PROVISIO & CONTIGENT LIABILITIES
Provisions are recognized when the Company has a present
obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made on the amount of the obligation.
If the effect of the time value of money is material, provisions
are discounted using a current pre-tax rate that reflects
current market assessment of time value of money and, where
appropriate, the risks specific to the liability. Unwinding of the
discount is recognized in the Statement of Profit and Loss as
a finance cost. Provisions are reviewed at each reporting date
and are adjusted to reflect the current best estimate.
Contingent liabilities are also disclosed when there is a possible
obligation arising from past events, the existence of which will
be confirmed only by the occurrence or non -occurrence of one
or more uncertain future events not wholly within the control
of the Company. Claims against the Company where the
possibility of any outflow of resources in settlement is remote,
are not disclosed as contingent liabilities.
Contingent assets are not recognized in financial statements
since this may result in the recognition of income that may
never be realized. However, when the realization of income
is virtually certain, then the related asset is not a contingent
asset and is recognized.
m. Revenue Recognition:
Revenue is recognized on the basis of approved contracts
regarding the transfer of goods or services to a customer for
an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services.
Revenue is recognized upon transfer of control of promised
products to customers. Revenue towards satisfaction of
a performance obligation is measured at the amount of
transaction price (net of variable consideration) allocated to
that performance obligation, in accordance with Ind AS115 “
Revenue from contract with customers”. Amounts disclosed
as revenue are net of sales returns and allowances, trade
discounts and Goods and service tax.
Interest Income is recognised on a time proportion basis taking into
account the amount outstanding and the interest rate applicable
Export Incentives are accounted for to the extent considered
recoverable by the Management.
Rental income on assets given under operating lease
arrangements is recognized on a straight-line basis over
the period of the lease unless the receipts are structured to
increase in line with expected general inflation to compensate
for the Company’s expected inflationary cost increases.
n. Lease:
The determination of whether an arrangement is (or contains)
a lease is based on the substance of the arrangement at the
inception of the lease. The arrangement is, or contains, a lease
if fulfilment of the arrangement is dependent on the use of a
specific asset, or assets and the arrangement conveys a right
or control to use the asset, or assets even if that right is not
explicitly specified in an arrangement.
The arrangement conveys the right to control the use of an
identified asset, if it involves the use of an identified asset
and the Company has substantially all of the economic
benefits from use of the asset and has right to direct the use
of the identified asset. The cost of the right-of-use asset shall
comprise of the amount of the initial measurement of the lease
liability adjusted for any lease payments made at or before the
commencement date plus any initial direct costs incurred. The
right-of-use assets is subsequently measured at cost less any
accumulated depreciation, accumulated impairment losses, if
any and adjusted for any remeasurement of the lease liability.
The right-of-use assets is depreciated using the straight-line
method from the commencement date over the shorter of
lease term or useful life of right-of-use asset.
The Company measures the lease liability at the present value
of the lease payments that are not paid at the commencement
date of the lease. The lease payments are discounted using
the interest rate implicit in the lease, if that rate can be readily
determined. If that rate cannot be readily determined, the
Company uses incremental borrowing rate.
For short-term and low value leases, the Company recognises
the lease payments as an operating expense on a straight-line
basis over the lease term.
o. Employee Benefit Expense:
Defined benefit plan:
The Company pays gratuity to the employees whoever has
completed five years of service with the Company at the time
of resignation/superannuation. The gratuity liability amount is
contributed to the approved gratuity fund formed exclusively
for gratuity payment to the employees.
The liability in respect of gratuity and other post-employment
benefits is calculated using the Projected Unit Credit Method
and spread over the period during which the benefit is
expected to be derived from employees’ services.
Re-measurement of defined benefit plans in respect of post¬
employment are charged to the Other Comprehensive Income.
Re-measurement recognised in Other Comprehensive Income
(‘OCI’) is reflected immediately in retained earnings and will
not be reclassified to Statement of Profit and Loss.
The present value of the defined benefit plan liability is
calculated using a discount rate which is determined by
reference to market yields at the end of the reporting period
on government bonds.
