2.2 Material Accounting Policies

The principal accounting policies applied in the
preparation of the financial statements are set out below.
These policies have been consistently applied to all the
years presented, unless otherwise stated.

(a) Business Combinations

The Company applies the acquisition method
to account for business combination. The
consideration transferred for the acquisition of a
business comprises the,

- fair values of the assets transferred,

- liabilities incurred to the former owners of the
acquired business,

- equity interests issued by the Company, and

- fair value of any asset or liability resulting from
a contingent consideration arrangement

Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business
combination are measured initially at their fair
values at the acquisition date. The excess of the
fair value of consideration over the identifiable
net asset acquired is recorded as goodwill, if the
consideration is lower, the gain is recognised
directly in equity as capital reserve. In case, business
acquisition is classified as bargain purchase, the
aforementioned gain is recognised in the other
comprehensive income and accumulated in equity
as capital reserve.

Business combinations involving entities or
businesses under common control are accounted for
using the pooling of interest method. Under pooling
of interest method, the assets and liabilities of the
combining entities are reflected at their carrying
amounts, with adjustments only to harmonise
accounting policies.

Acquisition-related costs are expensed as incurred.

Any contingent consideration to be transferred
by the Company is recognised at fair value at
the acquisition date. Subsequent changes to the
fair value of the contingent consideration that is

deemed to be an asset or liability is recognised
in the statement of profit and loss. Contingent
consideration that is classified as equity is not
re-measured, and its subsequent settlement is
accounted for within equity.

(b) Property, Plant and Equipment

i) Recognition and measurement:

Property, plant and equipment including
bearer assets are carried at historical cost of
acquisition less accumulated depreciation
and accumulated impairment losses, if any.
Historical cost includes expenditure that is
directly attributable to the acquisition of the
item. Subsequent expenditure is added to its
book value 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 the replacements are derecognised.
All repairs and maintenance are charged to
the statement of profit and loss during the
financial year in which they are incurred.

ii) Depreciation:

Depreciation is provided on assets to get the
initial cost down to the residual value, including
on asset created on lands under lease. Land is
not depreciated. Depreciation is provided on a
straight line basis over the estimated useful life
of the asset as prescribed in Schedule II to the
Companies Act, 2013 or based on a technical
evaluation of the asset. Cost incurred on assets
under development are disclosed under capital
work in progress and not depreciated till asset
is ready to use.

The residual values and useful lives for
depreciation of property, plant and equipment
are reviewed periodically and adjusted
prospectively, if appropriate. 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. Recoverable amount is
higher of the value in use or exchange.

Gains and losses on disposals are determined
by comparing the sale proceeds with the
carrying amount and are recognised in the
statement of profit and loss.

iii) Estimated useful lives of items of property,
plant and equipment are as follows:

(c) Biological Assets

Biological assets are classified as bearer biological
assets and consumable biological assets.
Consumable biological assets are those that are
to be harvested as agricultural produce. Bearer
biological assets which are held to bear agricultural
produce are classified as Bearer assets.

The Company recognises tea bushes and shade
trees as bearer assets, with further classification as
mature bearer assets and immature bearer assets.
Mature bearer plants are those that have attained
harvestable stage.

Bearer assets are carried at historical cost of acquisition
less accumulated depreciation and accumulated
impairment losses, if any. Subsequent expenditure on
bearer assets are added to its book value 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.

Cost incurred for new plantations and immature
areas are capitalised. The cost of immature areas
coming into bearing is transferred to mature
plantations and depreciated over their estimated
useful life which has been ascribed to be within the
range of 50 years.

Tea is designated as agricultural produce at the point
of harvest and is measured at their fair value less
cost to sell as at each reporting date. Any changes
in fair value are recognised in the statement of profit
and loss in the year in which they arise.

(d) Intangible Assets

(i) Goodwill

Goodwill arising on a business combination
represents the excess of the fair value of
consideration over the identifiable net asset
acquired. Fair value of consideration represents
the aggregate of the consideration transferred,
a reliable estimate of contingent consideration
payable, the amount of any non-controlling
interest in the acquiree and the fair value of
any previous equity interest in the acquiree
on the acquisition date. Net assets acquired
represents the fair value of the identifiable
assets acquired and liabilities assumed.

