3. Material Accounting Policies3.1. Current versus non-current classification
The Company presents assets and liabilities in the
Standalone Balance Sheet based on current/non-
current classification.
An asset is current when it is:
• Expected to be realised or intended to be sold or
consumed in the normal operating cycle;
• Held primarily for the purpose of trading;
• Expected to be realised within twelve months after
the reporting period; or
• Cash or cash equivalent unless restricted from
being exchanged or used to settle a liability for at
least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
• It is expected to be settled in the normal operating
cycle;
• It is held primarily for the purpose of trading;
• It is due to be settled within twelve months after
the reporting period; or
• There is no unconditional right to defer the
settlement of the liability for at least twelve months
after the reporting period.
The Company classifies all other liabilities as non¬
current. Deferred tax assets and liabilities are classified
as non-current assets and liabilities.
Operating cycle
Operating cycle of the Company is the time between the
acquisition of assets for processing and their realisation
in cash or cash equivalents. As the Company’s normal
operating cycle is not clearly identifiable, it is assumed
to be twelve months.
3.2. Use of estimates and judgements
The estimates and judgements used in the preparation
of the standalone financial statements are continuously
evaluated by the Company and are based on historical
experience and various other assumptions and factors
(including expectations of future events) that the
Company believes to be reasonable under the existing
circumstances. Difference between actual results and
estimates are recognised in the period in which the
results are known / materialised.
The said estimates are based on the facts and events,
that existed as at the reporting date, or that occurred
after that date but provide additional evidence about
conditions existing as at the reporting date.
3.3. Business Combination under Common Control
A business combination involving entities or businesses
under common control is a business combination in
which all of the combining entities or businesses are
ultimately controlled by the same party or parties
both before and after the business combination and
the control is not transitory. The transactions between
entities under common control are specifically covered
by Ind AS 103. Such transactions are accounted for
using the pooling-of-interest method. The assets and
liabilities of the acquired entity are recognised at their
carrying amounts of the parent entity’s standalone
financial statements with the exception of certain
income tax and deferred tax assets. No adjustments are
made to reflect fair values, or recognise any new assets
or liabilities. The only adjustments that are made are
to harmonise accounting policies. The components
of equity of the acquired companies are added to the
same components within the Company’s equity. The
difference, if any, between the amounts recorded as
share capital issued plus any additional consideration
in the form of cash or other assets and the amount of
share capital of the transferor is transferred to other
equity and is presented separately from other capital
reserves. The Company’s shares issued in consideration
for the acquired companies are recognised from the
moment the acquired companies are included in these
standalone financial statements and the standalone
financial statements of the commonly controlled
entities would be combined, retrospectively, as if the
transaction had occurred at the beginning of the earliest
reporting period presented.
3.4. Foreign currencies transactions
The Company’s functional and presentation currency
is Indian Rupee. Transactions in foreign currencies are
initially recorded by the Company’s functional currency
spot rates at the date the transaction first qualifies for
recognition.
Monetary assets and liabilities denominated in
foreign currencies are translated at the functional
currency spot rates of exchange at the reporting date.
Differences arising on settlement of such transaction
and on translation of monetary assets and liabilities
denominated in foreign currencies at year end exchange
rate are recognised in profit or loss. They are recognised
in other comprehensive income if they relate to
qualifying cash flow hedges.
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using
the exchange rates at the dates of the initial transactions.
Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the
date when the fair value is determined. The gain or loss
arising on translation of non-monetary items measured
at fair value is treated in line with the recognition of
the gain or loss on the change in fair value of the item
(i.e., translation differences on items whose fair value
gain or loss is recognised in OCI or profit or loss are also
recognised in OCI or profit or loss, respectively).
3.5. Fair value measurement
Fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly
transaction between market participants at the
measurement date. The fair value measurement is
based on the presumption that the transaction to sell
the asset or transfer the liability takes place either:
• In the principal market for the asset or liability or
• In the absence of a principal market, in the most
advantageous market for the asset or liability.
The principal or the most advantageous market must be
accessible by the Company.
The fair value of an asset or a liability is measured using
the assumptions that market participants would use
when pricing the asset or liability, assuming that market
participants act in their economic best interest.
A fair value measurement of a non-financial asset takes
into account a market participant’s ability to generate
economic benefits by using the asset in its highest and
best use or by selling it to another market participant
that would use the asset in its highest and best use.
The Company uses valuation techniques that are
appropriate in the circumstances and for which
sufficient data are available to measure fair value,
maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured
or disclosed in the standalone financial statements are
categorised within the fair value hierarchy, described
as follows, based on the lowest level input that is
significant to the fair value measurement as a whole:
• Level 1 — Quoted (unadjusted) market prices in
active markets for identical assets or liabilities.