The defined benefit obligation recognised in the Balance
Sheet represents the actual deficit or surplus in the Company’s
defined benefit plans. Any surplus resulting from this
calculation is limited to the present value of any economic
benefits available in the form of refunds from the plans or
reductions in future contributions to the plans.
Defined contribution plan:
Employee benefits in the form of contribution to
superannuation fund, provident fund managed by Government
authorities, Employee state Insurance Corporation and Labour
Welfare Fund are considered as defined contribution plan and
the same is charged to Statement of Profit or Loss for the year
when the contributions to the respective funds are due.
Other long-term employee benefits:
The Company has a scheme for leave encashment for
employee, the liability for which is determined on the basis of
an actuarial valuation carried out at the end of the year using
Projected Unit Credit method.
Short Term Employee Benefits:
Short-term employee benefits are recognised as an expense on
accrual basis.
p. Income Taxes:
The tax expense for the period comprises current and deferred
tax. Tax is recognized in Statement of Profit and Loss, except
to the extent that it relates to items recognized in the OCI or in
equity. In which case, the tax is also recognized in OCI or equity.
Current Tax:
Current tax assets and liabilities are measured at the amount
expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the
amount are those that are enacted or substantively enacted,
at the reporting date in the countries where the Company
operates and generates taxable income.
The management periodically evaluates positions taken in
the tax returns with respect to situations in which applicable
Provisions are recognized when the Company has a present
obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made on the amount of the obligation.
If the effect of the time value of money is material, provisions
are discounted using a current pre-tax rate that reflects
current market assessment of time value of money and, where
appropriate, the risks specific to the liability. Unwinding of the
discount is recognized in the Statement of Profit and Loss as
a finance cost. Provisions are reviewed at each reporting date
and are adjusted to reflect the current best estimate.
Contingent liabilities are also disclosed when there is a possible
obligation arising from past events, the existence of which will
be confirmed only by the occurrence or non -occurrence of one
or more uncertain future events not wholly within the control
of the Company. Claims against the Company where the
possibility of any outflow of resources in settlement is remote,
are not disclosed as contingent liabilities.
Contingent assets are not recognized in financial statements
since this may result in the recognition of income that may
never be realized. However, when the realization of income
is virtually certain, then the related asset is not a contingent
asset and is recognized.
m. Revenue Recognition:
Revenue is recognized on the basis of approved contracts
regarding the transfer of goods or services to a customer for
an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services.
Revenue is recognized upon transfer of control of promised
products to customers. Revenue towards satisfaction of
a performance obligation is measured at the amount of
transaction price (net of variable consideration) allocated to
that performance obligation, in accordance with Ind AS115 “
Revenue from contract with customers”. Amounts disclosed
as revenue are net of sales returns and allowances, trade
discounts and Goods and service tax.
Interest Income is recognised on a time proportion basis taking into
account the amount outstanding and the interest rate applicable
Export Incentives are accounted for to the extent considered
recoverable by the Management.
Rental income on assets given under operating lease
arrangements is recognized on a straight-line basis over
the period of the lease unless the receipts are structured to
increase in line with expected general inflation to compensate
for the Company’s expected inflationary cost increases.
n. Lease:
The determination of whether an arrangement is (or contains)
a lease is based on the substance of the arrangement at the
inception of the lease. The arrangement is, or contains, a lease
if fulfilment of the arrangement is dependent on the use of a
specific asset, or assets and the arrangement conveys a right
or control to use the asset, or assets even if that right is not
explicitly specified in an arrangement.
The arrangement conveys the right to control the use of an
identified asset, if it involves the use of an identified asset
and the Company has substantially all of the economic
benefits from use of the asset and has right to direct the use
of the identified asset. The cost of the right-of-use asset shall
comprise of the amount of the initial measurement of the lease
liability adjusted for any lease payments made at or before the
commencement date plus any initial direct costs incurred. The
right-of-use assets is subsequently measured at cost less any
accumulated depreciation, accumulated impairment losses, if
any and adjusted for any remeasurement of the lease liability.
The right-of-use assets is depreciated using the straight-line
method from the commencement date over the shorter of
lease term or useful life of right-of-use asset.
