4. SIGNIFICANT ACCOUNTING POLICIES AND KEY
ACCOUNTING ESTIMATES AND JUDGEMENTS
A summary of the significant accounting policies applied
in the preparation of the standalone financial statements
are as given below. These accounting policies have
been applied consistently to all the periods presented in
the standalone financial statements, unless otherwise
stated.
1. Inventories
Raw materials and stores, work in progress, traded
and finished goods are stated at the lower of cost
and net realisable value. Cost of raw materials and
traded goods comprises cost of purchases. Cost
of work-in-progress and finished goods comprises
direct materials, 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 are assigned to individual items
of inventory arrived on weighted average basis.
Costs of purchased inventory are determined after
deducting rebates and discounts. Net realisable
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.
Stores, spares and consumables
Stores spares, packing material and all
consumables' items held for use in the production
of inventories are charged to profit & loss account
as and when purchased.
Provision is recognized for damaged, defective or
obsolete stocks where necessary.
2. Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet
comprise cash at banks and on hand, Cheques
on hand and short-term deposits with an original
maturity of three months or less, which are subject
to an insignificant risk of change in value.
3. Cash Flows
Cash flows are reported using the indirect method,
where by net profit before tax is adjusted for the
effects of transactions of a non-cash nature, any
deferrals or accruals of past or future operating
cash receipts or payments and item of income or
expenses associated with investing or financing
cash flows. The cash flows from operating,
investing and financing activities are segregated.
4. Income Tax
Income Tax comprises current and deferred tax.
a) Current Tax
Current Tax is measured on the basis of
estimated taxable income for the current
accounting period in accordance with the
applicable tax rates and the provisions of the
Income-tax Act, 1961. Current income tax
is recognized in the standalone statement
of profit and loss except to the extent that
it relates to an item recognized directly in
equity or in other comprehensive income.
b) Deferred Tax
Deferred tax is provided, on all temporary
differences at the reporting date between
the tax bases of assets and liabilities and
their carrying amounts for financial reporting
purposes. Deferred tax assets and liabilities
are measured at the tax rates that are
expected to be applied to the temporary
differences when they reverse, based on the
laws that have been enacted or substantively
enacted at the reporting date. Tax relating to
items recognised directly in equity or OCI is
recognised in equity or OCI and not in the
standalone statement of profit and loss.
Deferred tax assets and liabilities are offset
if there is a legally enforceable right to offset
current tax liabilities and assets, and they
relate to income taxes levied by the same
tax authority, but they intend to settle current
tax liabilities and assets on a net basis or
their tax assets and liabilities will be realized
simultaneously.
A deferred tax asset is recognized to the
extent that it is probable that future taxable
profits will be available against which
the temporary difference can be utilised.
Deferred tax assets are reviewed at each
reporting date and are reduced to the extent
that it is no longer probable.
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. In
the year in which the Minimum Alternative
Tax (MAT) credit becomes eligible to be
recognized as an asset in accordance with
the recommendations contained in guidance
note issued by the ICAI, the said asset
is created by way of credit to standalone
statement of profit and loss and shown
as MAT credit entitlement. The Company
reviews the same at each Balance Sheet
date and writes down the carrying amount
of MAT entitlement to the extent there is no
longer convincing evidence to the effect that
Company will pay normal Income Tax during
the specified period.
5. Property, Plant and Equipment
a) Recognition and Measurement
i) Property, plant and equipment held for use
in the production or/and supply of goods or
services, or for administrative purposes, are
stated in the balance sheet at cost, less any
accumulated depreciation and accumulated
impairment losses (if any).
ii) Cost of an item of property, plant and
equipment acquired comprises its purchase
price, including import duties and non¬
refundable purchase taxes, after deducting
any trade discounts and rebates, any directly
attributable costs of bringing the assets
to its working condition and location for
its intended use and present value of any
estimated cost of dismantling and removing
the item and restoring the site on which it is
located.
iii) In case of self-constructed assets, cost
includes the costs of all materials used
in construction, direct labour, allocation
of directly attributable overheads, directly
attributable borrowing costs incurred in
bringing the item to working condition for
its intended use, and estimated cost of
dismantling and removing the item and
restoring the site on which it is located.
