B.5 Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past
event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be
made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the
obligation.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a
third party, a receivable is recognised as an asset if it is virtually certain that reimbursements will be received
and the amount of the receivable can be measured reliably.
Contingent liability is disclosed for possible obligations which will be confirmed only by future events not within
the control of the Company or present obligations arising from past events where it is not probable that an
outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the
obligation cannot be made.
Contingent Assets are not recognized since this may result in the recognition of income that may never be
realized.
B.6 Financial instruments
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual
provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the
financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable
to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised
immediately in profit or loss.
Financial assets:
All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis.
Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within
the time frame established by regulation or convention in the marketplace.
Classification of financial assets
The financial assets are initially measured at fair value. Transaction costs that are directly attributable to the
acquisition of financial assets are added to the fair value of the financial assets on initial recognition.
After initial recognition:
(i) Financial assets (other than investments) are subsequently measured at amortised cost using the effective
interest method.
Effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating
interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash receipts (including all fees and points paid or received that form an integral part of the effective
interest rate, transaction costs and other premiums or discounts) through the expected life of the debt
instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Investments in debt instruments that meet the following conditions are subsequently measured at amortised
cost:
• The asset is held within a business model whose objective is to hold assets in order to collect
contractual cash flows; and
• the contractual terms of the instrument give rise on specified dates to cash flows that are solely
payments on principal and interest on the principal amount outstanding.
Income on such debt instruments is recognised in profit or loss and is included in the "Other Income".
The Company has not designated any debt instruments as fair value through other comprehensive income.
(ii) Financial assets (i.e. investments in instruments other than equity of subsidiaries) are subsequently measured
at fair value.
Such financial assets are measured at fair value at the end of each reporting period, with any gains (e.g. any
dividend or interest earned on the financial asset) or losses arising on re-measurement recognised in profit or
loss and included in the "Other Income".
Investments in equity instruments of subsidiaries
The Company measures its investments in equity instruments of subsidiaries at cost in accordance with Ind AS
27. At transition date, the Company has elected to continue with the carrying value of such investments
measured as per the previous GAAP and use such carrying value as its deemed cost.
Impairment of financial assets:
A financial asset is regarded as credit impaired when one or more events that may have a detrimental effect on
estimated future cash flows of the asset have occurred. The Company applies the expected credit loss model for
recognising impairment loss on financial assets (i.e. the shortfall between the contractual cash flows that are
due and all the cash flows (discounted) that the Company expects to receive).
De-recognition of financial assets:
The Company de-recognises a financial asset when the contractual rights to the cash flows from the asset expire,
or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to
another party. If the Company neither transfers nor retains substantially all the risks and rewards of ownership
and continues to control the transferred asset, the Company recognises its retained interest in the asset and an
associated liability for amounts it may have to pay. On de-recognition of a financial asset in its entirety, the
difference between the asset's carrying amount and the sum of the consideration received and receivable is
recognised in the Statement of profit and loss.
Financial liabilities and equity instruments
Equity instruments
Equity instruments issued by the Company are classified as equity in accordance with the substance and the
definitions of an equity instrument. An equity instrument is any contract that evidences a residual interest in the
assets of an entity after deducting all of its liabilities.
Financial liabilities
All financial liabilities are subsequently measured at amortised cost using the effective interest method. The
carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based
on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included
in the "Finance Costs".
The effective interest method is a method of calculating the amortised cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts
estimated future cash payments (including all fees and points paid or received that form an integral part of the
effective interest rate, transaction costs 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.
De-recognition of financial liabilities
The Company de-recognises financial liabilities when, and only when, the Company's obligations are discharged,
cancelled or have expired. An exchange between with a lender of debt instruments with substantially different
terms is accounted for as an extinguishment of the original financial liability and the recognition of a new
financial liability. Similarly, a substantial modification of the terms of an existing financial liability (whether or
not attributable to the financial difficulty of the debtor) is accounted for as an extinguishment of the original
financial liability and the recognition of a new financial liability. The difference between the carrying amount of
the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
B. 7 Earnings per share
Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity
shareholders by the weighted average number of equity shares outstanding during the year. For the purpose of
calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and
the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive
potential equity shares.
C. Critical Accounting judgements and key sources of estimation uncertainty
The preparation of financial statements in conformity with Ind AS requires the Company's Management to make
judgments, estimates and assumptions about the carrying amounts of assets and liabilities recognised in the
financial statements that are not readily apparent from other sources. The judgements, estimates and
associated assumptions are based on historical experience and other factors including estimation of effects of
uncertain future events that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
(accounted on a prospective basis) and recognised in the period in which the estimate is revised if the revision
affects only that period, or in the period of the revision and future periods of the revision affects both current
and future periods.
The following are the key estimates that have been made by the Management in the process of applying the
accounting policies:
Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be
measured based on quoted prices in active markets, their fair value are measured using valuation techniques.
The inputs to these models are taken from observable markets where possible, but where this is not feasible, a
degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as
liquidity risk, credit risk and volatility. Changes in assumptions relating to these factors could affect the reported
fair value of financial instruments.
Allowance for doubtful trade receivables
Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate
allowances for estimated irrecoverable amounts.
Estimated irrecoverable amounts are derived based on a provision matrix which takes into account various
factors such as customer specific risks, geographical region, product type, currency fluctuation risk, repatriation
policy of the country, country specific economic risks, customer rating, and type of customer, etc.
Individual trade receivables are written off when the management deems them not to be collectable.
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