3. Summary of Material Accounting Policies3.1. Current versus non-current classification
The Company segregates assets and liabilities
into current and non-current categories
for presentation in the balance sheet after
considering its normal operating cycle and other
criteria set out in Ind AS 1, “Presentation of
Financial Statements”. For this purpose, current
assets and liabilities include the current portion
of non-current assets and liabilities respectively.
Deferred tax assets and liabilities are always
classified as non-current.
The operating cycle is the time between the
acquisition of assets for processing and their
realization in cash and cash equivalents. The
Company has identified period up to twelve
months as its operating cycle.
3.2. Investment in subsidiaries, associate and joint
ventures
A subsidiary is an entity that is controlled by
another entity.
An associate is an entity over which the Company
has significant influence. Significant influence
is the power to participate in the financial and
operating policy decisions of the investee but is
not control or joint control over those policies.
A joint venture is a type of joint arrangement
whereby the parties that have joint control of the
arrangement have rights to the net assets of the
joint venture. Joint control is the contractually
agreed sharing of control of an arrangement,
which exists only when decisions about the
relevant activities require unanimous consent of
the parties sharing control.
The Company's investments in its subsidiaries,
associate and joint ventures are accounted at
cost less impairment. Investment in Compulsorily
Convertible Preference Shares of subsidiary
which are instruments at Fair Value Through
Profit and Loss are accounted as per policy on
equity instruments mentioned in 3.26A.
Impairment of investments
The Company reviews its carrying value
of investments carried at cost annually, or
more frequently when there is indication for
impairment. If the recoverable amount is less
than its carrying amount, the impairment loss is
recorded in the Statement of Profit and Loss.
3.3. Fair Value Measurement
The Company measures financial instruments,
such as, derivatives at fair value at each balance
sheet date.
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:
a) In the principal market for the asset or
liability, or
b) In the absence of a principal market, in the
most advantageous market for the asset or
liability
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
best economic 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:
a) Level 1 - Quoted (unadjusted) market prices
in active markets for identical assets or
liabilities
b) Level 2 - Valuation techniques for which
the lowest level input that is significant to
the fair value measurement is directly or
indirectly observable
c) 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 determines the policies and
procedures for both recurring fair value
measurement, such as derivative instruments
and unquoted financial assets measured at fair
value, and for non-recurring measurement.
External valuers are involved for valuation
of assets such as investment properties and
unquoted financial investments / instruments.
Involvement of external valuers is decided upon
annually by the Company. At each reporting
date, the Company analyses the movements
in the values of assets and liabilities which are
required to be remeasured or re-assessed as
per the accounting policies. For this analysis, the
Company verifies the major inputs applied in the
latest valuation by agreeing the information in
the valuation computation to contracts and other
relevant documents. Other fair value related
disclosures are given in the relevant notes
(Refer Note 41).
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 (Refer
Note 41).
3.4. Use of Estimates
The preparation of standalone financial
statements in conformity with Ind AS requires
the management to make judgments, estimates
and assumptions that affect the reported
amounts of revenues, expenses, assets and
liabilities like provision for employee benefits,
impairment allowances for receivables/advances,
contingencies, provision for warranties,
allowance for slow/non-moving inventories,
useful life of Property, Plant and Equipment,
provision for retrospective price revisions,
provision for taxation, etc., and the disclosure
of contingent liabilities during and at the end of
the reporting period. Although these estimates
are based on the management's best knowledge
of current events and actions, uncertainty about
these assumptions and estimates could result in
the outcomes requiring a material adjustment
to the carrying amounts of assets or liabilities in
future periods.
3.5. Cash and Cash Equivalents
Cash and Cash equivalents comprises cash on
hand and demand deposits with banks. Cash
equivalents are short-term (with an original
maturity of three months or less from the date
of acquisition), highly liquid investments that
are readily convertible into known amounts of
cash and which are subject to insignificant risk of
change in value.
3.6. Statement of Cash Flow
Cash flows are reported using the indirect
method, whereby profit / (loss) before tax is
adjusted for the effects of transactions of non¬
cash nature and any deferrals or accruals of past
or future cash receipts or payments.
For the purpose of the Statement of cash flows,
cash and cash equivalents as defined above,
net of outstanding bank overdrafts as they
are considered an integral part of the cash
management of the Company.