The costs of testing whether the asset is
functioning properly, after deducting the
net proceeds from selling items produced
while bringing the asset to that location and
condition are also added to the cost of self-
constructed assets.
iv) For transition to IND AS, the company has
revalued land at fair value as deemed cost
and considered other assets at Ind AS Cost.
v) Gains or losses arising from de-recognition
of property, plant and equipment are
measured as the difference between the net
disposal proceeds and the carrying amount
of the asset is recognized in the standalone
statement of profit and loss.
vi) Subsequent costs are included in the asset's
carrying amount, only when it is probable
that future economic benefits associated
with the cost incurred 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. Major
Inspection/ Repairs/ Overhauling expenses
are recognized in the carrying amount of
the item of property, plant and equipment
a replacement if the recognition criteria
are satisfied. Any Unamortized part of the
previously recognized expenses of similar
nature is derecognized.
vii) The residual values, useful lives and
methods of depreciation of property, plant
and equipment are reviewed at each financial
year end and adjusted prospectively, if
appropriate.
viii) The Company identifies and determines
cost of asset significant to the total cost of
the asset having useful life that is materially
different from that of the remaining life.
ix) Research and development costs that are
in nature of tangible/ intangible assets and
are expected to generate probable future
economic benefits are capitalised and
classified under tangible/intangible assets
and depreciated on the same basis as
other fixed assets. Revenue expenditure on
research and development is charged to the
statement of profit and loss in the year in
which it is incurred.
b) Depreciation and Amortization
i) Depreciation on property, plant and
equipment is provided under Straight Line
Method over the useful lives of assets
prescribed by Schedule II of the Companies
Act, 2013. Depreciation in change in the
value of fixed assets due to exchange rate
fluctuation has been provided prospectively
over the residual life of the respective assets.
ii) Depreciation in respect of property, plant
and equipment added / disposed off during
the year is provided on pro-rata basis, with
reference to the date of addition/disposal.
6. Intangible Assets
i) 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.
ii) 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 or loss.
iii) Intangible assets are amortised on straight line
basis over its estimated useful life of 5 years.
7. Impairment of tangible and intangible assets
At the end of each reporting period, the Company reviews
the carrying amounts of its tangible 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. Where 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.
Recoverable amount is the higher of fair value less
costs to sell 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.
If the recoverable amount of an asset (or cash¬
generating unit) is estimated to be less than it 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.
Where an impairment loss subsequently reverses, the
carrying amount of the asset (or cash-generating unit)
is increased to the revised estimate of its recoverable
amount, but 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.
Goodwill and intangible assets that have an indefinite
useful life are not subject to amortisation and are tested
annually for impairment or more frequently if events or
changes in circumstances indicate that they might be
impaired.
8. Capital Work in Progress
Capital work-in-progress is stated at cost which includes
expenses incurred during construction period, interest
on amount borrowed for acquisition of qualifying assets
and other expenses incurred in connection with project
implementation in so far as such expenses relate to
the period prior to the commencement of commercial
production.
9. Investment in Joint-Venture
Investment in Joint-venture is measured at cost less
impairment loss, if any.
The joint arrangement is structured through a separate
vehicle and the legal form of the separate vehicle,
the terms of the contractual arrangement and, when
relevant, any other facts and circumstances gives the
Company rights to the net assets of the arrangement
(i.e. the arrangement is a joint venture). The activities of
the joint venture are primarily aimed to provide the third
parties with an output and the parties to the joint venture
will not have rights to substantially all the economic
benefits of the assets of the arrangement.
10. Investment in subsidiaries and associates
Investments in subsidiaries and associates are
recognised at cost as per IND AS 27. Except where
investments accounted for at cost shall be accounted
for in accordance with IND AS 105, Non-current Assets
held for Sale and Discontinued Operations, when they
are classified as held for sale.