• Level 2 — Valuation techniques for which the
lowest level input that is significant to the fair value
measurement is directly or indirectly observable.
• Level 3 — Valuation techniques for which the
lowest level input that is significant to the fair value
measurement is unobservable.
For assets and liabilities that are recognised in the
standalone financial statements on a recurring basis,
the Company determines whether transfers have
occurred between levels in the hierarchy by re-assessing
categorisation (based on the lowest level input that is
significant to the fair value measurement as a whole) at
the end of each reporting period.
The Company’s Management determines the
policies and procedures for both recurring fair value
measurement, such as derivative instruments and for
non-recurring measurement, such as asset held for sale.
External valuers are involved for valuation of significant
assets, such as properties. Involvement of external
valuers is decided upon annually by the management
after discussion with and approval by the Company’s
Audit Committee. Selection criteria include market
knowledge, reputation, independence and whether
professional standards are maintained. Management
decides, after discussions with the Company’s external
valuers, which valuation techniques and inputs to use
for each case.
At each reporting date, management analyses the
movements in the values of assets and liabilities which
are required to be re-measured or re-assessed as per
the Company’s accounting policies. For this analysis,
management verifies the major inputs applied in the
latest valuation by agreeing the information in the
valuation computation to contracts and other relevant
documents.
Management, in conjunction with the Company’s
external valuers, also compares the change in the fair
value of each asset and liability with relevant external
sources to determine whether the change is reasonable
on yearly basis.
For the purpose of fair value disclosures, the Company
has determined classes of assets and liabilities on the
basis of the nature, characteristics and risks of the asset
or liability and the level of the fair value hierarchy, as
explained above.
This note summarises accounting policy for fair value.
Other fair value related disclosures are given in the
relevant notes.
• Material accounting judgements, estimates and
assumptions
• Quantitative disclosures of fair value measurement
hierarchy
• Property, plant and equipment & Intangible assets
measured at fair value on the date of transition
• Financial instruments (including those carried at
amortised cost)
3.6. Property, plant and equipment
Property, plant and equipment is stated at cost,
net of accumulated depreciation and accumulated
impairment losses, if any. Such cost includes the cost
of replacing part of the plant and equipment and
borrowing costs for long-term construction projects
if the recognition criteria are met. When significant
parts of Property, plant and equipment are required
to be replaced at intervals, the Company recognises
such parts as individual assets with specific useful lives
and depreciates them accordingly. Likewise, when a
major inspection is performed, its cost is recognised
in the carrying amount of the plant and equipment as
a replacement if the recognition criteria are satisfied.
All other repair and maintenance costs are recognised
in profit or loss as incurred. The present value of the
expected cost for the decommissioning of an asset after
its use is included in the cost of the respective asset if
the recognition criteria for a provision are met.
Borrowing cost relating to acquisition / construction of
property, plant and equipment which take substantial
period of time to get ready for its intended use are also
included to the extent they relate to the period till such
assets are ready to be put to use.
Capital work-in-progress comprises cost of property,
plant and equipment that are not yet installed and
ready for their intended use at the balance sheet date.
De-recognition
An item of property, plant and equipment is
derecognised upon disposal or when no future
economic benefits are expected from its use or disposal.
Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is
included in the Statement of Profit and Loss when the
asset is de-recognised.
Depreciation
Depreciation on property, plant and equipment is
provided so as to write off the cost of assets less
residual values over their useful lives of the assets,
using the straight-line method as prescribed under Part
C of Schedule II to the Companies Act 2013 except for
Buildings and Plant and Machinery.
When parts of an item of property, plant and equipment
have different useful life, they are accounted for as
separate items (Major Components) and are depreciated
over their useful life or over the remaining useful life of
the principal assets whichever is less.
Depreciation on certain Buildings and Plant and
Machinery are provided on straight line method over
the useful lives of the assets based upon the technical
evaluation by external agency which are as follows:
The management believes that the useful life as
given above best represent the period over which
management expects to use these assets. Hence the
useful lives for these assets are different from the useful
lives as prescribed under Part C of Schedule II to the
Companies Act 2013.
Depreciation for assets purchased/sold during a period
is proportionately charged for the period of use.
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.
3.7. Leases
The Company assesses whether a contract contains
a lease, at inception of a contract. A contract is, or
contains, a lease if the contract conveys the right to
control the use of an identified asset for a period of
time in exchange for consideration. To assess whether
a contract conveys the right to control the use of an
identified asset, the Company assesses whether: (1) the
contract involves the use of an identified asset (2) the
Company has substantially all of the economic benefits
from use of the asset through the period of the lease
and (3) the Company has the right to direct the use of
the asset.
