1.19 Provisions and Contingencies
Provisions involving substantial degree of estimation in measurement are recognized when
there is a present obligation as a result of past events and it is probable that there will be an
outflow of resources to settle the obligation in respect of which reliable estimate can be
made as on the balance sheet date. 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 a provision is measured using the cash flows estimated to settle the present obligation,
its carrying amount is the present value of those cash flows (when the effect of the time
value of money is material).
Contingent Liabilities are present obligations arising from a past event, when it is not
probable / probability is remote that an outflow of resources will be required to settle the
obligation and they are not recognized but are disclosed in the notes.
Contingent Assets are neither recognized nor disclosed in the financial statements except
where it has become virtually certain that an inflow of economic benefit will arise, the
asset and the related income are recognized in financial statements of the period in which
the change occurs Provisions for Contingent Liabilities and Contingent Assets are reviewed
at the end of Balance Sheet date.
1.20 Operating cycle
Based on the nature of products / activities of the Company and the normal time between
acquisition of assets and their realisation in cash or cash equivalents, the Company has
determined its operating cycle as 12 months for the purpose of classification of its assets
and liabilities as current and non-current.
1.21 Exceptional items
Items of income and expenditure within profit and loss from ordinary activities are of such
size, nature or incidence that their disclosure is relevant to explain the performance of the
enterprise for the period, the nature and amount of such items are disclosed separately as
Exceptional Items.
1.22 Commitments
(a) Commitments are future liabilities for contractual expenditure.
(b) Commitments are classified and disclosed as follows:
• Estimated amount of contracts remaining to be executed on capital account and
not provided for;
• Uncalled liability on shares and other investments partly paid;
• Funding related commitment to subsidiary, associate and joint venture companies
and
• Other non-cancellable commitments, if any, to the extent they are considered
material and relevant in the opinion of management.
(c) Other commitments related to sales/procurements made in the normal course of
business are not disclosed to avoid excessive details.
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