2. Material Accounting Policies
This note provides a list of the material
accounting policies adopted in the preparation
of these standalone financial statements. These
policies have been consistently applied to all the
years presented.
2.1 Basis of preparation of standalone
financial statements
The standalone financial statements of the
Company have been prepared in accordance with
Indian Accounting Standards (Ind AS) notified
under Section 133 of the Companies Act, 2013
(the Act) read with Companies (Indian Accounting
Standards) Rules, 2015, as amended from time to
time and presentation requirements of Division II
of Schedule III to the Companies Act, 2013 (Ind
AS compliant Schedule III) as applicable to the
standalone financial statements. The standalone
financial statements have been prepared on
accrual and going concern basis. The standalone
financial statements have been prepared on a
historical cost basis, except for certain assets and
liabilities that are measured at fair value as stated
in subsequent policies.
Standalone financial statements also includes
financial statements of the Trust (Welspun Living
Employee Welfare Trust) which is controlled by
the Company.
2.2 Foreign currency translation
a) Functional and presentation currency
The standalone financial statements of the
Company are presented in Indian Rupee (INR)
and all values are rounded to the nearest crore,
which is also its functional currency and all items
included in the standalone financial statements
of the Company are measured using the same
functional currency.
b) Transactions and balances
Foreign currency transactions are translated
and recorded into the functional currency using
the exchange rates prevailing on the date of the
transaction. Foreign exchange gains and losses
resulting from the settlement of such transactions
and from the translation of monetary assets and
liabilities denominated in foreign currencies at year
end exchange rates are generally recognised in
statement of profit and loss. They are deferred in
equity if they relate to qualifying cash flow hedges.
Foreign exchange differences regarded as an
adjustment to borrowing costs are presented in
the statement of profit and loss, within finance
costs. All other foreign exchange gains and losses
are presented in the statement of profit and loss on
a net basis within other expenses or other income,
as applicable.
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated
using the exchange rates at the date of the
initial transaction. Non-monetary items that are
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 the statement of profit and loss, respectively).
2.3 Revenue recognition
a) Revenue from contracts with customers
Revenue from contracts with customers is
recognised at transaction price (net of variable
consideration) 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. The Company has
generally concluded that it is the principal in
its revenue arrangements because it typically
controls the goods or services before transferring
them to the customer.
Revenue excludes amounts collected on behalf of
third parties.
The disclosures of significant accounting
judgments, estimates and assumptions relating
to revenue from contracts with customers are
provided in Note 46.
• Sale of goods
For sale of goods, revenue is recognised when
control of the goods has transferred at a point
in time i.e. when the goods have been delivered
to the specific location (delivery). Following
delivery, the customer has full discretion over the
responsibility, manner of distribution, price to sell
the goods and bears the risks of obsolescence
and loss in relation to the goods. A receivable is
recognised by the Company when the goods are
delivered to the customer as this represents the
point in time at which the right to consideration
becomes unconditional, as only the passage of
time is required before payment is due. Payment
is due within 0-180 days. The Company considers
the effects of variable consideration, the existence
of significant financing components, noncash
consideration, and consideration payable to the
customer (if any).
• Freight cost
Freight cost incurred as a cost of fulfilling the
contract is considered as a separate performance
obligation and the same is recovered from
Customer as part of the overall consideration.
• Variable consideration
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. Some contracts for the sale of goods
provide customers with rebates (including mark-
downs, chargebacks etc.). The rights to rebates
give rise to variable consideration.
The Company provides retrospective rebates
including, markdowns, chargebacks etc. to
certain customers once the conditions relating
to such rebates are satisfied as per terms of the
contract. Rebates are offset against amounts
payable by the customer. To estimate the variable
consideration for the expected future rebates, the
Company applies the most likely amount method
for contracts. The Company then applies the
requirements on constraining estimates of variable
consideration and recognises a refund liability for
the expected future rebates.
• Contract balances:
Trade receivables
A receivable represents the Company's right to
an amount of consideration that is unconditional
(i.e., only the passage of time is required before
payment of the consideration is due). Refer to
accounting policies of financial assets in note no.
2.13 Financial Instruments - Financial Assets.
Contract liabilities
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.