3.7. Property, Plant and Equipment
Property, plant and equipment are stated at cost
less accumulated depreciation and accumulated
impairment losses, if any. Capital work in progress
are stated at cost, net of accumulated impairment
loss, if any. Freehold land is measured at cost and
not depreciated. Cost includes related taxes,
duties, freight, insurance, etc. attributable to the
acquisition, installation of the Property, Plant and
Equipment and borrowing cost if capitalisation
criteria are met but excludes duties and taxes
that are recoverable from tax authorities.
Machinery Spares including spare parts, stand¬
by and servicing equipment are capitalised as
Property, Plant and Equipment if they meet the
definition of property, plant and equipment i.e.
if the Company intends to use these for more
than a period of 12 months. These spare parts
capitalized are depreciated as per Ind AS 16.
Subsequent expenditure relating to Property,
Plant and Equipment is capitalised only if it
is probable that future economic benefits
associated with the item will flow to the Company
and the cost of the item can be measured reliably.
Material replacement cost is capitalized
provided it is probable that future economic
benefits associated with the item will flow to
the Company and the cost of the item can be
measured reliably. When replacement cost is
eligible for capitalization, the carrying amount
of those parts that are replaced is derecognized.
When significant parts of plant and equipment
are required to be replaced at intervals, the
Company depreciates them separately based on
their specific useful life.
The Company identifies and determines cost of
each component/part of the asset separately,
if the component/part has a cost which is
significant to the total cost of the asset and has
useful life that is materially different from that of
the remaining asset.
An item of property, plant and equipment
and any significant part initially recognised 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 derecognised.
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 (Refer
Note - 3.19).
Pursuant to transition to Ind AS, the Company
has elected to continue with the carrying value
of all of its Property, Plant and Equipment as per
the previous GAAP as its deemed cost on the
transition date.
Capital Work-in-Progress: Projects under which
assets are not ready for their intended use are
carried at cost, net of accumulated impairment
loss, if any. Cost comprises direct cost and
attributable interest. Once it has become
available for use, their cost is re-classified
to appropriate caption and subjected to
depreciation.
3.8. Investment Properties
Investment property represents property held to
earn rentals or for capital appreciation or both.
Investment properties are measured initially at
cost, including transaction costs. Subsequent
to initial recognition, investment properties are
stated at cost less accumulated depreciation and
accumulated impairment loss, if any.
The cost includes the cost of replacing parts
and borrowing costs for long-term construction
projects if the recognition Criteria are met.
When significant parts of the investment
property are required to be replaced at intervals,
the Company depreciates them separately based
on their specific useful lives. All other repair
and maintenance costs are recognised in the
statement of profit and loss as incurred.
Depreciation on building classified as investment
property has been provided on the straight-line
method over a period of 60 years as prescribed
in Schedule II to the Companies Act, 2013. These
are based on the Company's estimate of their
useful lives taking into consideration technical
factors.
Though the Company measures investment
property using cost based measurement, the
fair value of investment property is disclosed in
the notes. Fair values are determined based on
an annual evaluation performed by an external
independent valuer applying valuation models.
Pursuant to transition to Ind AS, the Company has
elected to continue with the carrying value of all
of its Investment Properties as per the previous
GAAP as its deemed cost on the transition date.
Investment properties are derecognised either
when they have been disposed off or when they
are permanently withdrawn from use and no
future economic benefit is expected from their
disposal. The difference between the net disposal
proceeds and the carrying amount of the asset is
recognised in the statement of profit and loss in
the period of derecognition.
3.9. Intangible Assets
Intangible assets acquired separately are
measured on initial recognition at cost. Following
initial recognition, intangible assets are carried
at cost less any accumulated amortisation and
accumulated impairment losses. Internally
generated intangibles, excluding capitalised
development costs, are not capitalised and the
related expenditure is reflected in profit or loss in
the period in which the expenditure is incurred.
Intangible assets are amortised over the useful
economic life 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 unless such expenditure forms part
of carrying value of another asset. Gains or losses
arising from de-recognition 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.
3.10.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, 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 cost of disposal and its value
in use. The recoverable amount is determined
for an individual asset, unless the asset does
not generate cash inflows that are largely
independent of those from other assets or groups
of assets. Where 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 of
disposal, recent market transactions are taken
into account, if available. If no such transactions
can be identified, an appropriate valuation model
is used.