The Company measures the lease liability at the present value
of the lease payments that are not paid at the commencement
date of the lease. The lease payments are discounted using
the interest rate implicit in the lease, if that rate can be readily
determined. If that rate cannot be readily determined, the
Company uses incremental borrowing rate.
For short-term and low value leases, the Company recognises
the lease payments as an operating expense on a straight-line
basis over the lease term.
o. Employee Benefit Expense:
Defined benefit plan:
The Company pays gratuity to the employees whoever has
completed five years of service with the Company at the time
of resignation/superannuation. The gratuity liability amount is
contributed to the approved gratuity fund formed exclusively
for gratuity payment to the employees.
The liability in respect of gratuity and other post-employment
benefits is calculated using the Projected Unit Credit Method
and spread over the period during which the benefit is
expected to be derived from employees’ services.
Re-measurement of defined benefit plans in respect of post¬
employment are charged to the Other Comprehensive Income.
Re-measurement recognised in Other Comprehensive Income
(‘OCI’) is reflected immediately in retained earnings and will
not be reclassified to Statement of Profit and Loss.
The present value of the defined benefit plan liability is
calculated using a discount rate which is determined by
reference to market yields at the end of the reporting period
on government bonds.
The defined benefit obligation recognised in the Balance
Sheet represents the actual deficit or surplus in the Company’s
defined benefit plans. Any surplus resulting from this
calculation is limited to the present value of any economic
benefits available in the form of refunds from the plans or
reductions in future contributions to the plans.
Defined contribution plan:
Employee benefits in the form of contribution to
superannuation fund, provident fund managed by Government
authorities, Employee state Insurance Corporation and Labour
Welfare Fund are considered as defined contribution plan and
the same is charged to Statement of Profit or Loss for the year
when the contributions to the respective funds are due.
Other long-term employee benefits:
The Company has a scheme for leave encashment for
employee, the liability for which is determined on the basis of
an actuarial valuation carried out at the end of the year using
Projected Unit Credit method.
Short Term Employee Benefits:
Short-term employee benefits are recognised as an expense on
accrual basis.
p. Income Taxes:
The tax expense for the period comprises current and deferred
tax. Tax is recognized in Statement of Profit and Loss, except
to the extent that it relates to items recognized in the OCI or in
equity. In which case, the tax is also recognized in OCI or equity.
Current Tax:
Current tax assets and liabilities are measured at the amount
expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the
amount are those that are enacted or substantively enacted,
at the reporting date in the countries where the Company
operates and generates taxable income.
The management periodically evaluates positions taken in
the tax returns with respect to situations in which applicable
Deferred Tax:
Deferred tax is recognized on temporary differences between
the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the
computation of taxable profit.
Deferred tax liabilities and assets are measured at the tax rates
that are expected to apply in the period in which the liability is
settled or the asset realised, based on tax rates (and tax laws)
that have been enacted or substantively enacted by the end of
the reporting period.
Deferred tax assets and liabilities are offset if there is a legally
enforceable right to offset current tax liabilities and assets, and
they relate to income taxes levied by the same tax authority,
but they intend to settle current tax liabilities and assets on
a net basis or their tax assets and liabilities will be realized
simultaneously.
A deferred tax asset is recognized only to the extent that it is
probable that future taxable profits will be available against
which the temporary difference can be utilised. Deferred tax
assets are reviewed at each reporting date and are reduced to
the extent that it is no longer probable
q. Foreign Currency Transactions:
Transactions denominated in foreign currencies are recorded
at the exchange rates prevailing on the date of the transaction.
As at balance sheet date, foreign currency monetary items are
translated at closing exchange rate. Foreign currency non¬
monetary items carried at fair value are translated at the rates
prevailing at the date when the fair value was determined.
Foreign currency non-monetary items measured in terms of
historical cost are translated using the exchange rate as at the
date of initial transactions.