Refund liabilities
A refund liability is the obligation to refund
some or all of the consideration received (or
receivable) from the customer and is measured
at the amount the Company ultimately expects it
will have to return to the customer. The Company
updates its estimates of refund liabilities (and the
corresponding change in the transaction price) at
the end of each reporting period. Refer to above
accounting policy on variable consideration.
Cost to obtain a contract and cost to fulfill a
contract
The Company pays sales commission to its
selling agents for each contract that they obtain
for the Company. 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 (under
Other Expenses) because the amortisation period
of the asset that the Company otherwise would
have used is less than one year.
Costs to fulfill a contract i.e. freight, insurance
and other selling expenses are recognised as an
expense (under Other Expense) in the period in
which related revenue is recognised.
b) Engineering Procurement and Construction
(EPC) Contracts
Performance obligations with reference to
Engineering Procurement and Construction (EPC)
contracts are satisfied over the period of time,
and accordingly, Revenue from such contracts
is recognized based on progress of performance
determined using input method with reference to
the cost incurred on contract and their estimated
total costs. Transaction price is the amount of
consideration to which the Company expects to
be entitled in exchange for transferring goods
or services to a customer excluding amounts
collected on behalf of a third party.
Revenue, measured at transaction price, is
adjusted towards liquidated damages, time value
of money and price variations, escalation, change
in scope etc. wherever, applicable.
Estimates of revenue and costs are reviewed
periodically and revised, wherever circumstances
change, resulting increases or decreases in
revenue determination, is recognized in the
statement of profit and loss period in which
estimates are revised.
The Company evaluates whether each contract
consists of a single performance obligation or
multiple performance obligations. Due to the nature
of the work required to be performed on many of
the performance obligations, the estimation of
total revenue and cost at completion is subject to
many variables and requires significant judgement.
The Company considers its experience with
similar transactions and expectations regarding
the contract in estimating the amount of variable
consideration to which it will be entitled and
determining whether the estimated variable
consideration should be constrained. The Company
includes estimated amounts in the transaction
price to the extent it is probable that a significant
reversal of cumulative revenue recognised will not
occur when the uncertainty associated with the
variable consideration is resolved.
Progress billings are generally issued upon
completion of certain phases of the work as
stipulated in the contract. Billing terms of the
over-time contracts vary but are generally based
on achieving specified milestones. The difference
between the timing of revenue recognised and
customer billings result in changes to contract
assets and contract liabilities. Contractual retention
amounts billed to customers are generally due
upon expiration of the contract period.
The contracts generally result in revenue
recognised in excess of billings which are
presented as contract assets on the statement of
financial position. Amounts billed and due from
customers are classified as receivables on the
statement of financial position. The portion of
the payments retained by the customer until final
contract settlement is not considered a significant
financing component since it is usually intended
to provide customer with a form of security for
Company's remaining performance as specified
under the contract, which is consistent with the
industry practice. Contract liabilities represent
amounts billed to customers in excess of revenue
recognised till date. A liability is recognised for
advance payments and it is not considered as a
significant financing component since it is used to
meet working capital requirements at the time of
project mobilization stage. The same is presented
as contract liability in the balance sheet.
c) Other Operating Income
Rebate / Drawback of Taxes and Duties
In case of sale made by the Company as Support
Manufacturer, rebate / drawback of taxes and
duties arising from Remissions of Duties and Taxes
on Exported Products (RoDTEP), Duty Drawback
scheme, Rebate of State and Central Taxes and
Levies (ROSCTL) and other applicable export
incentives are recognised on post export basis at
the rate at which the entitlements accrue and is
included in the 'Other Operating Income' (Revenue
from operation).
Sale of Scrap
Sale of manufacturing scrap is treated as other
operating income and is recognised at transaction
price when the control of goods is transferred to
the customer.
Other Income
Other income is accounted for on accrual basis
except where the receipt of income is uncertain.
2.4 Government grants
Grants from the government are recognised
at their fair value where there is a reasonable
assurance that the grant will be received and the
Company will comply with all attached conditions.
Grants related to assets are government grants
whose primary condition is that an entity qualifying
for them should purchase, construct or otherwise
acquire long-term assets. Grants related to income
are government grants other than those related
to assets.
