3. Material accounting policies
(a) Revenue recognition
The Company earns revenue from shipping/vessel operations, comprising charter hire of vessels and Ocean
freight/logistics services. The Company offers its vessels on time-charter for transportation of cargo in coastal
and international waterways.
Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price (net
of variable consideration) allocated to that performance obligation. The transaction price of services rendered
is net of variable consideration on account of adjustments due to current prevailing freight rates, the cost of
operation, vessel performance, pool points earned, service level credits, price concessions and incentives and
number of days in operation as applicable, if any, as part of the contract and recognized as follows;
(i) Charter Hire - The Company earns charter hire revenue by placing its vessels on time charter, and in pool
arrangements. The performance obligations within pool and time-charter contracts include the operation
of the vessel. Charter hire revenue is recognised over time as the Company satisfies its obligation based
on the time elapsed between the delivery of a vessel to a charterer and the redelivery of a vessel from
the charterer. For time charter contracts, charter hire is typically invoiced as per the terms of charter hire
agreement and charter hire revenue is accrued based on the daily hire rates. Other variable hire components
of the contract, such as off-hire and speed claims, are recognised only to the extent that it is highly probable
that a significant reversal will not occur when the uncertainty is subsequently resolved.
For pool arrangements, the Company only has pool arrangements operated by third parties in which the
Company's owned vessels are deployed. The Company recognises revenue from these pool arrangements
based on its portion of the net distributions reported by the relevant pool, which represents the total
earnings of the pool after voyage expenses and pool manager fees. The net distribution is computed
based on (a). pool points and the participation days of the Company's vessels in these third-party pool
arrangements or (b). net revenue / net earning sharing as per the contractual terms. The Company acts as
a principal in pool arrangements, as it controls the vessel operations and bears significant risks and rewards.
(ii) Ocean Freight revenue - Ocean freight income from transportation of cargo by coastal and international
waterways respectively is recognised following the proportionate completion method on time basis. In
case of end-to-end logistics service under multimodal transport, the revenue is recognized following the
proportionate completion method on time basis for each mode.
(iii) Unfinished Voyages - Revenue and expenses for unfinished voyages are recognised based on the estimated
stage of completion determined with reference to transit days elapsed up to the reporting date. The
estimates are reviewed at each reporting date and revised, where necessary.
(iv) Other operating income in nature of documentation charges is recognised upon delivery of such services
to the customers.
(b) Other Income
Interest income
Interest income, except for on income tax refund, is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial asset to that asset's net carrying amount on
initial recognition.
Interest income on an income tax refund is accrued when it is awarded per order received from a competent
authority under Income Tax Act 1961.
For accounting policies related to Gain / (loss) arising sale of assets, refer to paragraph (c) below.
(c) Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated
impairment losses, if any. Historical cost comprises its purchase price net of any trade discounts and rebates,
import duties and other taxes (other than those subsequently recoverable from tax authorities), any directly
attributable expenditure on making the asset ready for its intended use at the location and condition necessary
for it to be capable of operating in the matter intended by the Company, including relevant borrowing costs for
qualifying asset.
An item of property, plant and equipment is derecognized upon disposal (upon delivery to the buyer) or when
no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on
the disposal or retirement of an item of property, plant and equipment is determined as the difference between
the sales proceeds and the carrying amount of the asset and is recognized in the Statement of Profit and Loss.
For transition to Ind AS, the Company had elected to continue with the carrying value of all of its property, plant
and equipment recognized as of April 1, 2016 (transition date) measured as per the previous GAAP and use that
carrying value as its deemed cost as of the transition date.
Depreciation commences when the assets are ready for their intended use. The depreciable amount for assets
is the cost of an asset, or other amount substituted for cost, less its estimated residual value. Depreciation is
recognized so as to write off the depreciable amount of assets over their useful lives, using the straight-line
method as per the useful life prescribed in Schedule II to the Companies Act, 2013 except in respect of the
following categories of assets, in whose case the life of the assets has been assessed as under based on technical
advice, taking into account the nature of the asset, the expected usage of the asset, the operating conditions
of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and
maintenance support, etc.
(1) A shipping company on periodic basis is required to bring all ships into dry dock or Lay-up for major
inspection, maintenance and/or overhaul.
Where the cost of a part of the asset (“asset component”) is significant to the total cost of the asset and the
useful life for that part is different from the useful life of the remaining asset, useful life of that significant part is
determined separately, and such asset component is depreciated over its separate useful life.
The Company reviews the residual value, useful lives and depreciation method annually and, if expectations differ
from previous estimates, the change is accounted for as a change in accounting estimate on a prospective basis.
(d) Intangible assets
Intangible assets purchased are carried at cost as of the date of acquisition less accumulated amortisation and
accumulated impairment losses, if any. Intangible asset in the nature of computer software is amortised on a
straight line basis over the estimated useful life of 6 years.
The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the
effect of any changes in estimate being accounted for on a prospective basis.