Exchange difference arising on settlement or translation of
foreign currency monetary items are recognized as income
or expense in the year in which they arise except to the
extent exchange differences are regarded as an adjustment to
interest cost on those foreign currency borrowings relating to
assets under construction for future productive use, which are
included in the cost of those assets when they are regarded
as an adjustment to interest costs on those foreign currency
borrowings
r. Earnings Per Share:
The basic Earnings Per Share (“EPS”) is computed by dividing
the net profit/(loss) after tax for the year attributable to the
equity shareholders by the weighted average number of equity
shares outstanding during the year. The weighted average
number of equity shares outstanding during the period is
adjusted for events of bonus issue and share split, if any that
have changed the number of equity shares outstanding,
without a corresponding change in resources.
For the purpose of calculating diluted EPS, net profit/(loss) after
tax for the year attributable to the equity shareholders and the
weighted average number of equity shares outstanding during
the year are adjusted for the effects of all dilutive potential
equity shares.
s. 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 & Financial
Liabilities are recognized when the Company becomes party
to contractual provisions of the relevant instrument.
Initial Measurement:
At initial recognition, the Company measures a financial asset
and financial liabilities at its 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 and
ancillary costs related to borrowings) 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 Statement of Profit and Loss.
Classification and Subsequent Measurement: Financial Assets
The Company classifies financial assets as subsequently
measured at amortised cost, fair value through other
comprehensive income (“FVOCI”) or fair value through profit
or loss (“FVTPL”) on the basis of following:
• The entity’s business model for managing the financial
assets; and
• The contractual cash flow characteristics of the
financial asset.
Amortised Cost:
A financial asset shall be classified and measured at amortised
cost if both of the following conditions are met:
• The financial asset is held within a business model whose
objective is to hold financial assets in order 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 (SPPI) on the principal amount
outstanding.
After initial measurement, such financial assets are
subsequently measured at amortised cost using the effective
interest rate (EIR) method. Amortised cost is calculated by
taking into account any discount or premium on acquisition
and fees or costs that are an integral part of the EIR. The EIR
amortisation is included in finance income in the statement
of profit or loss. The losses arising from impairment are
recognised in the statement of profit or loss. This category
generally applies to trade and other receivables.
Fair Value through Other Comprehensive Income (‘FVOCI’):
A financial asset shall be classified and measured at FVOCI if
both of the following conditions are met:
• The financial asset is held within a business model whose
objective is achieved by both collecting contractual cash
flows and selling financial assets; and
• The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments
of principal and interest (SPPI) on the principal amount
outstanding.
Deferred Tax:
Deferred tax is recognized on temporary differences between
the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the
computation of taxable profit.
Deferred tax liabilities and assets are measured at the tax rates
that are expected to apply in the period in which the liability is
settled or the asset realised, based on tax rates (and tax laws)
that have been enacted or substantively enacted by the end of
the reporting period.
Deferred tax assets and liabilities are offset if there is a legally
enforceable right to offset current tax liabilities and assets, and
they relate to income taxes levied by the same tax authority,
but they intend to settle current tax liabilities and assets on
a net basis or their tax assets and liabilities will be realized
simultaneously.
A deferred tax asset is recognized only to the extent that it is
probable that future taxable profits will be available against
which the temporary difference can be utilised. Deferred tax
assets are reviewed at each reporting date and are reduced to
the extent that it is no longer probable
q. Foreign Currency Transactions:
Transactions denominated in foreign currencies are recorded
at the exchange rates prevailing on the date of the transaction.
As at balance sheet date, foreign currency monetary items are
translated at closing exchange rate. Foreign currency non¬
monetary items carried at fair value are translated at the rates
prevailing at the date when the fair value was determined.
Foreign currency non-monetary items measured in terms of
historical cost are translated using the exchange rate as at the
date of initial transactions.
Exchange difference arising on settlement or translation of
foreign currency monetary items are recognized as income
or expense in the year in which they arise except to the
extent exchange differences are regarded as an adjustment to
interest cost on those foreign currency borrowings relating to
assets under construction for future productive use, which are
included in the cost of those assets when they are regarded
as an adjustment to interest costs on those foreign currency
borrowings
r. Earnings Per Share:
The basic Earnings Per Share (“EPS”) is computed by dividing
the net profit/(loss) after tax for the year attributable to the
equity shareholders by the weighted average number of equity
shares outstanding during the year. The weighted average
number of equity shares outstanding during the period is
adjusted for events of bonus issue and share split, if any that
have changed the number of equity shares outstanding,
without a corresponding change in resources.
