r) Provisions and Contingent Liabilities
(A) Provisions
- Provisions are recognized if, as a result of past event, the company has a present obligation (legal or constructive), and it is
probable that a cash outflow will be required to settle the obligation in respect of where a reliable estimate can be made.
- As the timing of outflows of resources is uncertain, being dependent upon the outcome of the future proceedings, these
provisions are not discounted to their present value.
- When some or all of economics benefits required to settle a provision are expected to be recovered from a third party, a
receivable is recognized as on asset if it is virtually certain that reimbursements will be received and amount of the receivable can
be measured reliably.
(B) Contingent liability
- A disclosure for contingent liability is made when is a possible obligation or a present obligation that may, but probably will not
require an outflow of resources.
- When there is possible obligation or a present obligation where the like hood of an outflow of resources is remote no provision or
disclosure is made.
Commitments include the amount of purchase order (net of advances) issued to parties for completion of assets.
Contingent assets are neither recognized nor disclosed in the financial statements
Provisions, contingent liabilities, and commitments are reviewed at each balance sheet date
2.4 Use of Significant accounting judgements and estimates
The preparation of the financial statements in conformity with Indian Accounting Standards (Ind AS) require management to make
judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of revenues,
expenses, assets and liabilities and disclosure of contingent liabilities at the date of the financial statement and reported amount of
revenue and expense during the period.
Although these estimates are based upon management's best knowledge of current events and actions, uncertainty about these
assumptions and estimates could result in the outcome requiring a material adjustment to the carrying amount of assets or liabilities
in future period. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognized in the period in which the estimate is revised if the revision affects only the period of the revision and future periods if
the revision affects both current and future periods.
The following are the areas of estimation uncertainty and critical judgements that the management has made in the process of
applying the Company's accounting policies and that have the most significant effect on the amounts recognised in the financial
statements:
i) Useful lives of property, plant and equipment
The estimated useful lives of property, plant and equipment are based on a number of factors including the effects of obsolescence,
internal assessment of user experience and other economic factors (such as the stability of the industry, and known technological
advances) and the level of maintenance expenditure required to obtain the expected future cash flows from the asset.
The Company reviews the useful life of property, plant and equipment at the end of each reporting date.
ii) Recoverable amount of property, plant and equipment
The recoverable amount of property plant and equipment is based on estimates and assumptions regarding the expected market
outlook and expected future cash flows. Any changes in these assumptions may have a material impact on the measurement of the
recoverable amount and could result in impairment.
iii) Defined benefit plans
The cost of the defined benefit plan and other post-employment benefits and the present value of such obligation are determined
using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in
the future. These include the determination of the discount rate, future, salary increases, mortality rates and future pension
increases. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive
to changes in these assumptions. All assumptions are reviewed at each reporting date.
iv) Recognition of deferred tax assets
Management judgement is required for the calculation of provision for income taxes and deferred tax assets and liabilities. The
company reviews at each balance sheet date the carrying amount of deferred tax assets. The factors used in estimates may differ
from actual outcome which could lead to signification adjustment to the amounts reported in financial statement.
v) Contingencies
Management judgement is required for estimating the possible outflow of resources, if any, in respect of
contingencies/claims/litigations against the Company as it is not possible to predict the outcome of pending matters with accuracy.
The Company annually assesses such claims and monitors the legal environment on an ongoing basis, with the assistance of
external legal counsel, wherever necessary.
vi) Fair value measurement
Some of the Company's assets and liabilities are measured at fair value for financial reporting purposes. The Board of Directors of
the Company approves the fair values determined by the Chief Financial Officer of the Company including determining the
appropriate valuation techniques and inputs for fair value measurements.
In estimating the fair value of an asset or liability, the Company uses market-observable data to the extent is available. Where Level
1 inputs are not available, the Company engages third party qualified valuers to perform the valuation. The Chief financial officer
works closely with the qualified external valuers to establish appropriate valuation techniques and inputs to the model.
vii) Income Tax
The Company's tax jurisdiction is India. Significant judgements are involved in determining the provision for income taxes including
judgement on whether tax positions are probable of being sustained in tax assessments. A tax assessment can involve complex
issues, which can only be resolved over extended time periods.
viii) Inventory
Management has carefully estimated the net realizable values of inventories, taking into account the most reliable evidence
available at each reporting date. The future realization of these inventories may be affected by market driven changes
2.5 Current - non-current classification
All assets and liabilities have been classified as current and non-current on the basis of the following criteria:
Assets
An asset is classified as current when it satisfies any of the following criteria:
a) it is expected to be realised in, or is intended for sale or consumption in, the company's normal operating cycle;
b) it is held primarily for the purpose of being traded;
c) it is expected to be realised within 12 months after the reporting date; or
d) it is cash or cash equivalent unless it is restricted from being exchanged or use to settle a liability for at least 12 months after the
reporting date.
Current assets include the current portion of non-current financial assets.
All other assets are classified as non-current.
Liabilities
A liability is classified as current when it satisfies any of the following criteria:
a) it is expected to be settled in the company's normal operating cycle;
b) it is held primarily for the purpose of being traded;
c) it is due to be settled within 12 months after the reporting date; or
d) The Company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.
Terms of a liability that could, at the option of the counterpart, result in its settlement by the issue of equity instruments do not affect
its classification.
Current liabilities include current portion of non-current financial liabilities.
All other liabilities are classified as non-current
Operating cycle
Operating cycle is the time between the acquisition of assets for processing/servicing and their realization in cash or cash
equivalents.
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