An intangible assets is derecognized on disposal, or when no future economic benefits are expected to arise
from continued use of asset. Gains or losses arising from de-recognition of an intangible asset, measured as the
difference between the net disposal proceeds and the carrying amount of the asset, and are recognized in the
Statement of Profit and Loss.
For transition to Ind AS, the Company has elected to continue with the carrying value of all of its intangible
assets recognised as of April 1, 2016 (transition date) measured as per the Previous GAAP and use that carrying
value as its deemed cost as of the transition date.
(e) Investment Property
Investment property is property held either to earn rental income or for capital appreciation or for both, but
not for sale in the ordinary course of business, use in the production or supply of goods or services or for
administrative purposes. Upon initial recognition, an investment property is measured at cost. Subsequent to
initial recognition, investment property is measured at cost or deemed cost less accumulated depreciation
and accumulated impairment losses, if any. The Company depreciates investment properties over a period
of 60 years on a straight line basis, which is in line with the indicative useful life of relevant type of building
mentioned in the Act.
Rental income is recognised on a straight-line basis over the lease term. Gains or losses arising on disposal are
recognised in the Statement of Profit and Loss.
(f) Leases
The Company as a lessee
The Company's lease asset classes primarily consist of leases for building. 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:
(i) the contract involves the use of an identified asset
(ii) the Company has substantially all of the economic benefits from use of the asset through the period
of the lease and
(iii) 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.
As a lessee, the Company determines the lease term as the noncancellable period of a lease adjusted with any
option to extend or terminate the lease, if the use of such option is reasonably certain. The Company makes an
assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably
certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the
Company considers factors, such as any significant leasehold improvements undertaken over the lease term,
costs relating to the termination of the lease and the importance of the underlying asset to TSLL's operations
taking into account the location of the underlying asset and the availability of suitable alternatives. The lease
term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances.
Certain lease arrangements include the options to extend or terminate the lease before the end of the lease term.
ROU assets and lease liabilities include 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 these 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.
The Company as a lessor
Leases for which the Company is a lessor are classified as finance or operating leases. Whenever the terms of
the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified
as a finance lease. All other leases are classified as operating leases. Rental income from operating leases is
recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating
and arranging an operating lease are added to the carrying amount of the leased asset and recognised on
a straight-line basis over the lease term. Amounts due from lessees under finance leases are recognised as
receivables at the amount of the Company's net investment in the leases. Finance lease income is allocated
to accounting periods so as to reflect a constant periodic rate of return on the Company's net investment
outstanding in respect of the leases.
(g) Foreign exchange transactions
The functional and presentation currency of the Company is Indian Rupee.
Income and expenses in foreign currencies are recorded at exchange rates prevailing on the date of the
transaction. Foreign currency denominated monetary assets and liabilities are translated at the exchange rate
prevailing on the Balance Sheet date and exchange gains and losses arising on settlement and restatement are
recognised in the Statement of Profit and Loss.
Non-monetary items denominated in a foreign currency are measured at historical cost and translated at the
exchange rate prevalent at the date of transaction.
Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except
for the exchange differences on foreign currency borrowings relating to assets under construction for future
productive use, which are included in the cost of those assets when they are regarded as an adjustment to
interest costs on those foreign currency borrowings.
Exchange differences arising on settlement/restatement of long-term foreign currency monetary items
recognized in the Standalone Financial Statements for the year ended March 31, 2017 prepared under Previous
GAAP, are capitalized as a part of the depreciable fixed assets to which the monetary item relates and depreciated
over the remaining useful life of such assets.
(h) Borrowing costs
Borrowing costs that are directly attributable to the acquisition or construction of a qualifying assets, which are
assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to
the cost of those assets, until such time as the assets are substantially ready for their intended use.
Interest income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All the other borrowing costs are recognised in the Statement of Profit and Loss in the period in which
they are incurred.
(i) Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax:
The Company has opted for Tonnage Tax Scheme for the shipping / vessel operation income. Current tax for
the current period is the aggregate of Tonnage Tax on shipping income determined in accordance with the
provisions of Sections 115V to 115VZC (Chapter XII-G) of the Income Tax Act, 1961 (“IT Act”).
Current tax for the period comprises:
• Tonnage tax payable on shipping income computed in accordance with the provisions of the IT Act; and
• Income tax on non-shipping income, computed based on taxable income determined under the relevant
provisions of the IT Act, after considering applicable tax credits.
Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the
recognised amounts and there is an intention to settle the asset and the liability on a net basis.
Deferred tax:
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in
the Standalone Financial Statements and the corresponding tax bases used in the computation of taxable profit
adjusted for assets and liabilities used in generation of income on which Tonnage Tax is paid.
Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are
generally recognised for all deductible temporary differences to the extent that it is probable that taxable
profits will be available against which those deductible temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset
to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in
which the liability is settled or the asset is realised, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period.
Current and deferred tax is recognised in profit and loss, except when they relate to items that are recognised
in other comprehensive income or directly in equity, in which case, the current and deferred tax are also
recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax
arises from the initial accounting of a business combination, the tax effect is included in the accounting for the
business combination.
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