Government grants relating to an expense item
are recognised in the statement of profit and loss
over the period necessary to match them with the
costs that they are intended to compensate and
presented either under "other operating income”
(Revenue from operation) or are deducted in
reporting the related expense. The presentation
approach is applied consistently to all similar
grants. Government grants relating to the purchase
of property, plant and equipment are included in
liabilities as deferred income and are credited to
the statement of profit and loss over the periods
and in proportions in which depreciation expense
on those assets is recognised.
2.5 Income Tax
The income tax expense or credit for the year
is the tax payable on the current year's taxable
income based on the applicable income tax rate
adjusted by changes in deferred tax assets and
liabilities attributable to temporary differences and
to unused tax losses.
Current and deferred tax is recognised in the
statement of profit and loss except to the extent
it relates to items recognised directly in equity
or other comprehensive income, in which case it
is recognised in equity or other comprehensive
income respectively.
a) Current income tax
Current tax charge is based on taxable profit
for the year. The tax rates and tax laws used to
compute the amount are those that are enacted or
substantively enacted, at the reporting date where
the Company operates and generates taxable
income. Management periodically evaluates
positions taken in tax returns with respect to
situations in which applicable tax regulation is
subject to interpretation. It establishes provisions
where appropriate on the basis of amounts
expected to be paid to the tax authorities. Current
tax assets and liabilities are offset when there is
a legally enforceable right to set off current tax
assets against current tax liabilities.
b) Deferred tax
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 assets are recognised
to the extent that it is probable that future taxable
income will be available against which the
deductible temporary differences, unused tax
losses, depreciation carry-forwards and unused
tax credits could be utilised.
Deferred income tax is not accounted for if it arises
from initial recognition of an asset or liability in a
transaction other than a business combination
that at the time of the transaction affects neither
accounting profit nor taxable profit (tax loss).
Deferred tax assets and liabilities are measured
based on the tax rates that are expected to apply
in the period when the asset is realised or the
liability is settled, based on tax rates and tax laws
that have been enacted or substantively enacted
by the balance sheet date.
The carrying amount of deferred tax assets is
reviewed at each reporting date and adjusted
to reflect changes in probability that sufficient
taxable profits will be available to allow all or part
of the asset to be recovered.
Deferred income tax assets and liabilities are
off-set against each other and the resultant
net amount is presented in the balance sheet,
if and only when, (a) the Company has a legally
enforceable right to set-off the current income tax
assets and liabilities, and (b) the Deferred income
tax assets and liabilities relate to income tax levied
by the same taxation authority.
Deferred tax assets are not recognised for
temporary differences between the carrying
amount and tax bases of investments in subsidiaries
where it is not probable that the differences will
reverse in the foreseeable future and taxable profit
will not be available against which the temporary
difference can be utilised.
2.6 Exceptional items
Exceptional items comprise items of income and
expense, including tax items, that are material
in amount and unlikely to recur and which
merit separate disclosure in order to provide
an understanding of the Company's underlying
financial performance.
2.7 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.
As a lessee
The Company applies a single recognition and
measurement approach for all leases, except
for short-term leases and leases of low-value
assets. 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 estimated
useful life of the assets is as follows:
• Commercial Property : 3 to 5 Years
• Other Equipments : 3 to 5 Years
If ownership of the leased asset transfers to
the Company at the end of the lease term or
the cost reflects the exercise of a purchase
option, depreciation is calculated using the
estimated useful life of the asset. The right-
of-use assets are also subject to impairment.
Refer to the accounting policies in Note 2.10
Impairment of non-financial assets.
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. Variable lease payments
that do not depend on an index or a rate are
recognised as expenses (unless they are
incurred to produce inventories) in the period
in which the event or condition that triggers
the payment occurs.
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 or change in
the assessment of an option to purchase the
underlying asset.
c) Short-term leases and leases of low-value
assets
The Company applies the short-term lease
recognition exemption to its short-term leases
of machinery and equipment (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). It also applies
the lease of low-value assets recognition
exemption to leases of office equipment
that are considered to be low value. Lease
payments on short-term leases and leases of
low value assets are recognised as expense
on a straight-line basis over the lease term.
As a 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.
Leases are classified as finance leases when
substantially all of the risks and rewards of
ownership transfer from the Company to the
lessee. Amounts due from lessees under
finance leases are recorded as receivables
at 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 net investment
outstanding in respect of the lease.