The Company bases its impairment calculation
on detailed budgets and forecast calculations
which are prepared separately for each of the
Company's cash-generating units 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. To
estimate cash flow projections beyond periods
covered by the most recent budgets/forecasts,
the Company extrapolates cash flow projections
in the budget using a steady or declining growth
rate for subsequent years, unless an increasing
rate can be justified. In any case, this growth rate
does not exceed the long-term average growth
rate for the products, industries, or country or
countries in which the entity operates, or for the
market in which the asset is used.
An assessment is made at each reporting date
as to whether there is any indication that
previously recognized impairment losses may
no longer exist or may have decreased. If such
indication exists, the Company estimates the
asset's or cash-generating unit's recoverable
amount. A previously recognized 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 recognized. 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
recognized for the asset in prior years.
After impairment, depreciation is provided on
the revised carrying amount of the asset over its
remaining useful life.
3.11. Inventories
Raw materials, stores & spare parts and stock-
in-trade are valued at lower of weighted average
cost and estimated net realisable value. Cost
includes freight, taxes and duties and is net of
Credit under GST scheme, where applicable.
Work-in-progress and finished goods are valued
at lower of weighted average cost and estimated
net realisable value. Cost includes all direct costs
and appropriate proportion of overheads to bring
the goods to the present location and condition
based on the normal operating capacity, but
excluding borrowing costs.
Materials 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 used are expected to be sold at or above
cost.
Net realizable value is the estimated selling
price in the ordinary course of business, less
estimated costs of completion and estimated
costs necessary to make the sale.
Cost of Traded goods 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.
3.12.Revenue from Contracts with Customers
Revenue is recognised when control of the goods
or services are transferred to the customer at an
amount that reflects the consideration to which
the Company expects to be entitled in exchange
for those goods or services, regardless of when
the payment is being made. The Company is
the principal in all of its revenue arrangements
because it typically controls the goods or services
before transferring them to the customer.
Goods and Services tax (GST) are not received
by the Company on its own account as it is tax
collected on value added to the commodity by
the Company on behalf of the Government.
Accordingly, it is excluded from revenue.
The specific recognition Criteria described below
must also be met before revenue is recognised.
Sale of Goods and Services:
Revenue from sale of goods is recognised at a
point in time when control of the goods is
transferred to the Customers. The normal credit
term is upto 120 days from the invoice date.
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 goods sold and services
rendered is net of variable consideration on
account of various discounts and schemes
offered by the Company as part of the contract.
If the consideration in a contract includes a
variable amount, the Company estimates the
amount of consideration to which it will be
entitled in exchange for transferring the goods
to the customer. The variable consideration is
estimated at contract inception and constrained
until it is highly probable that a significant revenue
reversal in the amount of cumulative revenue
recognised will not occur when the associated
uncertainty with the variable consideration is
subsequently resolved.
Generally, the Company receives short-term
advances from its customers. Using the practical
expedient in Ind AS 115, the Company does not
adjust the promised amount of consideration for
the effects of a significant financing component if
it expects, at contract inception, that the period
between the transfer of the promised good or
service to the customer and when the customer
pays for that good or service will be one year or
less.
Rendering of Services:
Revenue from rendering of services is
recognised with reference to the stage of
completion determined based on estimate of
work performed, and when the outcome of the
transaction can be estimated reliably.
Contract Balances:
Contract asset is the right to consideration
in exchange for goods or services transferred
to the customer. If the Company performs by
transferring goods or services to a customer
before the Customer pays consideration or
before payment is due, a contract asset is
recognised for the earned consideration that is
conditional.
Trade Receivable represents the Company's
right to an amount of consideration that is
unconditional. Refer to accounting policies of
financial assets in Note 3.26.A.
Contract liability is the obligation to transfer
goods or services to a Customer for which
the Company has received consideration (or
an amount of consideration is due) from the
customer. If a customer pays consideration
before the Company transfers goods or services
to the customer, a contract liability is recognised
when the payment is made or the payment is
due (whichever is earlier). Contract liabilities
are recognised as revenue when the Company
performs under the contract.
Cost to obtain a contract:
The Company pays sales commission to agents
for obtaining the contract. The Company has
elected to apply the optional practical expedient
for costs to obtain a contract which allows
the Company to immediately expense sales
commissions because the amortisation period
of the asset that the Company otherwise would
have used is one year or less.
Warranty obligations:
The Company provides warranties for certain
products and these warranties are accounted
for under Ind AS 37 Provisions, Contingent
Liabilities and Contingent Assets. Refer to the
accounting policy on warranty provisions in Note
3.22 Provisions and Contingencies.
3.13.Other Income
Dividends:
Dividend income is accounted for when the right
to receive it is established.