For the purpose of impairment testing, goodwill
acquired in a business combination is allocated
to each of the Cash generating units (CGUs), or
groups of CGUs, that is expected to benefit from
the acquisition itself or from the synergies of the
combination or both. Each unit or group of units
to which the goodwill is allocated represents the
lowest level within the entity at which the goodwill
is monitored for internal management purposes.

Goodwill is not amortised but is tested for
impairment. Goodwill impairment reviews are
generally undertaken annually. The carrying value
of the CGU containing the goodwill is compared
to the recoverable amount, which is the higher of
value in use and the fair value less costs of disposal.
Any impairment is recognised immediately as
an expense and is not subsequently reversed
unless the CGU is classified as “Asset held for
sale” and there is evidence of reversal. Goodwill
is subsequently measured at cost less amounts
provided for impairment.

(ii) Brands and Trademarks

Brands/trademarks acquired separately are
measured on initial recognition at the fair
value of consideration paid. Following initial

recognition, brands/trademarks are carried at
cost less any accumulated amortisation and
impairment losses, if any. A brand/trademark
acquired as part of a business combination is
recognised outside goodwill, at fair value at
the date of acquisition, if the asset is separable
or arises from contractual or other legal rights
and its fair value can be measured reliably.

The useful lives of brands/trademarks are
assessed to be either finite or indefinite. The
assessment includes whether the brand/
trademark name will continue to trade and
the expected lifetime of the brand/trademark.
Amortisation is charged on assets with
finite lives on a straight-line basis over a
period appropriate to the asset’s useful life.
The carrying values of brands/trademarks
with finite and indefinite lives are reviewed
for impairment when events or changes in
circumstances indicate that the carrying value
may not be recoverable.

Brands/trademark with indefinite useful lives
are also tested for impairment periodically
either individually or, if the intangible asset
does not generate cash flows that are largely
independent of those from other assets or
groups of assets, as part of the cash-generating
unit to which it belongs. Such intangibles
are not amortised. The useful life of a brand
with an indefinite life is reviewed annually to
determine whether indefinite life assessment
continues to be supportable. If not, the change
in the useful life assessment from indefinite to
finite is made on a prospective basis.

Brands and trademarks having finite lives
have been ascribed a useful life within the
range of 10 - 15 years.

(iii) Customer relationships

Customer relationships acquired in a business
combination are recognised at fair value at the
acquisition date. The customer relationships
have a finite useful life and are carried at cost
less accumulated amortisation. Amortisation
is calculated using the straight-line method

over the estimated useful life of the customer
relationship. Customer intangibles have been
ascribed a useful life to be within the range
of 8- 20 years.

(iv) Distribution Network

Distribution network acquired in a business
combination are recognised at fair value at
the acquisition date. The distribution networks
have a finite useful life and are carried at cost
less accumulated amortisation. Amortisation is
calculated using the straight-line method over the
estimated useful life of the distribution network.
Distribution networks have been ascribed a
useful life within a range of 8 - 10 years.

(v) Patent / knowhow

Product development cost incurred on
new products having enduring benefits is
recognised as an Intangible Asset and are
amortised over a period of 10 years.

(vi) Computer software

Software development costs are expensed
unless technical and commercial feasibility of
the project is demonstrated, future economic
benefits are probable, the Company has an
intention and ability to develop and sell or use
the software and the costs can be measured
reliably. Directly attributable costs that are
capitalised as part of the software product
include the software development cost, related
employee costs and an appropriate portion of
relevant overheads. Other expenditure that
do not meet these criteria are recognised as
an expense as incurred, developmental costs
previously recognised as an expense are not
recognised as an asset in a subsequent period.

Computer software development costs
recognised as assets are amortised over their
estimated useful lives, which range between
3 to 8 years. Acquired computer software
licences are capitalised on the basis of the
costs incurred to acquire and bring to use the
specific software. These costs are amortised
over their estimated useful lives of 3 to 8 years.