At the date of commencement of the lease, the
Company recognises a right-of-use asset (ROU) and a
corresponding lease liability for all lease arrangements
in which it is a lessee, except for leases with a term of
twelve months or less (short-term leases) and low
value leases. For these short-term and low value leases,
the Company recognises the lease payments as an
operating expense on a straight-line basis over the term
of the lease.
Certain lease arrangements includes the options to
extend or terminate the lease before the end of the
lease term. ROU assets and lease liabilities includes
these options when it is reasonably certain that they
will be exercised.
The right-of-use assets are initially recognised at cost,
which comprises the initial amount of the lease liability
adjusted for any lease payments made at or prior to the
commencement date of the lease plus any initial direct
costs less any lease incentives. They are subsequently
measured at cost less accumulated depreciation and
impairment losses.
Right-of-use assets are depreciated from the
commencement date on a straight-line basis over the
shorter of the lease term and useful life of the underlying
asset. Right of use assets are evaluated for recoverability
whenever events or changes in circumstances indicate
that their carrying amounts may not be recoverable.
For the purpose of impairment testing, the recoverable
amount (i.e. the higher of the fair value less cost to sell
and the value-in-use) is determined on an individual
asset basis unless the asset does not generate cash flows
that are largely independent of those from other assets.
In such cases, the recoverable amount is determined
for the Cash Generating Unit (CGU) to which the asset
belongs.
The lease liability is initially measured at amortised
cost at the present value of the future lease payments.
The lease payments are discounted using the interest
rate implicit in the lease or, if not readily determinable,
using the incremental borrowing rates in the country of
domicile of the leases. Lease liabilities are remeasured
with a corresponding adjustment to the related right
of use asset if the Company changes its assessment if
whether it will exercise an extension or a termination
option.
Lease liability and ROU asset have been separately
presented in the Balance Sheet and lease payments
have been classified as financing cash flows.
3.8. Borrowing cost
Borrowing cost includes interest expense as per
Effective Interest Rate (EIR) and exchange differences
arising from foreign currency borrowings to the extent
they are regarded as an adjustment to the interest cost.
Borrowing costs directly attributable to the acquisition,
construction or production of an asset that necessarily
takes a substantial period of time to get ready for its
intended use or sale are capitalised as part of the cost
of the respective asset. Where funds are borrowed
specifically to finance a project, the amount capitalised
represents the actual borrowing costs incurred.
Where surplus funds are available out of money
borrowed specifically to finance a project, the income
generated from such current investments is deducted
from the total capitalised borrowing cost. Where the
funds used to finance a project form part of general
borrowings, the amount capitalised is calculated using
a weighted average of rates applicable to relevant
general borrowings of the Company during the year.
Capitalisation of borrowing costs is suspended and
charged to profit and loss during the extended periods
when the active development on the qualifying assets
is interrupted.
All other borrowing costs are expensed in the period in
which they occur.
3.9. Intangible Assets
Intangible Assets that the Company controls and
from which it expects future economic benefits are
capitalised upon acquisition and measured initially:
• for assets acquired in a business combination at
fair value on the date of acquisition
• for separately acquired assets, at cost comprising
the purchase price and directly attributable costs
to prepare the asset for its intended use.
Expenditure incurred during the research phase is
charged totheStatementofProfitand Loss. Development
costs of products are charged to the Statement of
Profit and Loss unless a product’s technological and
commercial feasibility has been established, in which
case such expenditure is capitalised.
Following initial recognition, Intangible assets are
carried at cost less accumulated amortisation and
accumulated impairment losses, if any. Internally
generated intangible assets, excluding capitalised
development costs, are not capitalised and expenditure
is recognised in the Statement of Profit and Loss in the
period in which expenditure is incurred.
The useful lives of intangible assets are assessed as finite.
Intangible assets with finite lives are amortised over
their useful economic lives and assessed for impairment
whenever there is an indication that the intangible
asset may be impaired. The amortisation period and
the amortisation method for an intangible asset with a
finite useful life are reviewed at least at the end of each
reporting period. Changes in the expected useful life or
the expected pattern of consumption of future economic
benefits embodied in the asset are considered to modify
the amortisation period or method, as appropriate, and
are treated as changes in accounting estimates. The
amortisation expense on intangible assets with finite
lives is recognised in the Statement of Profit and Loss.
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
and Loss when the asset is derecognised.