2.8 Property, plant and equipment
Property Plant and equipment except for freehold
land are stated in the balance sheet at cost less
accumulated depreciation and accumulated
impairment losses, if any. The cost of property
plant and equipment comprises its purchase
price net of any trade discounts and rebates, any
import duties, GST and other taxes (other than
those subsequently recoverable from the tax
authorities), any directly attributable expenditure
on making the asset ready for its intended use,
including relevant borrowing costs for qualifying
assets and any expected cost of decommissioning.
Subsequent costs are included in the asset's
carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future
economic benefits associated with the item will
flow to the Company and the cost of the item can
be measured reliably. The carrying amount of any
component accounted for as a separate asset is
derecognised when replaced. All other repairs and
maintenance are charged to statement of profit
and loss during the reporting period in which they
are incurred. Capital work in progress is stated at
cost, net of accumulated impairment loss, if any.
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.
Export Promotion Capital Goods (EPCG) grant
relating to property, plant and equipment relate to
duty saved on import of capital goods and spares
under the EPCG scheme. Under the scheme,
the Company is committed to export prescribed
times of the duty saved on import of capital goods
over a specified period of time. In case such
commitments are not met, the Company would be
required to pay the duty saved along with interest
to the regulatory authorities. Such grants are
initially recognised at fair value and added to the
cost of underlying property, plant and equipment
and a corresponding liability which is credited to
the statement of profit and loss based on fulfilment
of related export obligations.
Depreciation methods, estimated useful lives
and residual value
Freehold land is not depreciated. Leasehold
improvements are amortised over the shorter of
estimated useful life or the related lease term.
For following items of property, plant and
equipment, depreciation is calculated using the
straight-line method to allocate their cost, net of
their residual values, over their estimated useful
lives as follows:
Plant and Machinery (other than electrical
installations) of flooring division are depreciated
on straight line method over the useful life ranging
between 5 years to 15 years. Other Plant and
Machinery (other than electrical installations)
are depreciated on written down value method
over the useful life ranging between 7.5 years to
20 years.
The useful lives have been determined based on
technical evaluation done by the management's
expert in order to reflect the actual usage of the
assets and which is equal to or lower than those
specified by Schedule II to the Companies Act
2013. The residual values are not more than 5% of
the original cost of the asset. The assets' residual
values and useful lives are reviewed, and adjusted
if appropriate, at the end of each reporting period.
Estimated useful lives, residual values and
depreciation methods are reviewed annually,
taking into account commercial and technological
obsolescence as well as normal wear and tear and
adjusted prospectively, if appropriate.
An item of property, plant and equipment is
derecognised upon disposal or when no future
economic benefits are expected to arise from
the continued use of asset. Gains and losses on
disposals are determined by comparing proceeds
with carrying amount. These are included in the
statement of profit and loss within other expenses
or other income, as applicable.
2.9 Intangible assets
Intangible assets including patents with finite
useful lives acquired by the Company are
measured at cost less accumulated amortisation
and accumulated impairment losses.
The estimated useful life and amortisation
method are reviewed at the end of each annual
reporting period, with the effect of any changes
in the estimate being accounted for on a
prospective basis.
2.10 Impairment of non-financial assets
Intangible assets that have an indefinite useful
life are not subject to amortisation and are tested
annually for impairment, or more frequently if
events or changes in circumstances indicate that
they might be impaired. Other assets are tested
for impairment whenever events or changes in
circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is
recognised for the amount by which the asset's
carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset's
fair value less costs of disposal and value in use.
For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there
are separately identifiable cash inflows which are
largely independent of the cash inflows from other
assets or groups of assets (cash-generating units).
Non-financial assets other than goodwill that
suffered an impairment are reviewed for possible
reversal of the impairment at the end of each
reporting period.
2.11 Inventories
Raw materials and stores, work in progress,
traded and finished goods
Raw materials and stores, work in progress, traded
and finished goods are stated at the lower of cost
and net realisable value. Cost of raw materials
and traded goods comprises cost of purchases on
weighted average basis. Cost of work in progress
and finished goods comprises direct materials,
direct labour and an appropriate proportion of
variable and fixed overhead expenditure, the latter
being allocated on the basis of normal operating
capacity. Cost of inventories also includes all other
costs incurred in bringing the inventories to their
present location and condition. Costs are assigned
to individual items of inventories moving weighted
average basis. Costs of purchased inventories are
determined after deducting rebates and discounts.