(vii) Research and Development

Research expenditure is recognised in the
statement of profit and loss as and when
incurred. Development expenditure is
capitalized only if the costs can be reliably
measured, future economic benefits are
probable, the product is technically feasible
and the Company has the intent and the
resources to complete the project.

Following initial recognition of the development
expenditure as an asset, the asset is carried at
cost less any accumulated amortisation and
accumulated impairment losses. Amortisation
of the asset begins when development is
complete and the asset is available for use.
It is amortised over the period of expected
future benefit.

During the period of development, the asset is
tested for impairment annually

(e) Impairment of tangible and intangible assets

Assets that are subject to depreciation or
amortisation are reviewed for impairment whenever
events or changes in circumstances indicate that
the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by
which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the
higher of an asset’s fair value less costs of disposal
and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest
possible levels for which there are independent cash
inflows (cash-generating units). Prior impairment
of non-financial assets (other than goodwill) are
reviewed for possible reversal of impairment losses
at each reporting date. Intangible assets that have
an indefinite useful life or intangible assets not
ready to use are not subject to amortisation and are
tested annually for impairment.

(f) Assets held for sale and disposal groups

Non-current assets held for sale and disposal
groups are presented separately in the balance
sheet when the following criteria are met:

- the Company is committed to selling the asset
or disposal group;

- the assets are available for sale immediately;

- an active plan of sale has commenced; and

- sale is expected to be completed
within 12 months.

Assets held for sale and disposal groups are
measured at the lower of their carrying amount and
fair value less cost to sell. Assets held for sale are no
longer amortised or depreciated.

(g) 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

At initial recognition, the Company measures a financial
assets at its fair value and in the case of financial assets
not recorded at fair value through profit or loss at
transaction costs that are attributable to the acquisition
of the financial asset. Transaction cost of financial assets
carried at fair value through profit or loss is expensed
in the Statement of Profit or Loss. However, trade
receivables that do not contain a significant financing
component are measured at transaction price.

Investments in Subsidiaries, Associates and Joint
Venture:

Investments in Subsidiaries, Associates and Joint
Venture are 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 investments in subsidiaries, associates
and joint venture, the difference between net disposal
proceeds and the carrying amounts are recognised in
the Statement of Profit and Loss.

Subsequent measurement
Debt Instruments:

Subsequent measurement of debts instruments
depends on the Company’s business model for
managing the assets and the cash flows of the
assets. The Company classifies its financial assets
in the following categories:

i) Financial assets at amortised cost- Assets
that are held for collection of contractual cash
flows on specified dates where those cash
flows represent solely payments of principal
and interest are measured at amortised cost.
After initial measurement, 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 or loss. The losses
arising from impairment are recognised in the
profit or loss. This category generally applies
to trade receivables and Loans

ii) Financial assets at fair value through other
comprehensive income (FVTOCI) - Assets that
are held for collection of contractual cash flows
and for selling the financial assets, where the
assets cash flows represents solely payments
of principal and interest, are on specified
dates are subsequently measured at fair
value through other comprehensive income.
Fair value movements are recognised in the
other comprehensive income (OCI). Interest
income from these financial assets is included
in finance income using the effective interest
rate method and impairment losses, if any are
recognised in the Statement of Profit and Loss.
When the financial asset is derecognition, the
cumulative gain or loss previously recognised
in OCI is reclassified from the equity to the
Statement of Profit and Loss.

iii) Financial assets at fair value through profit
or loss (FVTPL) -

are not classified in any of the categories
above are FVTPL.

Equity Instruments

All equity investments are measured at fair values.
The Company may irrevocably elect to measure the
same either at FVTOCI or FVTPL on initial recognition.
The Company makes such election on an instrument-
by-instrument basis. The fair value changes on the
investment are recognised in OCI. The accumulated
gains or losses recognised in OCI are reclassified to
retained earnings on sale of such investments. Dividend
income on the investments in equity instruments are
recognised in the Statement of Profit and Loss.

Derecognition

The Company derecognises a financial asset when
the contractual rights to the cash flows from the
financial asset expire, or it transfers the contractual
rights to receive the cash flows from the asset.