For the purpose of calculating diluted EPS, net profit/(loss) after
tax for the year attributable to the equity shareholders and the
weighted average number of equity shares outstanding during
the year are adjusted for the effects of all dilutive potential
equity shares.
s. 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 & Financial
Liabilities are recognized when the Company becomes party
to contractual provisions of the relevant instrument.
Initial Measurement:
At initial recognition, the Company measures a financial asset
and financial liabilities at its 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 and
ancillary costs related to borrowings) 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 Statement of Profit and Loss.
Classification and Subsequent Measurement: Financial Assets
The Company classifies financial assets as subsequently
measured at amortised cost, fair value through other
comprehensive income (“FVOCI”) or fair value through profit
or loss (“FVTPL”) on the basis of following:
• The entity’s business model for managing the financial
assets; and
• The contractual cash flow characteristics of the
financial asset.
Amortised Cost:
A financial asset shall be classified and measured at amortised
cost if both of the following conditions are met:
• The financial asset is held within a business model whose
objective is to hold financial assets in order 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 (SPPI) on the principal amount
outstanding.
After initial measurement, such financial assets are
subsequently measured at amortised cost using the effective
interest rate (EIR) method. Amortised cost is calculated by
taking into account any discount or premium on acquisition
and fees or costs that are an integral part of the EIR. The EIR
amortisation is included in finance income in the statement
of profit or loss. The losses arising from impairment are
recognised in the statement of profit or loss. This category
generally applies to trade and other receivables.
Fair Value through Other Comprehensive Income (‘FVOCI’):
A financial asset shall be classified and measured at FVOCI if
both of the following conditions are met:
• The financial asset is held within a business model whose
objective is achieved by both collecting contractual cash
flows and selling financial assets; and
• The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments
of principal and interest (SPPI) on the principal amount
outstanding.
Financial Asset included within the FVOCI category are
measured initially as well as at each reporting date at fair
value. Fair value movements are recognised in the Other
Comprehensive Income (OCI). However, the Company
recognizes interest income, impairment losses & reversals and
foreign exchange gain or loss in the Statement of Profit and
Loss. On de-recognition of the asset, cumulative gain or loss
previously recognised in OCI is re-classified from the equity to
Statement of Profit and Loss. Interest earned whilst holding
FVTOCI debt instrument is reported as interest income using
the EIR method.
Fair Value through Profit or Loss (‘FVTPL’):
FVTPL is a residual category for Financial Asset. Any debt
instrument, which does not meet the criteria for categorization
as at amortised cost or as FVOCI, is classified as at FVTPL.
Financial Assets included within the FVTPL category are
measured at fair value with all changes recognized in the
Statement of Profit and Loss.
All recognised financial assets are subsequently measured in
their entirety at either amortised cost or fair value, depending
on the classification of the financial assets.
Equity instruments:
All equity investments in scope of Ind AS 109 are measured at fair
value. Equity instruments which are held for trading are classified
as at FVTPL. For all other equity instruments, the Company
decides to classify the same either as at FVTOCI or FVTPL. The
Company makes such election on an instrument-by-instrument
basis. Where the Company’s management has elected to present
fair value gains and losses on equity investments in other
comprehensive income, there is no subsequent reclassification
of fair value gains and losses to the Statement of Profit and Loss.
Dividends from such investments are recognized in the Statement
of Profit and Loss as other income when the Company’s right to
receive payments is established.
Impairment of financial assets:
The Company assesses on a forward looking basis the expected
credit losses associated with its assets. The impairment
methodology applied depends on whether there has been a
significant increase in credit risk.
For Financial Assets, the Company applies ‘simplified approach’
as specified under Ind AS 109, which requires expected
lifetime losses to be recognised from initial recognition of
the receivables. The application of simplified approach does
not require the Company to track changes in credit risk. The
provision matrix is prepared based on historically observed
default rates over the expected life of trade receivables and
is adjusted for forward-looking estimates. At each reporting
date, the historically observed default rates and changes in the
forward-looking estimates are updated.