Amortisation
Software is amortised over management estimate of
its useful life of 5 years or License Period whichever is
lower and Patent/Knowhow is amortised over its useful
life of 5 years. Licences are amortised over 10 years.
3.10. Inventories
Inventories of Raw material, Work-in-progress and
Finished goods are valued at the lower of cost including
related overheads and net realisable value. However,
Raw material and other items held for use in the
production of inventories are not written down below
cost if the finished products in which they will be
incorporated are expected to be sold at or above cost.
Costs incurred in bringing each product to its present
location and condition are accounted for as follows:
• Raw materials: cost includes cost of purchase and
other costs incurred in bringing the inventories
to their present location and condition. Cost is
determined on weighted average basis.
• Finished goods and work in progress: cost
includes cost of direct materials and labour and
a proportion of manufacturing overheads based
on the normal operating capacity, but excluding
borrowing costs. Cost is determined on weighted
average basis. Taxes which are subsequently
recoverable from taxation authorities are not
included in the cost.
Inventories of stores and consumables are valued at
cost. The stock of waste is valued at net realisable value.
Net realisable value is the estimated selling price in the
ordinary course of business, less estimated costs of
completion and the estimated costs necessary to make
the sale.
3.11. Impairment of non-financial assets
The Company assesses at each reporting date whether
there is an indication that an asset may be impaired.
If any indication exists, or when annual impairment
testing for an asset is required, the Company estimates
the asset’s recoverable amount. An asset’s recoverable
amount is the higher of an asset’s or cash-generating
unit’s (CGU) fair value less costs to sell and its value
in use. It is determined for an individual asset, unless
the asset does not generate cash inflows that are
largely independent of those from other assets of the
Company. When the carrying amount of an asset or CGU
exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax
discount rate that reflects current market assessments
of the time value of money and the risks specific to
the asset. In determining fair value less costs to sell,
recent market transactions are taken into account, if
available. If no such transactions can be identified, an
appropriate valuation model is used. These calculations
are corroborated by valuation multiples, quoted share
prices for publicly traded subsidiaries or other available
fair value indicators.
The Company bases its impairment calculation on
detailed budgets and forecasts which are prepared
separately for each of the Company’s CGU to which
the individual assets are allocated. These budgets and
forecast calculations are generally covering a period of
five years. For longer periods, a long-term growth rate is
calculated and applied to project future cash flows after
the fifth year.
Impairment losses, including impairment on
inventories, are recognised in the Statement of Profit
and Loss in those expense categories consistent with
the function of the impaired asset, except for a property
previously revalued where the revaluation was taken
to other comprehensive income. In this case, the
impairment is also recognised in other comprehensive
income up to the amount of any previous revaluation.
For assets excluding goodwill, an assessment is made
at each reporting date as to whether there is any
indication that previously recognised impairment losses
may no longer exist or may have decreased. If such
indication exists, the Company estimates the asset’s
or CGU’s recoverable amount. A previously recognised
impairment loss is reversed only if there has been
a change in the assumptions used to determine the
asset’s recoverable amount since the last impairment
loss was recognised. The reversal is limited so that
the carrying amount of the asset does not exceed its
recoverable amount, nor exceed the carrying amount
that would have been determined, net of depreciation,
had no impairment loss been recognised for the asset in
prior years. Such reversal is recognised in the Statement
of Profit and Loss unless the asset is carried at a
revalued amount, in which case the reversal is treated
as a revaluation increase.
3.12. Revenue Recognition
The Company derives revenues primarily from sale of
manufactured goods and related services. Revenue
includes adjustments made towards liquidated
damages and variations wherever applicable.
Revenue is recognised on satisfaction of performance
obligation upon transfer of control of promised products
or services to customers in an amount that reflects
the consideration the Company expects to receive in
exchange for those products or services.
Revenue from rendering of services is recognised over
time as and when the customer receives the benefit of
the Company’s performance and the Company has an
enforceable right to payment for services transferred.
Unbilled revenue represents value of goods and services
performed in accordance with the contract terms but
not billed.
Revenue related to fixed price maintenance and support
services contracts where the Company is standing ready
to provide services is recognised based on time elapsed
mode and revenue is straight lined over the period of
performance.
The Company satisfies a performance obligation and
recognises revenue over time, if one of the following
criteria is met:
1. The customer simultaneously receives and
consumes the benefits provided by the Company’s
performance as the Company performs; or
2. The Company’s performance creates or enhances
an asset that the customer controls as the asset is
created or enhanced; or
3. The Company’s performance does not create an
asset with an alternative use to the Company and
an entity has an enforceable right to payment for
performance completed to date.