Net realisable value is the estimated selling price in
the ordinary course of business less the estimated
costs of completion and the estimated costs
necessary to make the sale.
2.12 Investment in financial instruments issued
by subsidiary
Company considers issuance of non-market rate
redeemable preference shares and Compulsorily
Convertible Debentures by subsidiary as
compound instrument comprising a loan with
market terms and a capital injection and hence
treat the difference between the cash paid and
fair value on initial recognition as an addition to
the equity investment in the subsidiary. Equity
component is not subsequently re-measured.
The Company has also invested into various
financial instruments of subsidiaries such as
Compulsorily Convertible Debentures which
are accounted and subsequently measured
at amortised cost and Non-Cumulative Non¬
Convertible Redeemable Preference Shares,
Optionally Convertible Debentures and
Redeemable Cumulative Preference Shares which
are accounted and subsequently measured at fair
value through Profit and Loss.
2.13 Financial Instruments
A financial instrument is any contract that gives
rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.
Financial Assets
a) Classification
The Company classifies its financial assets in
the following measurement categories:
• those to be measured subsequently at fair
value (either through other comprehensive
income, or through profit or loss), and
• those measured at amortised cost.
The classification depends on the entity's
business model for managing the financial
assets and the contractual terms of the
cash flows.
• For assets measured at fair value, gains
and losses will either be recorded in
the statement of profit and loss or other
comprehensive income;
• For investments in debt instruments, this
will depend on the business model in
which the investment is held;
• For investments in equity instruments, this
will depend on whether the Company has
made an irrevocable election at the time of
initial recognition to account for the equity
investment at fair value through other
comprehensive income.
The Company reclassifies debt investments
when and only when its business model for
managing those assets changes.
b) Initial Recognition and Measurement
At initial recognition, the Company measures a
financial asset at its fair value plus, in the case
of a financial asset not at fair value through
profit or loss, transaction costs that are directly
attributable to the acquisition of the financial
asset. Transaction costs of financial assets
carried at fair value through profit or loss are
expensed in the statement of profit and loss.
c) Subsequent Measurement
• Debt Instruments
Subsequent measurement of debt
instruments depends on the Company's
business model for managing the asset
and the cash flow characteristics of the
asset. There are three measurement
categories into which the Company
classifies its debt instruments:
i) A mortised cost: Assets that are
held for collection of contractual
cash flows where those cash
flows represent solely payments of
principal and interest are measured
at amortised cost. A gain or loss
on such assets are subsequently
measured at amortised cost and is
not part of a hedging relationship
is recognised in the statement of
profit and loss when the asset is
derecognised or impaired. Interest
income from these financial assets
is included in other income using the
effective interest rate method.
ii) Fair value through other
comprehensive income (FVOCI):
Assets that are held for collection
of contractual cash flows and for
selling the financial assets, where
the assets' cash flows represent
solely payments of principal and
interest, are measured at fair value
through other comprehensive
income (FVOCI). Movements in the
carrying amount are taken through
OCI, except for the recognition of
impairment gains or losses, interest
income and foreign exchange gains
and losses which are recognised
in the statement of profit and
loss. When the financial asset is
derecognised, the cumulative gain
or loss previously recognised in
OCI is reclassified from equity to
the statement of profit and loss
and recognised in other expenses
or other incomes, as applicable.
Interest income from these
financial assets is included in other
income using the effective interest
rate method.
iii) Fair value through profit or loss: A
financial asset which is not classified
in any of the above categories are
measured at fair value through profit
or loss.
• Equity Investments
Investment in subsidiaries are carried at
cost in the separate financial statements
and accounted on first-in first-out
(FIFO) basis.
The Company subsequently measures
all other equity investments at fair value.
Where the Company's management
has elected to present fair value gains
and losses on equity investments in
other comprehensive income, there
will be no subsequent reclassification
of fair value gains and losses to the
statement of profit and loss. Dividends
from such investments are recognised
in the statement of profit and loss as
other income when the Company's right
to receive payments is established.
Changes in the fair value of financial
assets at fair value through profit or
loss are recognised in the statement of
profit and loss. Impairment losses (and
reversal of impairment losses) on equity
investments measured at FVOCI are not
reported separately from other changes
in fair value.