Derecognition of Financial Instruments:
The Company derecognises 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. If the Company retains substantially all the
risks and rewards of ownership of a transferred financial asset,
the Company continues to recognise the financial asset and also
recognises a collateralised borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the
difference between the asset’s carrying amount and the sum of
the consideration received and receivable and the cumulative
gain or loss that had been recognised in other comprehensive
income and accumulated in equity is recognised in statement
of profit or loss if such gain or loss would have otherwise been
recognised in statement of profit or loss on disposal of that
financial asset.
On derecognition of a financial asset other than in its entirety
(e.g. when the Company retains an option to repurchase part
of a transferred asset), the Company allocates the previous
carrying amount of the financial asset between the part
it continues to recognise under continuing involvement,
and the part it no longer recognises on the basis of the
relative fair values of those parts on the date of the transfer.
The difference between the carrying amount allocated to
the part that is no longer recognised and the sum of the
consideration received for the part no longer recognised
and any cumulative gain or loss allocated to it that had been
recognised in other comprehensive income is recognised in
statement of profit or loss if such gain or loss would have
otherwise been recognised in statement of profit or loss on
disposal of that financial asset. A cumulative gain or loss
that had been recognised in other comprehensive income is
allocated between the part that continues to be recognised
and the part that is no longer recognised on the basis of the
relative fair values of those parts.
Classification and Subsequent Measurement: Financial
Liabilities
Fair Value Measurement:
The Company measures financial instruments, such as
investments (other than equity investments in Subsidiaries,
Joint Ventures and Associates) and derivatives at fair values at
each Balance Sheet date.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction
to sell the asset or transfer the liability takes place either. In the
principal market for the asset or liability, or In the absence of
a principal market, in the most advantageous market for the
asset or liability.
The fair value of an asset or a liability is measured using the
assumptions that market participants would use when pricing
the asset or liability, assuming that market participants act in
their economic best interest.
A fair value measurement of a non-financial asset takes into
account a market participant’s ability to generate economic
benefits by using the asset in its highest and best use or by
selling it to another market participant that would use the
asset in its highest and best use.
The Company uses valuation techniques that are appropriate in
the circumstances and for which sufficient data are available to
measure fair value, maximising the use of relevant observable
inputs and minimising the use of unobservable inputs.
All assets and liabilities (for which fair value is measured
or disclosed in the financial statements) are categorised
within the fair value hierarchy, described as follows, based
on the lowest level input that is significant to the fair value
measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets
for identical assets or liabilities.
Level 2 - Valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly or
indirectly observable other than quoted prices included in
level 1.
Level 3 - Valuation techniques for which the lowest level
input that is significant to the fair value measurement is
unobservable.
For assets and liabilities that are recognised in the financial
statements on a recurring basis, the Group determines whether
transfers have occurred between levels in the hierarchy by re¬
assessing categorisation (based on the lowest level input that
is significant to the fair value measurement as a whole) at the
end of each reporting period.
The Management determines the policies and procedures
for both recurring fair value measurement, such as derivative
instruments and unquoted financial assets measured at fair
value, and for non-recurring measurement, such as assets held
for disposal in discontinued operations.
At each reporting date, Management analyses the movements
in the values of assets and liabilities, which are required to
be remeasured or re-assessed as per the Group’s accounting
policies. For this analysis, the Management verifies the
major inputs applied in the latest valuation by agreeing the
information in the valuation computation to contracts and
other relevant documents.
Financial Liabilities:
Financial liabilities are classified, at initial recognition as fair
value through profit or loss:
• Loans and borrowings;
• Payables; or
• As derivatives designated as hedging instruments in an
effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value,
and in the case of loans and borrowings and payables are
recognised net of directly attributable transaction costs. The
Group’s financial liabilities include trade and other payables,
loans and borrowings, including bank overdrafts, financial
guarantee contracts and derivative financial instruments.
