the Company has transferred substantially all the risks and rewards of ownership.
(iii) Measurement
At initial recognition, the Company measures a financial asset (excluding trade receivables which do not contain a significant financing component)
at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the
acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of
principal and interest.
Debt instruments
Subsequent measurement of debt instruments depends on the Company's business model for managing the asset and the cash flow characteristics
of the asset. There are three measurement categories into which the Company classifies its debt instruments:
- Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and
interest are measured at amortised cost. Interest income from these financial assets is included in Other Income using the effective interest
rate method. Foreign exchange gains and losses and impairment gains or losses are recognised in profit or loss. Any gain or loss arising on
derecognition is recognised directly in profit or loss.
- Fair value through other comprehensive income (FVOCI): Assets that are held for collection of contractual cash flows and for selling the
financial assets, where the assets' cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the
carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains
and losses which are recognised in profit and loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised
in OCI is reclassified from equity to profit or loss.
- Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or
loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss is recognised in profit or loss in the
period in which it arises. Interest income from these financial assets is included in other income.
Equity instruments
The Company subsequently measures all equity investments at fair value. Where the Company's management has elected to present fair value
gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to
profit or loss following the derecognition of the investment. Dividends from such investments are recognised in profit or loss as other income
when the Company's right to receive payments is established.
Changes in the fair value of financial assets at fair value through profit or loss are recognised in profit or loss. Impairment losses (and reversal of
impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
(iv) Impairment of financial assets:
The Company recognizes a loss allowance for expected credit losses on a financial asset that is at amortized cost. Loss allowance in respect of
financial assets is measured at an amount equal to life time expected credit losses and is calculated as the difference between their carrying
amount and the present value of the expected future cash flows discounted at the original effective interest rate.
Entity-specific details about investments and other financial assets are provided in note 5.
xii) Property, plant and equipment
The Company's accounting policy for land is explained in note 3.Historical cost includes expenditure that is directly attributable to the acquisition
of items. The cost of self generated assets comprises of raw material, components, direct labour, other direct cost and related production
overheads. Such assets are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.
Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying
amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to
profit or loss during the reporting period in which they are incurred.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated
recoverable amount.
Gains and losses in disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss within other
income / other expenses.
xiii) Intangible assets
Software
Costs associated with maintaining software are recognised as an expense as incurred.
Separately purchased intangible assets are initially measured at cost. Subsequently, intangible assets are carried at cost less accumulated
amortisation and accumulated impairment losses, if any.
Research and development
Research expenditure and development expenditure that do not meet the criteria for capitalization are recognized as an expense as incurred.
Development costs previously recognized as an expense are not recognized as an asset in a subsequent period.
Entity-specific details about intangible assets are provided in note 4.
xiv) Trade and other payables
These amounts represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. Trade and
other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognized
initially at their fair value and subsequently measured at amortized cost using the effective interest method.
xv) Borrowings
Borrowings are initially recognized at fair value, net of transaction cost incurred. Borrowings are subsequently measured at amortized cost.
Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in profit or loss over the period of the
borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan
to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs.
To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a pre-payment
for liquidity services and amortized over the period of the facility to which it relates.
Borrowings are removed from the Standalone 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 recognized in profit or loss.
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 period.
xvi) Borrowing cost
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are
capitalized during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets
that necessarily take a substantial period of time to get ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from
the borrowing costs eligible for capitalization.
Other borrowing costs are recognized as an expense in the period in which these are incurred.
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