11. Leases
a) The Company as lessor
Leases for which the Company is a lessor is
classified as finance or operating leases. Whenever
the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee, the
contract is classified as finance lease. All other
leases are classified as operating leases.
Rental income from operating leases is
recognised on a straight-line basis over the term
of the relevant lease. Initial direct costs incurred in
negotiating and arranging an operating lease are
added to the carrying amount of the leased asset
and recognised on a straight-line basis over the
lease term.
b) The Company as lessee
The Company assesses whether a contract is
or contains a lease, at inception of the contract.
The Company recognises a right-of-use asset
and a corresponding lease liability with respect to
all lease arrangements in which it is the lessee,
except for short-term leases (defined as leases
with a lease term of 12 months or less) and
leases of low value assets. For these leases, the
Company recognises the lease payments as an
operating expense on a straight-line basis over
the lease term, unless another systematic basis
is more representative of the time pattern in which
economic benefits from the leased assets are
consumed. Contingent and variable rentals are
recognized as expense in the periods in which
they are incurred.
c) Lease Liability
The lease payments that are not paid at the
commencement date are discounted using
the interest rate implicit in the lease. If that rate
cannot be readily determined, which is generally
the case for leases in the Company, the lessee's
incremental borrowing rate is used, being the rate
that the individual lessee would have to pay to
borrow the funds necessary to obtain an asset of
similar value to the right-of-use asset in a similar
economic environment with similar terms, security
and conditions.
Lease payments included in the measurement of
the lease liability comprise:
• Fixed lease payments (including in¬
substance fixed payments) payable during
the lease term and under reasonably certain
extension options, less any lease incentives;
• Variable lease payments that depend on an
index or rate, initially measured using the
index or rate at the commencement date;
• The amount expected to be payable by the
lessee under residual value guarantees;
• The exercise price of purchase options, if the
lessee is reasonably certain to exercise the
options; and
• Payments of penalties for terminating the
lease, if the lease term reflects the exercise
of an option to terminate the lease.
The lease liability is presented as a separate line
in the Balance Sheet.
The lease liability is subsequently measured by
increasing the carrying amount to reflect interest
on the lease liability (using the effective interest
method) and by reducing the carrying amount to
reflect the lease payments made.
The Company re-measures the lease liability (and
makes a corresponding adjustment to the related
right-of-use asset) whenever:
• The lease term has changed or there is a
change in the assessment of exercise of a
purchase option, in which case the lease
liability is re-measured by discounting the
revised lease payments using a revised
discount rate.
• A lease contract is modified and the lease
modification is not accounted for as a
separate lease, in which case the lease
liability is re-measured by discounting the
revised lease payments using a revised
discount rate.
d) Right of Use (ROU) Assets
The ROU assets comprise the initial measurement
of the corresponding lease liability, lease payments
made at or before the commencement day and
any initial direct costs. They are subsequently
measured at cost less accumulated depreciation
and impairment losses.
Whenever the company incurs an obligation for
costs to dismantle and remove a leased asset,
restore the site on which it is located or restore
the underlying asset to the condition required by
the terms and conditions of the lease, a provision
is recognised and measured under Ind AS 37-
Provisions, Contingent Liabilities and Contingent
Assets. The costs are included in the related right-
of-use asset.
ROU assets are depreciated over the shorter
period of the lease term and useful life of the
underlying asset. If the company is reasonably
certain to exercise a purchase option, the right-
of-use asset is depreciated over the underlying
asset's useful life. The depreciation starts at the
commencement date of the lease.
The ROU assets are not presented as a separate
line in the Balance Sheet but presented below
similar owned assets as a separate line in the PPE
note under “Notes forming part of the Financial
Statement”.
The Company applies Ind AS 36- Impairment
of Assets to determine whether a right-of-use
asset is impaired and accounts for any identified
impairment loss as per its accounting policy on
‘property, plant and equipment'.
As a practical expedient, Ind AS 116 permits a
lessee not to separate non-lease components
when bifurcation of the payments is not available
between the two components, and instead
account for any lease and associated non-lease
components as a single arrangement. The
Company has used this practical expedient.