For performance obligations where none of the above
conditions are not met, revenue is recognised at the
point in time at which the performance obligation is
satisfied.
The Company does not expect to have any contracts
where the period between the transfer of the promised
goods or services to the customer and payment by the
customer exceeds one year. As a consequence, it does
not adjust any of the transaction prices for the time
value of money.
Revenue is measured based on the transaction price,
which is the consideration, adjusted for volume
discounts, service level credits, performance bonuses,
price concessions and incentives, if any, as specified in
the contract with the customer. Revenue also excludes
taxes collected from customers.
Export Incentive
Export incentives under various schemes notified by
government are accounted for in the year of exports
based on eligibility and when there is no uncertainty in
receiving the same.
Interest Income
Interest income from debt instruments are recorded
using the effective interest rate (EIR) and accrued on
timely basis. The EIR is the rate that exactly discounts
the estimated future cash receipts over the expected
life of the financial instrument or a shorter period,
where appropriate, to the net carrying amount of the
financial asset. When calculating the effective interest
rate, the Company estimates the expected cash flows
by considering all the contractual terms of the financial
instrument (for example, prepayment, extension, call
and similar options) but does not consider the expected
credit losses. Interest income is included in other
income in the statement of profit or loss.
Profit or loss on sale of Investments
Profit or Loss on sale of investments are recorded on
transfer of title from the Company, and is determined as
the difference between the sale price and carrying value
of investment and other incidental expenses.
Rental income
Rental income arising from operating leases on
investment properties is accounted for on a straight¬
line basis over the lease terms except in the case where
incremental lease reflects inflationary effect and rental
income is accounted in such case by actual rent for the
period.
Insurance claims
Insurance claims are accounted for to the extent
the Company is reasonably certain of their ultimate
collection.
3.13. Financial instruments - initial recognition and
subsequent measurement
Financial assets and financial liabilities are recognised
when a Company becomes a party to the contractual
provisions of the instruments. For recognition and
measurement of financial assets and financial liabilities,
refer policy as mentioned below:
Initial recognition of financial assets and financial
liabilities:
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) 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 profit or loss.
Subsequent measurement of financial assets:
For purposes of subsequent measurement, financial
assets are classified in four categories:
(a) Financial assets at amortised cost
(b) Financial assets at fair value through other
comprehensive income (FVTOCI)
(c) Financial assets at fair value through profit or loss
(FVTPL)
(d) Equity instruments measured at fair value through
other comprehensive income (FVTOCI)
(a) Financial assets at amortised cost:
A financial asset is measured at amortised cost if the
financial asset is held within a business model whose
objective is to hold financial assets in order to collect
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.
This category is the most relevant to the Company.
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.
(b) Financial assets at fair value through other
comprehensive income
A financial asset is measured at fair value through other
comprehensive income if the financial asset is held
within a business model whose objective is achieved
by both collecting contractual cash flows and selling
financial assets, 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.
Financial assets included within the FVTOCI category are
measured at each reporting date at fair value. Fair value
movements are recognised in the other comprehensive
income (OCI). However, the Company recognises
interest income, impairment losses & reversals and
foreign exchange gain or loss in the Statement of Profit
and Loss. On derecognition of the asset, cumulative
gain or loss previously recognised in OCI is reclassified
from the equity to P&L. Interest earned whilst holding
FVTOCI financial asset is reported as interest income
using the EIR method.
(c) Financial assets at fair value through profit or loss
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. The transaction costs directly attributable
of financial assets at fair value through profit or loss are
immediately recognised profit or loss.
The Company may elect to designate a financial asset,
which otherwise meets amortised cost or fair value
through other comprehensive income criteria, as at
fair value through profit or loss. However, such election
is allowed only if doing so reduces or eliminates a
measurement or recognition inconsistency (referred
to as ‘accounting mismatch’). The Company has not
designated any debt instrument as at FVTPL.
(d) Equity instruments:
All equity investments in scope of Ind-AS 109 other
than Investment in subsidiaries, Joint Ventures
and Associates 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.
Equity Investment in subsidiaries, Joint Ventures and
Associates are measured at cost as per Ind AS 27 -
Separate Standalone financial statements.
If the Company decides to classify an equity instrument
as at FVTOCI, then all fair value changes on the
instrument, excluding dividends, are recognised in the
OCI. There is no recycling of the amounts from OCI to
Statement of Profit and Loss, even on sale of investment.
However, the Company may transfer the cumulative
gain or loss within equity.