Interest Income:
For all debt instruments measured at amortised
cost, interest income is recognised on time
proportion basis, taking into account the amount
outstanding and effective interest rate.
Rental Income:
Rental income arising from operating leases is
accounted for on a straight-line basis over the
lease terms and is included in revenue in the
statement of profit and loss due to its operating
nature.
Royalty Income:
Royalty income is recognized on an accrual basis
in accordance with the substance of the relevant
agreement.
3.14.Government Grants, Subsidies and Export
Benefits
Government grants and subsidies are recognised
when there is reasonable assurance that the
Company will comply with the conditions
attached to them and the grants/subsidy will be
received.
When the grant or subsidy from the Government
relates to an expense item, it is recognised as
income on a systematic basis in the statement
of profit and loss over the period necessary to
match them with the related costs, which they
are intended to compensate. When the grant
relates to an asset, the same is reduced from the
carrying amount of the asset. The grant is then
recognised in statement of profit and loss over
the useful life of the depreciable asset by way of a
reduced depreciation charge.
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, i.e. by equal annual instalments.
When loans or similar assistance are provided
by governments or related institutions, with
an interest rate below the current applicable
market rate, the effect of this favourable interest
is regarded as a government grant. The loan or
assistance is initially recognised and measured
at fair value of the proceeds received. The loan
is subsequently measured as per the accounting
policy applicable to financial liabilities.
Export benefits are accounted for in the year of
exports based on eligibility and when there is no
uncertainty in receiving the same.
3.15.Employee BenefitsI. Defined Contribution Plansa. Superannuation
The Company contributes a sum equivalent
to 15% of the eligible employees salary to
a Superannuation Fund administered by
trustees and managed by Life Insurance
Corporation of India (LIC). The Company has
no liability for future Superannuation Fund
benefits other than its annual contribution
and recognizes such contributions as an
expense in the year in which the services
are rendered.
b. Provident Fund
Contributions in respect of Employees
who are not covered by Company's
Employees Provident Fund Trust are made
to the Regional Provident Fund. These
Contributions are recognised as expense in
the year in which the services are rendered.
The Company has no obligation other than
the contribution payable to the Regional
Provident fund.
c. Employee State Insurance
Contributions to Employees State Insurance
Scheme are recognised as expense in the
year in which the services are rendered.
II. Defined Benefit Plana. Gratuity
The Company makes annual contribution to
a Gratuity Fund administered by trustees
and the Contributions are invested in a
Scheme with Life Insurance Corporation
of India, as permitted by Indian Law. The
Company accounts its liability for future
gratuity benefits based on actuarial
valuation, as at the Balance Sheet date,
determined every year using the Projected
Unit Credit method.
Re-measurements, comprising of actuarial
gains/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 immediately
recognised in the balance sheet with a
corresponding debit or credit in to retained
earnings through Other Comprehensive
Income in the period in which they occur.
Re-measurements are not re-classified to
profit or loss in subsequent periods.
Past service cost is recognised in profit
or loss on the earlier of the date of the
plan amendment or curtailment, and the
date that the Company recognises related
restructuring costs.
Net interest is calculated by applying the
discount rate to the net defined benefit
liability or asset. The Company recognises
the following changes in the net defined
benefit obligation as an expense in the
statement of profit and loss:
- Service costs comprising current
service costs, past-service costs and
- Net interest expense or income.
b. Provident Fund
Eligible employees of the Company receive
benefits from a provident fund, which is
a defined benefit plan. Both the eligible
employee and the Company make monthly
contributions to the provident fund plan
equal to a specified percentage of the
covered employee's salary. The Company
contributes a portion to the Company's
Employee Provident Fund Trusts. These
trusts invest in specific designated
instruments as permitted by the Indian
law. The remaining portion is contributed
to the government administered pension
fund. The rate at which annual interest is
payable to the beneficiaries by the trusts
is administered by the government. The
Company has an obligation to make good
the shortfall, if any, between the return
from the investments of the Trusts and the
notified interest rate.
Re-measurements, comprising of actuarial
gains/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 immediately
recognised in the balance sheet with a
corresponding debit or Credit in to retained
earnings through Other Comprehensive
Income in the period in which they occur.
Re-measurements are not re-classified to
profit or loss in subsequent periods.
