1.15 Provisions
a. A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that is
reasonably estimable, and it is probable that an outflow of economic benefits will be required to settle the obligation.
b. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at
a pretax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where
discounting issued, the increase in the provision due to the passage of time is recognized as a finance cost.
1.16 Financial instruments
a. Recognition and Initial recognition
The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the
instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which
are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issues of financial
assets and financial liabilities that are not at fair value through profit or loss, are added to the fair value on initial recognition.
A financial asset or financial liability is initially measured at fair value plus, for an item not at fair value through profit and loss
(FVTPL), transaction costs that are directly attributable to its acquisition or issue.
b. Classification and Subsequent measurement
Financial assets
On initial recognition, a financial asset is classified as measured at
- amortized cost;
- FVTPL
Financial assets are not reclassified subsequent to their initial recognition, except if and in the period the company changes its
business model for managing financial assets.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:
- The asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and
- The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
All financial assets not classified as measured at amortized cost as described above are measured at FVTPL. On initial recognition,
the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized
cost at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Financial assets: Business model assessment
The Company makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level
because this best reflects the way the business is managed and information is provided to management. The information
considered includes:
- The stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether
management's strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching
the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows
through the sale of the assets;
- How the performance of the portfolio is evaluated and reported to the Company's management;
- The risks that affect the performance of the business model (and the financial assets held within that business model) and how
those risks are managed;
- How managers of the business are compensated - e.g. whether compensation is based on the fair value of the assets managed
or the contractual cash flows collected; and
- The frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about
future sales activity.
Transfers of financial assets to third parties in transactions that do not qualify for de recognition are not considered sales for this
purpose, consistent with the Company's continuing recognition of the assets.
Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured
at FVTPL.
Financial assets: Assessment* whether contractual cash flows are solely payments of principal and interest
*For the purposes of this assessment, 'principal' is defined as the fair value of the financial asset on initial recognition. 'Interest' is
defined in assessing whether the contractual cash flows are solely payments of principal and interest, the Company considers the
contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could
change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the
Company considers:
- Contingent events that would change the amount or timing of cash flows;
- Terms that may adjust the contractual coupon rate, including variable interest rate features;
- Prepayment and extension features; and
- Terms that limit the Company's claim to cash flows from specified assets (e.g. non- recourse features).
A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount
substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include
reasonable additional compensation for early termination of the contract. Additionally, for a financial asset acquired at a
significant discount or premium to its contractual paramount, a feature that permits or requires prepayment at an amount that
substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include
reasonable additional compensation for early termination) is treated as consistent with this criterion if the fair value of the
prepayment feature is insignificant at initial recognition.
Financial assets: Subsequent measurement and gains and losses
Financial assets at FVTPL: These assets are subsequently measured at fair value. Net gains and losses, including any interest or
dividend income, are recognized in profit or loss.
Financial assets at amortized cost: These assets are subsequently measured at amortized cost using the effective interest method.
The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are
recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.
Financial liabilities:
Classification, Subsequent measurement and gains and losses
Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is
classified as held- for- trading, or it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are
measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss. Other financial
liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign
exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.
c. Derecognition
Financial assets
The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it
transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of
ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks
and rewards of ownership and does not retain control of the financial asset.
If the Company enters into transactions whereby it transfers assets recognized on its balance sheet, but retains either all or
substantially all of the risks and rewards of the transferred assets, the transferred assets are not derecognized.
Financial liabilities
The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The
Company also derecognizes a financial liability when its terms are modified and the cash flows under the modified terms are
substantially different. In this case, a new financial liability based on the modified terms is recognized at fair value. The difference
between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is
recognized in profit or lose.
d. Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the balance sheet when and only when, the
Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to
realize the asset and settle the liability simultaneously.
e. Impairment
The Company recognizes loss allowances for expected credit losses on financial assets measured at amortized cost; at each
reporting date, the Company assesses whether financial assets carried at amortized cost and debt securities at fair value through
other comprehensive income (FVOCI) are credit impaired. A financial asset is 'credit- impaired' when one or more events that
have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset
is credit- impaired includes the following observable data:
- Significant financial difficulty of the borrower or issuer;
- The restructuring of a loan or advance by the Company on terms that the Company would not consider otherwise;
- It is probable that the borrower will enter bankruptcy or other financial reorganization; or
- The disappearance of an active market for a security because of financial difficulties. The Company measures loss allowances at
an amount equal to lifetime expected credit losses, except for the following, which are measured as 12 month expected credit
losses:
- Debt securities that are determined to have low credit risk at the reporting date; and
- Other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the
financial instrument) has not increased significantly since initial recognition.
Loss allowances for trade receivables are always measured at an amount equal to lifetime expected credit losses.
Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of
a financial instrument.
12-month expected credit losses are the portion of expected credit losses that result from default events that are possible within
12months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).
In all cases, the maximum period considered when estimating expected credit losses is the maximum contractual period over
which the Company is exposed to credit risk.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when
estimating expected credit losses, the Company considers reasonable and supportable information that is relevant and available
without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company's
historical experience and informed credit assessment and including forward- looking information.
Measurement of expected credit losses Expected credit losses are a probability weighted estimate of credit losses. Credit losses
are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company in
accordance with the contract and the cash flows that the Company expects to receive).
As per our report of even date.
for RAO & SHYAM for and on behalf of Adroit Infotech Limited
Chartered Accountants
Firm Registration Number: 006186S
Sd./- Sd./-
Sd./- Sudhakiran Reddy Sunkerneni Sridhar Pyata Reddy
Kandarp Kumar Dudhoria Managing Director Director
Partner DIN 01436242 DIN 07268714
Membership Number: 228416
UDIN: 25228416BMONTY3524
Sd./- Sd./-
Ravichandra Rao Badanidiyoor Piyush Prajapati
Chief Finance officer Company secretary &
Compliance officer
Place: Hyderabad Membership No. A48320
Date 22 May 2025
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