• Cash and cash equivalents
Cash and cash equivalents includes cash
in hand, deposits held with banks, other
short term 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.
• Trade receivable
Trade receivable are recognised initially
at transaction price which approximates
the fair value and subsequently
measured at amortised cost using the
effective interest method, less provision
for impairment.
d) Impairment of financial assets
In accordance with Ind AS 109, the Company
applies expected credit loss (ECL) model for
measurement and recognition of impairment
loss on the following financial assets and
credit risk exposure:
i) Financial assets that are debt instruments,
and are measured at amortised cost e.g.,
loans, debt securities, deposits, trade
receivables and bank balance;
ii) Trade receivables or any contractual
right to receive cash or another financial
asset that result from transactions that
are within the scope of Ind AS 115.
ECL impairment loss allowance (or reversal)
recognised during the period is recognised
as income/ expense in the statement of profit
and loss. This amount is reflected under
the head 'other expenses' in the statement
of profit and loss. The balance sheet
presentation for various financial instruments
is described below:
i) Financial assets measured as at amortised
cost, contractual revenue receivables:
ECL is presented as an allowance, i.e.,
as an integral part of the measurement
of those assets in the balance sheet.
The allowance reduces the net carrying
amount. Until the asset meets write-off
criteria, the Company does not reduce
impairment allowance from the gross
carrying amount;
ii) For trade receivables only, the Company
applies the simplified approach permitted
by Ind AS 109 financial instruments,
which requires expected lifetime losses
to be recognised from initial recognition
of the receivables.
e) Derecognition of financial assets
A financial asset is derecognised only when
i) The Company has transferred the rights
to receive cash flows from the financial
asset or
ii) retains the contractual rights to receive
the cash flows of the financial asset but
assumes a contractual obligation to pay
the cash flows to one or more recipients.
Where the entity has transferred an asset,
the Company evaluates whether it has
transferred substantially all risks and rewards
of ownership of the financial asset. In such
cases, the financial asset is derecognised.
Where the entity has not transferred
substantially all risks and rewards of
ownership of the financial asset, the financial
asset is not derecognised. Where the entity
has neither transferred a financial asset nor
retains substantially all risks and rewards of
ownership of the financial asset, the financial
asset is derecognised if the Company has not
retained control of the financial asset. Where
the Company retains control of the financial
asset, the asset is continued to be recognised
to the extent of continuing involvement in the
financial asset.
f) Other income
• Interest income
Interest income from debt instruments is
recognised using the effective interest
rate method. The effective interest
rate is the rate that exactly discounts
estimated future cash receipts through
the expected life of the financial asset to
the gross carrying amount of a 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.
• Dividends
Dividends are recognised in the statement
of profit and loss only when the right
to receive payment is established, it is
probable that the economic benefits
associated with the dividend will flow
to the Company, and the amount of the
dividend can be measured reliably.
Financial liabilities
a) Initial Recognition and Measurement
Financial liabilities are initially recognised
at fair value, reduced by transaction costs
(in case of financial liability not at fair value
through profit or loss), that are directly
attributable to the issue of financial liability.
After initial recognition, financial liabilities are
measured at amortised cost using effective
interest method. The effective interest rate
is the rate that exactly discounts estimated
future cash outflow (including all fees paid,
transaction cost, and other premiums or
discounts) through the expected life of the
financial liability, or, where appropriate, a
shorter period, to the net carrying amount
on initial recognition. At the time of initial
recognition, there is no financial liability
irrevocably designated as measured at fair
value through profit or loss. Liabilities from
finance lease agreements are measured at
the lower of fair value of the leased asset or
present value of minimum lease payments.
b) Subsequent Measurement
• Borrowings
Borrowings are initially recognised at fair
value, net of transaction costs incurred.
Borrowings are subsequently measured
at amortised cost. Any difference
between the proceeds (net of transaction
costs) and the redemption amount is
recognised in the statement of profit and
loss over the period of the borrowings
using the effective interest method.
Fees paid on the establishment of loan
facilities are recognised as transaction
costs of the loan to the extent that it is
probable that some or all of the facility
will be drawn down. In this case, the fee
is deferred until the draw down occurs.