Impairment of financial assets
The Company assesses at each reporting date whether
a financial asset (or a group of financial assets) such as
investments, trade receivables, advances and security
deposits held at amortised cost and financial assets that
are measured at fair value through other comprehensive
income are tested for impairment based on evidence
or information that is available without undue cost or
effort. Expected credit losses (ECL) are assessed and
loss allowances recognised if the credit quality of the
financial asset has deteriorated significantly since initial
recognition.
Loss allowance for trade receivables with no significant
financing component is measured at an amount equal
to lifetime ECL. For all other financial assets, ECL are
measured at an amount equal to the 12 months ECL,
unless there has been significant increase in credit
risk from initial recognition in which case these are
measured at lifetime ECL. The amount of expected
credit losses (or reversal) that is required to adjust the
loss allowance at the reporting date to the amount that
is required to be recognised as an impairment gain or
loss in Statement of Profit and Loss.
Derecognition of financial assets
Financial assets are derecognised when the right to
receive cash flows from the assets has expired, or has
been transferred, and the Company has transferred
substantially all of the risks and rewards of ownership.
Concomitantly, if the asset is one that is measured at:
(a) amortised cost, the gain or loss is recognised in the
Statement of Profit and Loss;
(b) fair value through other comprehensive income,
the cumulative fair value adjustments previously
taken to reserves are reclassified to the Statement
of Profit and Loss unless the asset represents an
equity investment in which case the cumulative
fair value adjustments previously taken to reserves
is reclassified within equity.
Reclassification
When and only when the business model is changed,
the Company shall reclassify all affected financial
assets prospectively from the reclassification date as
subsequently measured at amortised cost, fair value
through other comprehensive income, fair value
through profit or loss without restating the previously
recognised gains, losses or interest and in terms of
the reclassification principles laid down in the Ind AS
relating to Financial Instruments.
Financial liabilities and equity instruments
Classification as debt or equity
Debt 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.
Financial liabilities
All financial liabilities are subsequently measured at
amortised cost using the effective interest method.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss
include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair
value through profit or loss. Financial liabilities are
classified as held for trading if they are incurred for the
purpose of repurchasing in the near term. This category
also includes derivative financial instruments entered
into by the Company that are not designated as hedging
instruments in hedge relationships as defined by Ind-AS
109.
Gains or losses on liabilities held for trading are
recognised in the profit or loss.
Financial liabilities designated upon initial recognition
at fair value through profit or loss are designated at
the initial date of recognition, and only if the criteria
in Ind-AS 109 are satisfied. For liabilities designated as
FVTPL, fair value gains/ losses attributable to changes
in own credit risks are recognised in OCI. These gains/
loss are not subsequently transferred to Statement
of Profit or Loss. However, the Company may transfer
the cumulative gain or loss within equity. All other
changes in fair value of such liability are recognised in
the statement of profit or loss. The Company has not
designated any financial liability as at fair value through
profit and loss.
Equity instruments
An equity instrument is any contract that evidences
a residual interest in the assets of an entity after
deducting all of its liabilities. Equity instruments issued
by a Company are recognised at the proceeds received,
net of direct issue costs.
Financial guarantee contracts
A financial guarantee contract is a contract that requires
the issuer to make specified payments to reimburse the
holder for a loss it incurs because a specified debtor
fails to make payments when due in accordance with
the terms of a debt instrument.
Financial guarantee contracts issued by a Company
are initially measured at their fair values and, if not
designated as at FVTPL, are subsequently measured at
the higher of:
• the amount of loss allowance determined in
accordance with impairment requirements of Ind
AS 109; and
• the amount initially recognised less, when
appropriate, the cumulative amount of income
recognised in accordance with the principles of Ind
AS 115.
Derecognition of financial liabilities
The Company derecognises financial liabilities
when, and only when, the Company’s obligations are
discharged, cancelled or have expired. An exchange
with a lender of debt instruments with substantially
different terms is accounted for as an extinguishment
of the original financial liability and the recognition
of a new financial liability. Similarly, a substantial
modification of the terms of an existing financial liability
(whether or not attributable to the financial difficulty of
the debtor) is accounted for as an extinguishment of the
original financial liability and the recognition of a new
financial liability. The difference between the carrying
amount of the financial liability derecognised and the
consideration paid and payable is recognised in profit
or loss.
Offsetting Financial Instruments
Financial assets and liabilities are offset and the net
amount is reported in the balance sheet where 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.
1.14. Cash and cash equivalent
Cash and cash equivalent in the balance sheet includes
cash on hand, at banks and short-term deposits with a
maturity of three months or less, which are subject to
an insignificant risk of changes in value.