Extension and termination options are included
in many of the leases. In determining the lease
term, the management considers all facts and
circumstances that create an economic incentive
to exercise an extension option, or not exercise a
termination option.
12. Revenue Recognition
Revenue represents amount receivable from sale of
solar modules, sale of solar power and lease rental,
stated net of discounts.
Ind AS 115 “Revenue from Contracts with Customers”
introduced one single new model for recognition
of revenue which includes a 5-step approach and
detailed guidelines. Among other, such guidelines are
on allocation of revenue to performance obligations
within multi-element arrangements, measurement and
recognition of variable consideration and the timing of
revenue recognition.
The Company considers the terms of the contract in
determining the transaction price. The transaction
price is based upon the amount the entity expects to
be entitled to in exchange for transferring of promised
goods and services to the customer after deducting
incentive programs, included but not limited to discounts,
volume rebates etc.
a) Revenue from sale of goods
Revenue from the sale of solar modules is
measured based on the consideration specified in
a contract with a customer and excludes amounts
collected on behalf of third parties. Company
recognises revenue at a point in time, when
control is transferred to the customer, and the
consideration agreed is expected to be received.
Control is generally deemed to be transferred
upon delivery of the products in accordance with
the agreed delivery plan.
In case of related party transactions where related
party meets the definition of customer (i.e. a
party that has contracted with the Company to
obtain goods or services that are an output of
the Company's ordinary activity in exchange for
consideration) and the transactions are within
the scope of the standard then the revenue is
recognised based on the principles of IND AS 115.
Revenues for services are recognised when the
service rendered has been completed.
• Revenue from services
Revenue from services mainly consists of
the following;
• Income from Lease Rent
Revenue from services, which mainly
consists of lease rentals from letting of
space, is recognised over time on satisfying
performance obligations as per the terms
of agreement, that is, by reference to the
period in which services are being rendered.
Revenue from services, if any, involving
single performance obligation is recognised
at a point in time
• Sale of energy
Revenue from operations comprises of
sale of power. Revenue is recognized at an
amount that reflects the consideration for
which the Company expects to be entitled
in exchange for transfer of power (goods /
service) to the customer. Revenue from sale
of power is accounted for in accordance
with tariff provided in Power Purchase
Agreement (PPA) read with the regulations
of respective regulatory authorities and no
significant uncertainty as to the measurability
or collectability exist. There is no impact on
the adoption of the standard in the financial
statement as the Company's revenue
primarily comprised of revenue from sale
of power and the recognition criteria of this
revenue stream is largely unchanged by Ind
AS 115.
• Contract Assets
Contract assets are recognised when there
is excess of revenue earned over billings
on contracts. Unbilled receivables where
further subsequent performance obligation
is pending are classified as contract
assets when the company does not have
unconditional right to receive cash as per
contractual terms. Revenue recognition
for fixed price development contracts is
based on percentage of completion method.
Invoicing to the clients is based on milestones
as defined in the contract. This would
result in the timing of revenue recognition
being different from the timing of billing the
customers. Unbilled revenue for fixed price
development contracts is classified as non¬
financial asset as the contractual right to
consideration is dependent on completion of
contractual milestones.
• Impairment of Contract asset
The Company assesses a contract asset
for impairment in accordance with Ind AS
109.An impairment of a contract asset is
measured, presented and disclosed on the
same basis as a financial asset that is within
the scope of Ind AS 109.
• Contract Liability
Contract Liability is recognised when there
are billings in excess of revenues and it
also includes consideration received from
customers for whom the company has
pending obligation to transfer goods or
services.
The billing schedules agreed with customers
include periodic performance-based
payments and / or milestone-based progress
payments. Invoices are payable within
contractually agreed credit period.