To the extent there is no evidence that it
is probable that some or all of the facility
will be drawn down, the fee is capitalised
as a prepayment for liquidity services and
amortised over the period of the facility
to which it relates.
Borrowings are removed from the balance
sheet when the obligation specified in
the contract is discharged, cancelled
or expired. The difference between
the carrying amount of a financial
liability that has been extinguished or
transferred to another party and the
consideration paid, including any non¬
cash assets transferred or liabilities
assumed, is recognised in statement of
profit and loss.
Where the terms of a financial liability are
renegotiated and the entity issues equity
instruments to a creditor to extinguish
all or part of the liability (debt for equity
swap), a gain or loss is recognised in
the statement of profit and loss, which
is measured as the difference between
the carrying amount of the financial
liability and the fair value of the equity
instruments issued.
Where there is a breach of a material
provision of a long-term loan
arrangement on or before the end of the
reporting period with the effect that the
liability becomes payable on demand
on the reporting date, the entity does
not classify the liability as current, if the
lender agreed, after the reporting period
and before the approval of the standalone
financial statements for issue, not to
demand payment as a consequence of
the breach.
• Trade and other payables
These amounts represent liabilities for
goods and services provided to the
Company prior to the end of financial
year which are unpaid. Trade and other
payables are recognised, initially at fair
value, and subsequently measured at
amortised cost using effective interest
rate method.
• Financial guarantee contracts
Financial guarantee contracts are
recognised as a financial liability at the
time the guarantee is issued. The liability
is initially measured at fair value and
subsequently at the higher of the amount
determined in accordance with Ind AS
37 Provisions, Contingent Liabilities
and Contingent Assets and the amount
initially recognised less cumulative
amortisation, where appropriate.
• Derivatives and hedging activities
In order to hedge its exposure to
foreign exchange, interest rate, and
commodity price risks, the Company
enters into forward, option, swap
contracts and other derivative financial
instruments. The Company does not
hold derivative financial instruments for
speculative purposes.
Derivatives are initially recognised at fair
value on the date a derivative contract
is entered into and are subsequently re¬
measured to their fair value at the end of
each reporting period.
Derivatives that are not designated
as hedges: The Company enters into
derivative contracts to hedge risks which
are not designated as hedges. Such
contracts are accounted for at fair value
through profit or loss.
• Embedded Derivatives
Derivatives embedded in a host contract
that is an asset within the scope of Ind
AS 109 are not separated. Financial
assets with embedded derivatives
are considered in their entirety when
determining whether their cash flows
are solely payment of principal and
interest. Derivatives embedded in all
other host contract are separated only if
the economic characteristics and risks of
the embedded derivative are not closely
related to the economic characteristics
and risks of the host and are measured
at fair value through profit or loss.
Embedded derivatives closely related to
the host contracts are not separated.
• Embedded foreign currency
derivatives:
Embedded foreign currency derivatives
are not separated from the host
contract if they are closely related. Such
embedded derivatives are closely related
to the host contract, if the host contract
is not leveraged, does not contain any
option feature and requires payments in
one of the following currencies:
i) the functional currency of any
substantial party to that contract,
ii) the currency in which the price of
the related good or service that is
acquired or delivered is routinely
denominated in commercial
transactions around the world,
iii) a currency that is commonly used
in contracts to purchase or sell
non-financial items in the economic
environment in which the transaction
takes place (i.e., relatively liquid, and
stable currency).
Foreign currency embedded derivatives
which do not meet the above criteria
are separated and the derivative is
accounted for at fair value through profit
or loss. The Company currently does not
have any such derivatives which are not
closely related.
c) Derecognition
A financial liability is derecognised when the
obligation under the liability is discharged
or cancelled or expires. When an existing
financial liability is replaced by another from
the same lender on substantially different
terms, or the terms of an existing liability are
substantially modified, such an exchange or
modification is treated as the de-recognition
of the original liability and the recognition of a
new liability. The difference in the respective
carrying amounts is recognised in the
statement of profit and 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.