For the purpose of the cash flows statement, cash and
cash equivalents includes cash, short-term deposits,
as defined above, other short-term and 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 adjusted for outstanding bank
overdrafts as they are considered an integral part of
the Company’s cash management. Bank Overdrafts are
shown within Borrowings in current liabilities in the
balance sheet.
3.15. Government Grants
Government grants are recognised where there is
reasonable assurance that the grant will be received
and all attached conditions will be complied with. When
the grant relates to an expense item, it is recognised in
Statement of Profit or Loss on a systematic basis over the
periods that the related costs, for which it is intended to
compensate, are expensed. When the grant relates to an
asset, it is recognised as income in equal amounts over
the expected useful life of the related asset.
When the Company receives grants of non-monetary
assets, the asset and the grant are recorded at fair value
amounts and released to profit or loss over the expected
useful life in a pattern of consumption of the benefit of
the underlying asset by equal annual instalments.
3.16. Taxes
Tax expense comprises of current income tax and
deferred tax.
Current income tax:
The tax currently payable is based on taxable profit for
the year. Taxable profit differs from ‘profit before tax’ as
reported in the statement of profit and loss because of
items ofincome or expense that are taxable or deductible
in other years and items that are never taxable or
deductible. The tax rates and tax laws used to compute
the amount are those that are enacted or substantively
enacted at the reporting date. Management periodically
evaluates positions taken in the tax returns with respect
to situations in which applicable tax regulations are
subject to interpretation and establishes provisions
where appropriate.
Current income tax assets and liabilities are measured
at the amount expected to be recovered from or paid
to the taxation authorities. Management periodically
evaluates positions taken in the tax returns with respect
to situations in which applicable tax regulations are
subject to interpretation and establishes provisions
where appropriate.
Current tax is recognised in the Statement of Profit
and Loss, except to the extent that it relates to items
recognised in other comprehensive income or directly
in equity. In this case, the tax is also recognised in
other comprehensive income or directly in equity,
respectively.
Deferred tax
Deferred tax is provided using the liability method on
temporary differences between the tax bases of assets
and liabilities and their carrying amounts for financial
reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable
temporary differences, except:
• When the deferred tax liability arises from the
initial recognition of goodwill or an asset or liability
in a transaction that is not a business combination
and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss;
• In respect of taxable temporary differences
associated with investments in subsidiaries and
interests in joint arrangements, when the timing
of the reversal of the temporary differences can be
controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible
temporary differences, the carry forward of unused tax
credits and any unused tax losses. Deferred tax assets are
recognised to the extent that it is probable that taxable
profit will be available against which the deductible
temporary differences, and the carry forward of unused
tax credits and unused tax losses can be utilised, except:
• When the deferred tax asset relating to the
deductible temporary difference arises from
the initial recognition of an asset or liability in a
transaction that is not a business combination and,
at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss;
• In respect of deductible temporary differences
associated with investments in subsidiaries,
associates and interests in joint arrangements,
deferred tax assets are recognised only to the
extent that it is probable that the temporary
differences will reverse in the foreseeable future
and taxable profit will be available against which
the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed
at each reporting date and reduced to the extent that it
is no longer probable that sufficient taxable profit will
be available to allow all or part of the deferred tax asset
to be utilised. Unrecognised deferred tax assets are
re-assessed at each reporting date and are recognised
to the extent that it has become probable that future
taxable profits will allow the deferred tax asset to be
recovered.
Deferred tax assets and liabilities are measured at the
tax rates that are expected to apply in the year when
the asset is realised or the liability is settled, based
on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Deferred tax is recognised in the Statement of Profit
and Loss, except to the extent that it relates to items
recognised in other comprehensive income or directly
in equity. In this case, the tax is also recognised in
other comprehensive income or directly in equity,
respectively.
Deferred tax assets and deferred tax liabilities are offset
if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred
taxes relate to the same taxable entity and the same
taxation authority.
3.17. Employee Benefits
(a) Short Term Employee Benefits
All employee benefits payable within twelve months
of rendering the service are classified as short term
benefits. Such benefits include salaries, wages, bonus,
short term compensated absences, awards, ex-gratia,
performance pay etc. and the same are recognised in
the period in which the employee renders the related
service.
(b) Post-Employment Benefits
(i) Defined contribution plan
The Company’s approved provident fund scheme,
superannuation fund scheme, employees’ state
insurance fund scheme and Employees’ pension scheme
are defined contribution plans. The Company has no
obligation, other than the contribution paid/payable
under such schemes. The contribution paid/payable
under the schemes is recognised during the period in
which the employee renders the related service.