Subsequent Measurement:
The measurement of financial liabilities depends on their
classification, as described below:
Financial Liabilities at FVTPL:
Financial liabilities at FVTPL include financial liabilities held
for trading and financial liabilities designated upon initial
recognition as at FVTPL. Financial liabilities are classified
as held for trading, if they are incurred for the purpose of
repurchasing in the near term. This category also includes
derivative financial instruments entered into by the Group,
that are not designated as hedging instruments in hedge
relationships as defined by Ind AS 109. Separated embedded
derivatives are also classified as held for trading, unless they
are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised
in the Statement of Profit and Loss. Financial liabilities,
designated upon initial recognition at FVTPL, are designated
as such at the initial date of recognition, and only if the criteria
in Ind AS 109 are satisfied.
Loans and Borrowings:
After initial recognition, interest-bearing loans and borrowings
are subsequently measured at amortised cost using the
Effective Interest Rate (EIR) method. Gains and losses
are recognised in the Statement of Profit and Loss, when
the liabilities are derecognised as well as through the EIR
amortisation process.
Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that are
an integral part of the EIR. The EIR amortisation is included as
finance costs in the Statement of Profit and Loss.
De-recognition of Financial Liabilities:
The Group de-recognises financial liabilities when and only
when, the Group’s obligations are discharged, cancelled or
have expired. The difference between the carrying amount of
the financial liability de-recognised and the consideration paid
and payable is recognised in Statement of Profit and Loss.
t. Cash and cash equivalent
Cash and cash equivalents in the Balance Sheet comprise
cash at bank and in hand, including fixed deposit with original
maturity period of three months or less and short-term highly
liquid investments with an original maturity of three months
or less, that are readily convertible into cash which are subject
to insignificant risk of changes in value and are held for the
purpose of meeting short-term cash commitments.
u. Cash Flow Statement:
Cash flows are reported using the indirect method, whereby the
net profit before tax is adjusted for the effects of transactions
of a non-cash nature, any deferrals or accruals of past or future
operating cash receipts or payments and item of income or
expenses associated with investing or financing cash flows. The
cash flows from operating, investing and financing activities of
the Company are segregated.
v. Derivative Financial Instruments and Hedge Accounting:
The Company enters into derivative financial instruments viz.
foreign exchange forward contracts to manage its exposure
foreign exchange rate risks. The Company formally establishes
a hedge relationship between such forward currency contracts
(‘hedging instrument’) and recognized financial liabilities
(‘hedged item’) through a formal documentation at the
inception of the hedge relationship in line with the Company’s
Risk Management objective and strategy. The Company does not
hold derivative financial instruments for speculative purposes.
Derivatives are initially recognized at fair value at the date the
derivative contracts are entered into and are subsequently
remeasured to their fair value at the end of each reporting
period. The resulting gain or loss is recognized in statement of
profit or loss immediately excluding derivatives designated as
cash flow hedge.
Recognition and measurement of fair value hedge:
Hedging instrument is initially recognized at fair value on the date
on which a derivative contract is entered into and is subsequently
measured at fair value at each reporting date. Gain or loss arising
from changes in the fair value of hedging instrument is recognized
in the Statement of Profit and Loss. Hedging instrument is
recognized as a financial asset in the Balance Sheet if its fair value
as at reporting date is positive as compared to carrying value and
as a financial liability if its fair value as at reporting date is negative
as compared to carrying value.
Hedged item (recognized financial liability) is initially
recognized at fair value on the date of entering into contractual
obligation and is subsequently measured at amortized cost.
The hedging gain or loss on the hedged item is adjusted to the
carrying value of the hedged item as per the effective interest
method and the corresponding effect is recognized in the
Statement of Profit and Loss.
On Derecognition of the hedged item, the unamortized fair
value of the hedging instrument is recognized in the Statement
of Profit and Loss
w. Segment Reporting
Identification of Segments:
An operating segment is a component of the Company that
engages in business activities from which it may earn revenues
and incur expenses, whose operating results are regularly
reviewed by the Company’s management to make decisions
for which discrete financial information is available. Operating
Segments are identified based on monitoring of operating
results by the chief operating decision maker (CODM)
separately for the purpose of making decision about resource
allocation and performance assessment.