2.14 Borrowing costs
General and specific borrowing costs that
are directly attributable to the acquisition,
construction or production of a qualifying asset
are capitalised during the period of time that is
required to complete and prepare the asset for its
intended use or sale. Qualifying assets are assets
that necessarily take a substantial period of time to
get ready for their intended use or sale. Investment
income earned on the temporary investment of
specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing
costs eligible for capitalisation. Other borrowing
costs are expensed in the period in which they
are incurred.
a) Short-term obligations
Liabilities for wages and salaries, including non¬
monetary benefits that are expected to be settled
wholly within 12 months after the end of the
period in which the employees render the related
service are recognised in respect of employees'
services up to the end of the reporting period and
are measured at the amounts expected to be paid
when the liabilities are settled. The liabilities are
presented as current employee benefit obligations
in the balance sheet.
b) Other long-term employee benefit obligations
The liabilities for earned and sick leave are not
expected to be settled wholly within 12 months
after the end of the period in which the employees
render the related service. They are therefore
measured as the present value of expected future
payments to be made in respect of services
provided by employees up to the end of the
reporting period using the projected unit credit
method. The benefits are discounted using the
market yields at the end of the reporting period
that have terms approximating to the terms of the
related obligation. Remeasurements as a result of
experience adjustments and changes in actuarial
assumptions are recognised in the statement of
profit and loss.
The obligations are presented as current liabilities
in the balance sheet if the entity does not have
an unconditional right to defer settlement for at
least twelve months after the reporting period,
regardless of when the actual settlement is
expected to occur.
c) Post-employment obligations
The Company operates the following post¬
employment schemes:
i) defined benefit plans such as gratuity, and
ii) defined contribution plans such as provident
fund and superannuation
• Defined Benefit Plans
Gratuity obligations
The liability or asset recognised in the balance
sheet in respect of defined benefit gratuity
plans is the present value of the defined
benefit obligation at the end of the reporting
period less the fair value of plan assets.
The defined benefit obligation is calculated
annually by actuaries using the projected unit
credit method.
The present value of the defined benefit
obligation denominated in Indian Rupees
('INR') is determined by discounting the
estimated future cash outflows by reference
to market yields at the end of the reporting
period on government bonds that have
terms approximating to the terms of the
related obligation. The benefits which are
denominated in currency other than INR, the
cash flows are discounted using market yields
determined by reference to high-quality
corporate bonds that are denominated in the
currency in which the benefits will be paid,
and that have terms approximating to the
terms of the related obligation.
The net interest cost is calculated by applying
the discount rate to the net balance of the
defined benefit obligation and the fair value of
plan assets. This cost is included in employee
benefit expense in the statement of profit
and loss.
Remeasurement gains and losses arising
from experience adjustments and changes in
actuarial assumptions are recognised in the
period in which they occur, directly in other
comprehensive income. They are included in
retained earnings in the statement of changes
in equity and in the balance sheet.
Remeasurements are not reclassified to
the statement of profit and loss in the
subsequent periods.
Changes in the present value of the defined
benefit obligation resulting from plan
amendments or curtailments are recognised
immediately in the statement of profit and loss
as past service cost.
• Defined contribution plans
i) Provident Fund, Employee State
Insurance Corporation (ESIC), Pension
Fund and other Social Security Funds
The Contribution towards provident fund,
ESIC, pension fund and Social Security
Funds for certain employees is made
to the regulatory authorities where the
Company has no further obligations.
Such benefits are classified as Defined
Contribution Schemes as the Company
does not carry any further obligations
apart from the contributions made on a
monthly basis.
ii) Superannuation Fund
Contribution towards superannuation
fund for certain employees is made to
SBI Life Insurance Company where the
Company has no further obligations.
Such benefits are classified as Defined
Contribution Schemes as the Company
does not carry any further obligations,
apart from contribution made on monthly
basis.
d) Bonus Plan
The Company recognises a liability and an expense
for bonuses. The Company recognises a provision
where contractually obliged or where there is a past
practice that has created a constructive obligation.
2.16 Share Based Payments
Senior executives of the company receive
remuneration in the form of share-based
payment, 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. Refer Note 45.
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 expense or credit in the
statement of profit and loss 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 grant date fair value of the unmodified award,
provided the original vesting terms of the award
are met. An additional expense, measured as at
the date of modification, is recognised for any
modification that increases the total fair value of the
share-based payment transaction, or is otherwise
beneficial to the employee. 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 the statement of
profit and loss.
The dilutive effect of outstanding options is
reflected as additional share dilution in the
computation of diluted earnings per share.
|