• Modification in contract
Contracts are subject to modification to
account for changes in contract specification
and requirements. The Company reviews
modification to contract in conjunction
with the original contract, basis which the
transaction price could be allocated to a
new performance obligation, or transaction
price of an existing obligation could undergo
a change. In the event transaction price is
revised for existing obligation, a cumulative
adjustment is accounted for.
b) Interest Income
Interest income from a financial asset is
recognized when it is probable that the economic
benefit will flow to the company and the amount
of income can be measured reliably. Interest
income is accrued on a time basis, by reference
to principal outstanding and the effective interest
rate applicable, which is the rate that exactly
discounts estimated future cash receipts through
the expected life of the financial assets to that
assets' net carrying amount on initial recognition.
13. Retirement and other employee benefits
a) Short Term Employee Benefits
Short term employee benefit obligations are
measured on an undiscounted basis and are
expensed as the related services are provided.
Liabilities for wages and salaries, including non¬
monetary benefits that are expected to be settled
wholly within twelve months after the end of the
period in which the employees render the related
service are recognized in respect of employees'
services up to the end of the reporting period.
b) Other Long Term Employee Benefits
The liabilities for earned leaves that are not
expected to be settled wholly within twelve months
are measured as the present value (determined
by actuarial valuation using the projected unit
credit method) of the expected future payments
to be made in respect of services provided by
employees up to the end of the reporting period
and recognised in books of accounts. The
present value of the defined benefit plan liability
is calculated using a discount rate which is
determined by reference to market yields at the
end of the reporting period on government bonds.
Re-measurements as the result of experience
adjustment and changes in actuarial assumptions
are recognized in standalone statement of profit
and loss.
c) Post-Employment Benefits
The Company operates the following post¬
employment schemes:
i) Defined Benefit Plan
The liability or asset recognized in the
Balance Sheet in respect of defined benefit
plans is the present value of the defined
benefit obligation at the end of the reporting
period less the fair value of plan assets.
The Company's net obligation in respect
of defined benefit plans is calculated by
estimating the amount of future benefit that
employees have earned in the current and
prior periods.
The defined benefit obligation is calculated
annually by Actuaries using the projected
unit credit method. The liability recognized for
defined benefit plans is the present value of
the defined benefit obligation at the reporting
date less the fair value of plan assets,
together with adjustments for unrecognized
actuarial gains or losses and past service
costs. Net interest is calculated by applying
the discount rate at the beginning of the
period to the net defined benefit liability or
asset. Past service cost is recognised in
the standalone statement of profit and loss
in the period of a plan amendment. The
present value of the defined benefit plan
liability is calculated using a discount rate
which is determined by reference to market
yields at the end of the reporting period on
government bonds.
Re-measurement, comprising actuarial
gains and losses, the effect of the changes to
the asset ceiling (if applicable) and the return
on plan assets (excluding net interest), is
reflected immediately in the Balance Sheet
with a charge or credit recognised in Other
Comprehensive Income (OCI) in the period
in which they occur. Re-measurement
recognised in OCI is reflected immediately in
retained earnings and will not be reclassified
to standalone statement of profit and loss.
ii) Defined Contribution Plan
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.
Contribution payable under the provident
fund is recognised as expenditure in the
standalone statement of profit and loss and/
or carried to Construction work-in-progress
when an employee renders the related
service.
14. Government Grants
Government grants are recognized at their fair values
when there is reasonable assurance that the grants will
be received and the Company will comply with all the
attached conditions.
a) Government grants are recognised in the
statement of profit or loss on a systematic basis
over the periods in which the Company recognises
the related costs for which the grants are
intended to compensate.
b) Grants related to acquisition/ construction of
property, plant and equipment are recognised
as deferred revenue in the Balance Sheet and
transferred to the statement of profit or loss on a
systematic and rational basis over the useful lives
of the related asset.