III. Long Term Compensated Absences
The Company treats accumulated leave
expected to be carried forward beyond
twelve months, as long-term employee
benefit for measurement purposes. Such
long-term compensated absences are
provided for based on the actuarial valuation
using the projected unit Credit method at
the year-end. Re-measurements as a result
of experience adjustments and changes in
actuarial assumptions are recognised in
statement of profit and loss. The Company
presents the leave related obligations as a
current liability in the balance sheet, to the
extent it does not have a right to defer the
settlement for at least twelve months after
the reporting date.
IV. Short Term Employee Benefits
Short term employee benefits includes
short term compensated absences which
is recognized based on the eligible leave at
Credit on the Balance Sheet date, and the
estimated cost is based on the terms of the
employment contract.
3.16. Leases
The Company assesses at contract inception
whether a contract is, or contains, a lease. That
is, if the contract conveys the right to control the
use of an identified asset for a period of time in
exchange for consideration.
Company as a lessee
The Company applies a single recognition and
measurement approach for all leases, except
for short-term leases. The Company recognises
lease liabilities to make lease payments and right-
of-use assets representing the right to use the
underlying assets.
a. Right-of-use assets
The Company recognises right-of-use assets
at the commencement date of the lease (i.e.,
the date the underlying asset is available
for use). Right-of-use assets are measured
at cost, less any accumulated depreciation
and impairment losses, and adjusted for any
remeasurement of lease liabilities. The cost
of right-of-use assets includes the amount
of lease liabilities recognised, initial direct
costs incurred, and lease payments made
at or before the commencement date less
any lease incentives received. Right-of-use
assets are depreciated on a straight-line
basis over the shorter of the lease term
and the estimated useful lives of the assets.
The right-of-use assets are also subject to
impairment. Right-of-use assets mainly
consists of land having a lease term of 35 to
95 years and building, having a lease term of
2 to 35 years.
b. Lease Liabilities
At the commencement date of the lease,
the Company recognises lease liabilities
measured at the present value of lease
payments to be made over the lease term.
The lease payments include fixed payments
(including in substance fixed payments) less
any lease incentives receivable, variable
lease payments that depend on an index
or a rate, and amounts expected to be paid
under residual value guarantees. The lease
payments also include the exercise price of
a purchase option reasonably certain to be
exercised by the Company and payments
of penalties for terminating the lease, if the
lease term reflects the Company exercising
the option to terminate.
In calculating the present value of lease
payments, the Company uses its incremental
borrowing rate at the lease commencement
date because the interest rate implicit in
the lease is not readily determinable. After
the commencement date, the amount
of lease liabilities is increased to reflect
the accretion of interest and reduced for
the lease payments made. In addition,
the carrying amount of lease liabilities is
remeasured if there is a modification, a
change in the lease term, a change in the
lease payments (e.g., changes to future
payments resulting from a change in an
index or rate used to determine such lease
payments) or a change in the assessment of
an option to purchase the underlying asset.
The Company's lease liabilities are included
in financial liabilities (see Note 13 and 15b).
c. Short-term leases
The Company applies the short-term
lease recognition exemption to its short¬
term leases (i.e., those leases that have a
lease term of 12 months or less from the
commencement date and do not contain a
purchase option). Lease payments on short¬
term leases are recognised as expense on a
straight-line basis over the lease term.
Company as Lessor
Leases in which the Company does not transfer
substantially all the risks and rewards incidental
to ownership of an asset are classified as operating
leases. Rental income arising is accounted for on
a straight-line basis over the lease terms and is
included in revenue in the statement of profit
and loss due to its operating nature. Initial direct
costs incurred in negotiating and arranging an
operating lease are added to the carrying amount
of the leased asset and recognised over the
lease term on the same basis as rental income.
Contingent rents are recognised as revenue in
the period in which they are earned.
3.17. Foreign Currency Transactions
Initial recognition
Transactions in foreign currencies are initially
recorded by the Company at functional currency
spot rate at the date the transaction first qualified
for recognition.
Measurement as at Balance Sheet date
Foreign currency monetary items of the
Company outstanding at the Balance Sheet date
are restated at year end exchange rates.
Non-monetary items carried at historical cost
are translated using the exchange rates at the
dates of initial transactions.
Treatment of Exchange Differences
Exchange differences arising on settlement/
restatement of foreign currency monetary assets
and liabilities of the Company are recognised as
income or expense in the statement of profit and
loss.
3.18. Derivative Instruments and Hedge Accounting
Cash flow hedge:
The Company uses Cash flow hedges (forward
contracts) to hedge its risks associated with
foreign currency fluctuations relating to firm
commitment or highly probable forecast
transactions.