Impairment of financial assets

The Company assesses expected credit losses
associated with its assets carried at amortised cost
and FVTOCI debt instrument based on Company’s
past history of recovery, credit-worthiness of the
counter party and existing market conditions. The
impairment methodology applied depends on whether
there has been a significant increase in credit risk. For
trade receivables, the Company applies the simplified
approach for recognition of impairment allowance as
provided in Ind AS 109 - Financial Instruments, which
requires expected lifetime losses to be recognised on
initial recognition of the receivables.

Financial liabilities

Initial recognition and measurement

All financial liabilities are recognised initially at fair
value and in case of loans and borrowings net of
directly attributable costs.

Subsequent measurement

Financial liabilities are subsequently measured
at amortised cost using effective interest method.
Financial liabilities carried at fair value through
profit or loss are measured at fair value with all
changes in fair value recognised in the Statement
of Profit and Loss. For trade and other payable
maturing within one year from the balance sheet
date, the carrying value approximates fair value
due to short maturity of these instruments.

Derecognition

A financial liability is derecognised when the
obligation under the liability is discharged or
cancelled or expires.

Derivative financial instruments and hedging
activities

A derivative is a financial instrument which changes
value in response to changes in an underlying asset
and is settled at a future date. Derivatives are initially
recognised at fair value on the date a derivative
contract is entered into and are subsequently re¬
measured at their fair value. The method of recognising
the resulting gain or loss depends on whether the
derivative is designated as a hedging instrument, and
if so, the nature of the item being hedged.

The Company designates certain derivatives as either:

(a) hedges of the fair value of recognised assets
or liabilities (fair value hedge); or

(b) hedges of a particular risk associated with
a firm commitment or a highly probable
forecasted transaction (cash flow hedge);

The Company documents at the inception of the
transaction the relationship between hedging
instruments and hedged items, as well as its
risk management objectives and strategy for
undertaking various hedging transactions. The
Company also documents its assessment, both
at hedge inception and on an on-going basis, of
whether the derivatives that are used in hedging
transactions are effective in offsetting changes in
cash flows of hedged items.

Movements in the hedging reserve are accounted
in other comprehensive income and are reported
within the statement of changes in equity. The full
fair value of a hedging derivative is classified as a
non-current asset or liability when the remaining

maturity of hedged item is more than 12 months,
and as a current asset or liability when the
remaining maturity of the hedged item is less than
12 months. Trading derivatives are classified as a
current asset or liability.

(a) Fair value hedge

Changes in the fair value of derivatives that
are designated and qualify as fair value
hedges are recorded in the statement of profit
and loss, together with any changes in the fair
value of the hedged asset or liability that are
attributable to the hedged risk. The Company
only applies fair value hedge accounting for
hedging foreign exchange risk on recognised
assets and liabilities.

(b) 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 other
comprehensive income. The ineffective portion
of changes in the fair value of the derivative is
recognised in the statement of profit and loss.

Gains or losses accumulated in equity are
reclassified to the statement of profit and loss
in the periods when the hedged item affects
the statement of profit and loss.

When a hedging instrument expires or is
swapped or unwound, or when a hedge no
longer meets the criteria for hedge accounting,
any accumulated gain or loss in other equity
remains there and is reclassified to statement
of profit and loss when the forecasted cash
flows affect profit or loss.

When a forecasted transaction is no longer
expected to occur, the cumulative gains/losses
that were reported in equity are immediately
transferred to the statement of profit and loss.

Fair value measurement

The Company classifies the fair value of its financial
instruments in the following hierarchy, based on the
inputs used in their valuation:

i) Level 1 - The fair value of financial instruments
quoted in active markets is based on their
quoted closing price at the balance sheet date.

ii) Level 2 - The fair value of financial instruments
that are not traded in an active market is
determined by using valuation techniques
using observable market data. Such valuation
techniques include discounted cash flows,
standard valuation models based on market
parameters for interest rates, yield curves
or foreign exchange rates, dealer quotes for
similar instruments and use of comparable
arm’s length transactions.

iii) Level 3 - The fair value of financial instruments
that are measured on the basis of entity specific
valuations using inputs that are not based on
observable market data (unobservable inputs).

Offsetting 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 recognised
amounts and there is an intention to settle on a
net basis or realise 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
Company or the counterparty.