15. Foreign Currency Transactions
a) The functional currency and presentation currency
of the company is Indian Rupee (INR).
b) Transactions in currencies other than the
company's functional currency are recorded on
initial recognition using the exchange rate at the
transaction date. At each balance sheet date,
foreign currency monetary items are reported using
the closing rate.
c) Non- monetary items that are measured in terms
of historical cost in foreign currency are not
retranslated. Exchange difference that arise on
settlement of monetary items or on reporting of
monetary items at each Balance sheet date at the
closing spot rate are recognised in profit or loss in
the period in which they arise except for:
i) exchange difference on foreign currency
borrowings related to assets under
construction for future productive use, which
are included in the cost of those assets when
they are regarded as an adjustment to interest
cost on those foreign currency borrowings;
and
ii) exchange differences on transactions entered
into in order to hedge certain foreign currency
risks.
iii) exchange differences on monetary items
receivable from or payable to a foreign
operation for
Which settlement is neither planned nor likely to
occur (therefore forming part of the net investment in
the foreign operation), which are recognised initially
in other comprehensive income and reclassified
from equity to the Statement of Profit and Loss on
repayment of the monetary items.
According to Appendix B of Ind AS 21 “Foreign
currency transactions and advance consideration”,
purchase or sale transactions must be translated at
the exchange rate prevailing on the date the asset
or liability is initially recognized. In practice, this is
usually the date on which the advance payment is
paid or received. In the case of multiple advances,
the exchange rate must be determined for each
payment and collection transaction
16. Borrowing Cost
Borrowing cost include interest expense calculated using
the Effective interest method, finance charges in respect
of assets acquired on finance lease and exchange
difference arising on foreign currency borrowings to the
extent they are regarded as an adjustment to the finance
cost.
Borrowing costs (including other ancillary borrowing cost)
directly attributable to the acquisition or construction of a
qualifying asset are capitalized as a part of the cost of that
asset that necessarily takes a substantial period of time
to complete and prepare the asset for its intended use or
sale. The Company considers a period of twelve months
or more as a substantial period of time.
Transaction costs in respect of long-term borrowing
are amortized over the tenure of respective loans using
Effective Interest Rate (EIR) method. All other borrowing
costs are recognized in the standalone statement of
profit and loss in the period in which they are incurred.
17. Earnings per Share
Earnings per share are calculated by dividing the net
profit or loss before OCI for the year attributable to
equity shareholders by the weighted average number of
equities shares outstanding during the period. For the
purpose of calculating diluted earnings per share, the
net profit or loss before OCI 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.
18. Exceptional Item
Exceptional items include income or expense that are
considered to be part of ordinary activities, however
are of such significance and nature that separate
disclosure enables the user of the financial statements
to understand the impact in a more meaningful manner.
Exceptional items are identified by virtue of either their
size or nature so as to facilitate comparison with prior
periods and to assess underlying trends in the financial
performance of the Company.
19. Financial Guarantee Contract
Financial guarantee contract provided to the lenders of
the Company by its Parent Company is measured at
their fair values and benefit of such financial guarantee
is recognised to equity as a capital contribution from
the parent.
20. 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
and financial liabilities are recognised when a Company
entity becomes a party to the contractual provisions of
the instruments.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are
directly attributable to the acquisition or issue of financial
assets and financial liabilities (other than financial
assets and financial liabilities at fair value through profit
or loss and ancillary costs related to borrowings) are
added to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, on initial
recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at fair
value through profit or loss are recognised immediately
in standalone statement of profit and loss.
a) Financial Assets
i) Classification and Subsequent
Measurement
For purposes of subsequent measurement,
financial assets are classified in four
categories:
• Measured at Amortized Cost
• Measured at Fair Value Through Other
Comprehensive Income (FVTOCI)
• Measured at Fair Value Through Profit
or Loss (FVTPL) and
• Equity Instruments measured at Fair
Value Through Other Comprehensive
Income (FVTOCI)
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.
• Measured at Amortized Cost
The Financial assets are subsequently
measured at the amortized cost if both
the following conditions are met:
• The asset is held within a business
model whose objective is achieved by
both collecting 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 (SPPI) on the
principal amount outstanding.
After initial measurement, such
financial assets are subsequently
measured at amortized cost using the
effective interest rate (EIR) method.
Income is recognised on an effective
interest basis for debt instruments
other than those financial assets
classified as FVTPL. Interest income
is recognised in the standalone
statement of profit and loss.
