3. Summary of Material Accounting Policies
3.1. 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 recognized
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 deferred in equity 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 fixed assets
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 fixed assets 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:
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
recognizes 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 recognizes 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 recognized 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 amortized 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 capitalized 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.
Revenue expenditure pertaining to research is charged to the
Statement of Profit and 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 amortized over management estimate of its useful life
of 5 years or License Period whichever is lower and
Patent/Knowhow is amortized over its useful life of 5 years.
Licences are amortized 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 recognized 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 recognized in the other comprehensive
income (OCI). However, the Company recognizes 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 amortized 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 recognized 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
recognized 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 18.
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.
3.14. 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 of income 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.
$.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.
(d) Termination Benefits :
Termination benefits such as compensation under voluntary
retirement scheme are recognised in the year in which
termination benefits become payable.
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.
|