(ii) Defined benefit plan:
The employee’s gratuity fund scheme, Compensatory
Pension Scheme and post-retirement medical benefit
schemes are Company’s defined benefit plans. The
present value of the obligation under such defined
benefit plans is determined based on the actuarial
valuation using the Projected Unit Credit Method as at
the date of the Balance sheet. In case of funded plans,
the fair value of plan asset is reduced from the gross
obligation under the defined benefit plans, to recognise
the obligation on the net basis.
Re-measurements, comprising of actuarial gains
and losses, the effect of the asset ceiling, excluding
amounts included in net interest on the net defined
benefit liability and the return on plan assets (excluding
amounts included in net interest on the net defined
benefit liability), are recognised immediately in the
Balance Sheet with a corresponding debit or credit to
retained earnings through OCI in the period in which
they occur. Re-measurements are not reclassified to
Statement of Profit and Loss in subsequent periods.
(c) Other long term employment benefits:
The employee’s long term compensated absences are
Company’s defined benefit plans. The present value
of the obligation is determined based on the actuarial
valuation using the Projected Unit Credit Method as at
the date of the Balance sheet. In case of funded plans,
the fair value of plan asset is reduced from the gross
obligation, to recognise the obligation on the net basis.
3.18. Share-based payments
Employees (including senior executives) of the
Company receive remuneration in the form of share-
based payments, whereby employees render services
as consideration for equity instruments (equity-settled
transactions).
Equity-settled transactions:
The cost of equity-settled transactions is determined by
the fair value at the date when the grant is made using
an appropriate valuation model.
That cost is recognised, together with a corresponding
increase in share-based payment (SBP) reserves in
equity, over the period in which the performance and/
or service conditions are fulfilled in employee benefits
expense. The cumulative expense recognised for
equity-settled transactions at each reporting date until
the vesting date reflects the extent to which the vesting
period has expired and the Company’s best estimate of
the number of equity instruments that will ultimately
vest. The statement of profit and loss expense or credit
for a period represents the movement in cumulative
expense recognised as at the beginning and end of that
period and is recognised in employee benefits expense.
Service and non-market performance conditions are
not taken into account when determining the grant date
fair value of awards, but the likelihood of the conditions
being met is assessed as part of the Company’s best
estimate of the number of equity instruments that
will ultimately vest. Market performance conditions
are reflected within the grant date fair value. Any
other conditions attached to an award, but without
an associated service requirement, are considered to
be non-vesting conditions. Non-vesting conditions are
reflected in the fair value of an award and lead to an
immediate expensing of an award unless there are also
service and/or performance conditions.
No expense is recognised for awards that do not
ultimately vest because non-market performance
and/or service conditions have not been met. Where
awards include a market or non-vesting condition,
the transactions are treated as vested irrespective
of whether the market or non-vesting condition is
satisfied, provided that all other performance and/or
service conditions are satisfied.
When the terms of an equity-settled award are modified,
the minimum expense recognised is the expense had
the terms had not been modified, if the original terms of
the award are met. An additional expense is recognised
for any modification that increases the total fair value
of the share-based payment transaction, or is otherwise
beneficial to the employee as measured at the date of
modification. Where an award is cancelled by the entity
or by the counterparty, any remaining element of the
fair value of the award is expensed immediately through
profit or loss.
The dilutive effect of outstanding options is reflected as
additional share dilution in the computation of diluted
earnings per share.
3.19. Earnings per share (EPS)
Basic EPS is computed by dividing the net profit / loss
for the year attributable to ordinary equity holders
of the Company by the weighted average number of
ordinary shares outstanding during the year.
Diluted EPS is computed by dividing the net profit / loss
attributable to ordinary equity holders of the Company
by the weighted average number of ordinary shares
outstanding during the year adjusted for the weighted
average number of ordinary shares that would be issued
on conversion of all the dilutive potential ordinary
shares into ordinary shares.
The dilutive potential equity shares are adjusted for the
proceeds receivable had the equity shares been actually
issued at fair value (i.e. the average market value of the
outstanding equity shares). Dilutive potential equity
shares are deemed converted as of the beginning
of the period, unless issued at a later date. Dilutive
potential equity shares are determined independently
for each period presented. The number of equity shares
and potentially dilutive equity shares are adjusted
retrospectively for all periods presented for any share
splits and bonus shares issues including for changes
effected prior to the approval of the standalone financial
statements by the Board of Directors.
3.20. Dividend
The Company recognises a liability (including tax
thereon) to make cash or non-cash distributions
to equity shareholders of the Company when the
distribution is authorised and the distribution is no
longer at the discretion of the Company.
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