• Measured at Fair Value Through
Other Comprehensive Income
(FVTOCI)
The financial assets are measured
at the FVTOCI if both the following
conditions are met:
• The objective of the business model is
achieved by both collecting contractual
cash flows and selling the financial
assets; and
• The asset's contractual cash flows
represent SPPI.
Debt instruments meeting these
criteria are measured initially at fair
value plus transaction costs. They
are subsequently measured at fair
value with any gains or losses arising
on re-measurement recognized in
other comprehensive income, except
for impairment gains or losses and
foreign exchange gains or losses.
Interest calculated using the effective
interest method is recognized in the
standalone statement of profit and loss
in investment income.
• Measured at Fair Value Through
Profit or Loss (FVTPL)
Financial assets are measured at fair
value through profit or Loss unless it is
measured at amortised cost or at fair
value through other comprehensive
income on initial recognition. Gains or
losses arising on re-measurement are
recognised in the standalone statement
of profit and loss. The net gains or loss
recognised in standalone statement
of profit and loss incorporates any
dividend or interest earned on the
financial assets and is included in the
“Other income” line item.
• Equity Instruments measured
at Fair Value Through Other
Comprehensive Income (FVTOCI)
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 makes such election
on an instrument-by instrument basis.
The classification is made on initial
recognition and is irrevocable. In
case the company decides to classify
an equity instrument as at FVTOCI,
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.
ii) Derecognition
The Company derecognizes a financial asset
on trade date only when the contractual
rights to the cash flows from the asset expire,
or when it transfers the financial asset and
substantially all the risks and rewards of
ownership of the asset to another entity.
iii) Impairment of Financial Assets
In accordance with Ind AS 109, the Company
uses ‘Expected Credit Loss' (ECL model, for
evaluating impairment of financial assets
other than those measured at fair value
through profit and loss (FVTPL).
Expected credit losses are measured through
a loss allowance at an amount equal to'
• The 12-months expected credit losses
(expected credit losses that result from
those default events on the financial
instrument that are possible within 12
months after the reporting date); or
• Full lifetime expected credit losses
(expected credit losses that result from
all possible default events over the life
of the financial instrument)
For trade receivables Company applies
‘simplified approach' which requires
expected lifetime losses to be recognised
from initial recognition of the receivables.
The Company uses historical default rate to
determine impairment loss on the portfolio of
trade receivables. At all reporting date these
historical default rates are reviewed and
changes in the forward-looking estimates
are analysed.
For other assets, the Company uses
12-month ELC to provide for impairment
loss where there is no significant increase in
credit risk. If there is significant increase in
credit risk full lifetime ELC is used.
iv) Foreign exchange gains and losses
The fair value of financial assets denominated
in a foreign currency is determined in that
foreign currency and translated at the spot
rate at the end of each reporting period.
For foreign currency denominated financial
assets measured at amortised cost, the
exchange differences are recognised in the
standalone statement of profit and loss.
b) Financial Liabilities and equity instruments
Debts and equity instruments issued by a
Company are classified as either financial liabilities
or as equity in accordance with the substance of
the contractual arrangements and the definitions
of a financial liability and an equity instrument.
Equity Instruments
An equity instrument is any contract that evidences
a residual interest in the assets of equity after
deducting all of its liabilities. Equity instruments
issued by the Company are recognised at the
proceeds received, net of direct issue costs.
Financial Liabilities
i) Recognition and Initial Measurement
Financial liabilities are classified, at initial
recognition, as at fair value through profit
or loss, loans and borrowings, payables or
as derivatives as appropriate. All financial
liabilities are recognized initially at fair value
and, in the case of loans and borrowings
and payables, net of directly attributable
transaction costs.
ii) Subsequent Measurement
Financial liabilities are measured
subsequently at amortized cost or FVTPL.