Interest and dividend income

Interest income is recognised within finance income
using the effective interest method. When a loan
and receivable is impaired, the Company reduces
the carrying amount to its recoverable amount,
being the estimated future cash flow discounted
at the original effective interest rate of the
instrument, and continues unwinding the discount
as interest income. Interest income on impaired
loan and receivables is recognised using the original
effective interest rate.

Dividend income is recognised when the right
to receive payment is established. Incomes from
investments are accounted on an accrual basis.

(h) Inventories

Raw materials, traded and finished goods are
stated at the lower of cost and net realisable value,
net realisable value represents the estimated selling
price less all estimated cost of completion and
selling expenses. Stores and spares are carried at
cost. Provision is made for obsolete, slow-moving
and defective stocks, where necessary.

Cost is determined on weighted average method for
all categories of inventories other than for auction/
privately bought teas wherein cost is measured at
actual cost of each lot. Cost comprises expenditure
incurred in the normal course of business in
bringing such inventories to its present location and
condition, where applicable, include appropriate
overheads based on normal level of activity.

In accordance with Ind AS 41- Agriculture,
inventories comprising agricultural produce that the
Company has harvested from its biological assets
are measured on initial recognition at their fair value
less costs to sell at the point of harvest.

(i) Employee Benefits

The Company operates various post-employment
schemes, including both defined benefit and
defined contribution plans and post-employment
medical plans. Short term employee benefits are
recognised on an undiscounted basis whereas
Long term employee benefits are recognised on a
discounted basis.

i) Post retirement employee benefits:

Contribution to post retirement defined benefit
and contribution schemes like Provident Fund
(PF), Superannuation Schemes and other such
schemes are accounted for on accrual basis
by the Company. With regard to Provident
Fund contribution made by the Company to
a Self-Administered Trust, the Company is
generally liable for annual contributions and
for any shortfall in the fund assets based on
the government specified minimum rates of
return. Such contributions and shortfalls are
recognised as an expense in the year incurred.

Post retirement defined benefits including
gratuity, pension and medical benefits for
qualifying executives/whole time directors
are determined through independent
actuarial valuation at year end and charge
recognised in the statement of profit and
loss. Interest costs on employee benefit
schemes have been classified within finance
cost. For schemes, where funds have been
set up, annual contributions determined as
payable in the actuarial valuation report are
contributed. Re-measurements as a result
of experience adjustments and changes in
actuarial assumptions are recognised in other
comprehensive income. Such accumulated re¬
measurement balances are never reclassified
into the statement of profit and loss subsequently.

The Company recognises in the statement of
profit and loss, gains or losses on curtailment
or settlement of a defined benefit plan as and
when the curtailment or settlement occurs.

ii) Other employee benefits:

Other employee benefits are accounted for
on accrual basis. Liabilities for compensated
absences are determined based on independent
actuarial valuation at year end and charge is
recognised in the statement of profit and loss.

iii) Employee termination benefits:

Payments to employees on termination along
with additional liabilities towards retirement
benefits arising pursuant to the termination
are charged to the statement of profit and loss
in the year in which it is incurred.

Termination benefits are payable when
employment is terminated by the Company
before the normal retirement date, or whenever
an employee accepts voluntary redundancy
in exchange for these benefits. The Company
recognises termination benefits at the earlier of
the following dates: (a) when the Company can
no longer withdraw the offer of those benefits;
and (b) when the Company recognises costs for
a restructuring that is within the scope of “Ind

AS 37 - Provisions, Contingent Liabilities and
Contingent Assets” and involves the payment
of termination benefits. In the case of an offer
made to encourage voluntary redundancy, the
termination benefits are measured based on
the number of employees expected to accept
the offer. Benefits falling due more than 12
months after the end of the reporting period
are discounted to their present value.

(j) Share based payment

The Company recognises compensation expense
relating to share based payments in accordance
with Ind AS 102-Share based Payment. For share
entitlement granted by the Company to its employees,
the estimated fair value as determined on the date of
grant, is charged to the Statement of Profit and Loss
on a straight line basis over the vesting period and
assessment of performance conditions if any, with a
corresponding increase in equity.