Operating Segment is identified based on the nature of
products and services, the different risks and returns, and the
Internal Business Reporting System.
Based on the management approach as defined in Ind AS 108,
the management evaluates the Company’s performance and
allocates resources based on an analysis of various performance
indicators by business segments and geographic segments.
x. Cash Dividend to Equity Holders of the Company:
The Company recognises a liability to make cash distributions
to equity holders of the Company when the distribution is
authorised and the distribution is no longer at the discretion of
the Company. As per the corporate laws in India, a distribution
is authorised when it is approved by the shareholders. A
corresponding amount is recognised directly in other equity.
NOTE - 1(B) SIGNIFICANT ACCOUNTING
JUDGEMENTS AND ESTIMATES
The preparation of the financial statements in conformity with
Ind AS requires management to make judgments, estimates
and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities, income
and expenses. Uncertainty about these assumptions and
estimates could result in outcomes that require a material
adjustment to the carrying amount of assets or liabilities
affected in future periods.
Estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimates are revised and
in any future periods affected.
In particular, information about significant areas of estimation,
uncertainty and critical judgments in applying accounting
policies that have the most significant effect on the amounts
recognized in the financial statements are included in the
following notes:
(i) Useful Lives of Property, Plant & Equipment:
Property, Plant and Equipment represent a significant
proportion of the asset base of the Company. The charge in
respect of periodic depreciation is derived after determining
an estimate of an asset’s expected useful life. The useful lives
of the Company’s assets are determined by the management
at the time the asset is acquired and reviewed periodically,
including at each financial year end. The lives are based on
historical experience with similar assets as well as anticipation
of future events, which may impact their life, such as changes
in technical or commercial obsolescence arising from changes
or improvements in production or from a change in market
demand of the product or service output of the asset.
(ii) Defined Benefit Plans and Compensated Absences:
The cost of the defined benefit plans, compensated absences
and the present value of the defined benefit obligation are
based on actuarial valuation using the projected unit credit
method. 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 and mortality rates.
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.
(iii) Expected Credit Losses on Financial Assets:
The impairment provisions of financial assets are based on
assumptions about risk of default and expected timing of
collection. The Company uses judgment in making these
assumptions and selecting the inputs to the impairment
calculation, based on the Company’s past history, customer’s
credit worthiness, existing market conditions as well as
forward looking estimates at the end of each reporting period.
(iv) Fair Value measurement of Financial Instruments:
When the fair values of financials assets and financial liabilities
recorded in the Balance Sheet cannot be measured based on
quoted prices in active markets, their fair value is measured
using valuation techniques, including the discounted cash flow
model, which involve various judgements and assumptions.
NOTE - 1(C) STANDARDS ISSUED BUT NOT YET
EFFECTIVE
Ministry of Corporate Affairs (“MCA”) notifies new standard
or amendments to the existing standards under Companies
(Indian Accounting Standards) Rules as issued from time to
time. On 31st March, 2023, MCA notified the Companies (Indian
Accounting Standards) Amendment Rules, 2022, applicable
from 1st April, 2023, as below:
I. Ind AS 1 - Presentation of Financial Statements - This
amendment requires the entities to disclose their material
accounting policies rather than their significant accounting
policies. The effective date for adoption of this amendment
is annual periods beginning on or after 1st April, 2023. The
Company has evaluated the amendment and the impact of
the amendment is insignificant in the standalone financial
statements.
II. Ind AS 8 - Accounting Policies, Changes in Accounting
Estimates and Errors - This amendment has introduced
a definition of ‘accounting estimates’ and included
amendments to Ind AS 8 to help entities distinguish changes
in accounting policies from changes in accounting estimates.
The effective date for adoption of this amendment is annual
periods beginning on or after 1st April, 2023. The Company
has evaluated the amendment and there is no impact on its
standalone financial statements.
III. Ind AS 12 - Income Taxes - This amendment has narrowed
the scope of the initial recognition exemption so that it does
not apply to transactions that give rise to equal and offsetting
temporary differences. The effective date for adoption of this
amendment is annual periods beginning on or after 1st April,
2023. The Company has evaluated the amendment and there
is no impact on its standalone financial statement.
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