The use of Derivative Contracts is governed by
the Company's policies on the use of such financial
derivatives consistent with the Company's risk
management strategy. The Company does not use
derivative financial instruments for speculative
purposes.
Derivative Contracts are measured at fair value.
Derivatives are carried as financial assets when
the fair value is positive and as financial liabilities
when the fair value is negative. Changes in the
fair value of these Derivative Contracts that
are designated and effective as hedges of future
cash flows are recognised directly in “Other
Comprehensive Income" and the ineffective
portion is recognized immediately in the
statement of profit and loss.
Changes in the fair value of Derivative Contracts
that do not qualify for hedge accounting are
recognized in the statement of profit and loss as
they arise.
The amounts recognised in the Other
Comprehensive Income are transferred to the
statement of profit and loss when the hedged
transactions crystalize.
If the forecast transaction is no longer expected
to occur, the cumulative gain or loss previously
recognised in Other Comprehensive Income is
transferred to statement of profit and loss.
Hedge accounting is discontinued when the
hedging instrument expires or is sold, terminated,
or exercised. If any of these events occur or if a
hedged transaction is no longer expected to occur,
the net cumulative gain or loss recognised under
Other Comprehensive Income is transferred to
the statement of profit and loss for the year.
At the inception of a hedge relationship,
the Company formally designates and
documents the hedge relationship to
which the Company wishes to apply hedge
accounting and the risk management objective
and strategy for undertaking the hedge by
applying the hedge accounting principles set
out in Ind AS 109 - “Financial Instruments".
The documentation includes the Company's
risk management objective and strategy for
undertaking hedge, the hedging/ economic
relationship, the hedged item or transaction, the
nature of the risk being hedged, hedge ratio and
how the Company will assess the effectiveness of
changes in the hedging instrument's fair value in
offsetting the exposure to changes in the hedged
item's fair value or cash flows attributable to
the hedged risk. Such hedges are expected to be
highly effective in achieving offsetting changes
in fair value or cash flows and are assessed on
an ongoing basis to determine that they actually
have been highly effective throughout the
financial reporting periods for which they were
designated.
3.19. Depreciation and Amortisation
The Company depreciates Property, Plant and
Equipment over their estimated useful lives using
the Straight-line method, as per Schedule II of
Companies Act, 2013. The estimated useful lives
are as follows:
The following category of Property, Plant
and Equipment and Intangible Assets are not
depreciated/amortised as per Schedule II
of Companies Act, 2013. These category of
Property, Plant and Equipment and Intangibles
are depreciated/amortised based on the
Company's estimate of their useful lives taking
into consideration, technical advice:
Depreciation is provided pro-rata from the
month of Capitalisation.
Certain Property, Plant and Equipment are
treated as Continuous Process Plants based on
technical evaluation done by the Management
and are depreciated on the straight-line method
based on the useful life as prescribed in Schedule
II to the Companies Act, 2013.
3.20. Research and Development
Revenue expenditure on research and
development is expensed when incurred. Capital
expenditure on research and development
is capitalised and depreciated/amortised in
accordance with Note 3.19 above.
3.21. Taxes
Income tax expense comprises current and
deferred taxes. Income tax expense is recognized
in the statement of profit and loss except to the
extent it relates to items recognized directly in
equity, in which case it is recognized in equity.
Current tax is the amount of tax payable on the
taxable income for the year and is determined in
accordance with the provisions of the Income Tax
Act, 1961.
Current tax relating to items recognised outside
profit or loss is recognised outside profit or
loss (either in other comprehensive income or
in equity). Current tax items are recognised in
correlation to the underlying transaction either
in OCI or directly in equity.
Deferred tax is provided using the balance sheet
approach 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,
and does not give rise to equal taxable and
deductible temporary differences.
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 and does not give rise to equal
taxable and deductible temporary differences.
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 relating to items recognised outside
the Statement of profit and loss is recognised
outside Statement of profit and loss (either
in other comprehensive income or in equity).
Deferred tax items are recognised in correlation
to the underlying transaction either in OCI or
directly in equity.
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 Company and the same taxation
authority.
Expenses and assets are recognised net of the
amount of sales/ taxes paid, except when the
tax incurred on a purchase of assets or services
is not recoverable, in which case, the tax paid is
recognised as part of the cost of acquisition of the
asset or as part of the expense item, as applicable.
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