A financial liability is classified as 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
recognized in profit or loss. Other financial
liabilities are subsequently measured at
amortized cost using the effective interest
rate method. Interest expense and foreign
exchange gains and losses are recognized
in profit or loss. Any gain or loss on de¬
recognition is also recognized in profit or
loss.
iii) Financial Guarantee Contracts
Financial guarantee contracts issued by the
company are those contracts that require a
payment to be made to reimburse the holder
for a loss it incurs because the specified
debtor fails to make a payment when due
in accordance with the terms of a debt
instrument.
Financial guarantee contracts are recognized
initially as a liability at fair value, adjusted
for transaction costs that are directly
attributable to the issuance of the guarantee.
Subsequently, the liability is measured at
the higher of the amount of loss allowance
determined as per impairment requirement of
Ind AS 109 and the amount recognized less
cumulative amortization.
iv) De-recognition
A financial liability is derecognized when the
obligation under the liability is discharged or
cancelled or expires.
v) Foreign exchange gains and losses
For financial liabilities that are denominated
in a foreign currency and are measured at
amortised cost at the end of each reporting
period, the foreign exchange gains and losses
are determined based on the amortised cost of
the instruments and are included in standalone
statement of profit and loss. The fair value
of the financial liabilities denominated in a
foreign currency is determined in that foreign
currency and translated at the spot rate at the
end of the reporting period.
vi) Offsetting financial instruments
Financial assets and liabilities are offset and
the net amount reported in the balance sheet
when there is a legally enforceable right to
offset the recognized amounts and there is an
intention to settle on a net basis or realize the
asset and settle the liability simultaneously.
The legally enforceable right must not be
contingent on future events and must be
enforceable in the normal course of business
and in the event of default, insolvency or
bankruptcy of the counterparty.
c) Derivative financial instruments
The Company uses derivative financial
instruments such as forward, swap, options etc. to
hedge against interest rate and foreign exchange
rate risks, including foreign exchange fluctuation
related to highly probable forecast sale. The
realized gain / loss in respect of hedged foreign
exchange contracts which has expired / unwinded
during the year are recognized in the standalone
statement of profit and loss and included in other
operating revenue / other expense as the case
may be. However, in respect of foreign exchange
forward contracts period of which extends
beyond the balance sheet date, the fair value
of outstanding derivative contracts is marked to
market and resultant net loss/gain is accounted
in the standalone statement of profit and loss.
Company does not hold derivative financial
instruments for speculative purposes.
d) Derivatives and Hedge Accounting
Derivatives are initially recognised at fair value
and are subsequently remeasured to their
fair value at the end of each reporting period.
The resulting gains / losses are recognised in
Statement of Profit and Loss immediately unless
the derivative is designated and effective as a
hedging instrument, in which event the timing of
recognition in profit or loss / inclusion in the initial
cost of non-financial asset depends on the nature
of the hedging relationship and the nature of the
hedged item. The Company complies with the
principles of hedge accounting where derivative
contracts are designated as hedge instruments.
At the inception of the hedge relationship, the
Company documents the relationship between the
hedge instrument and the hedged item, along with
the risk management objectives and its strategy
for undertaking hedge transaction, which is a cash
flow hedge.
e) Cash Flow Hedge
The effective portion of changes in the fair value
of derivatives that are designated and qualify
as cash flow hedges is recognised in the other
comprehensive income and accumulated as
‘Cash Flow Hedging Reserve'. The gains / losses
relating to the ineffective portion are recognised
in the Statement of Profit and Loss. Amounts
previously recognised and accumulated in other
comprehensive income are reclassified to profit or
loss when the hedged item affects the Statement
of Profit and Loss. However, when the hedged
item results in the recognition of a non- financial
asset, such gains / losses are transferred from
equity (but not as reclassification adjustment)
and included in the initial measurement cost of
the non- financial asset. Hedge accounting is
discontinued when the hedging instrument expires
or is sold, terminated, or exercised, or when it no
longer qualifies for hedge accounting. Any gains /
losses recognised in other comprehensive income
and accumulated in equity at that time remain in
equity and are reclassified when the underlying
transaction is ultimately recognised. When an
underlying transaction is no longer expected to
occur, the gains / losses accumulated in equity are
recognised immediately in the Statement of Profit
and Loss.
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