(n) Provisions, Contingent Liabilities, Contingent
Assets and Commitments:
Provisions are recognised only 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 of the amount of the obligation.
When the Company expects some or all of a
provision to be reimbursed, for example, under
an insurance contract, the reimbursement is
recognised as a separate asset, but only when
the reimbursement is virtually certain. The
expense relating to a provision is presented
in the Statement of Profit and Loss net of any
reimbursement.
If the effect of the time value of money is material,
provisions are discounted using a current pre¬
tax rate that reflects, when appropriate, the risks
specific to the liability. When discounting is used,
the increase in the provision due to the passage
of time is recognised as a finance cost.
Contingent liability is disclosed in case of:
- a present obligation arising from past
events, when it is not probable that an
outflow of resources will be required to settle
the obligation
- a present obligation arising from past events,
when no reliable estimate is possible
- a possible obligation arising from past
events, unless the probability of outflow of
resources is remote.
Contingent asset is disclosed where an inflow of
economic benefits is probable.
Commitments include the amount of purchase
order (net of advances) issued to parties for
completion of assets.
Provisions, contingent liabilities, contingent
assets and commitments are reviewed at each
balance sheet date.
(o) Fair Value Measurement:
The Company measures financial instruments of
certain investments at fair value, 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 principal or the most
advantageous market must be accessible by
the Company.
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, maximizing the use of relevant observable
inputs and minimizing 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
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 Balance Sheet on a recurring basis, the
Company 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.
For the purpose of fair value disclosures, the
Company has determined classes of assets
and liabilities on the basis of the nature,
characteristics and risks of the asset or liability
and the level of the fair value hierarchy as
explained above.
(p) Financial Instruments:
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.
(i) Financial Assets-
The classification depends on the Company's
business model for managing the financial
assets and the contractual terms of the cash
flows.
For assets measured at fair value, gains
and losses will either be recorded in profit
or loss or other comprehensive income.
For investments in equity instruments, this
will depend on whether the Company has
made an irrevocable election at the time of
initial recognition to account for the equity
investment at fair value through OCI.
Initial Recognition and Measurement
Financial assets are recognized when the
Company becomes a party to the contractual
provisions of the instrument. Financial assets
are recognized initially at fair value plus, in
the case of financial assets not recorded at
fair value through profit or loss, transaction
costs that are attributable to the acquisition
of the financial asset. Transaction costs of
financial assets carried at fair value through
profit or loss are expensed in the Statement
of Profit and Loss.
Subsequent Measurement
After initial recognition, financial assets
(other than investments in subsidiaries and
joint ventures) are measured either at:
i) fair value (either through other
comprehensive income or through profit
or loss) or,
ii) amortized cost
Measured at Amortized Cost
Financial assets that are held within a
business model whose objective is to hold
financial assets in order to collect contractual
cash flows that are solely payments of
principal and interest, are subsequently
measured at amortized cost using the
effective interest rate (‘ElR’) method less
impairment, if any, the amortization of EIR
and loss arising from impairment, if any is
recognized in the Statement of Profit and
Loss.
Measured at Fair Value Through Other
Comprehensive Income (FVOCI)
Financial assets that are held within a
business model whose objective is achieved
by both, selling financial assets and
collecting contractual cash flows that are
solely payments of principal and interest,
are subsequently measured at fair value
through other comprehensive income. Fair
value movements are recognized in the OCI
net of taxes.
Interest income measured using the EIR
method and impairment losses, if any are
recognized in Profit and Loss.
Gains or Losses on De-recognition
in case of investment in equity instruments
classified as the FVOCI, the gains or losses on
de-recognition are re-classified to retained
earnings.
in case of investments in debt instruments
classified as the FVOCI, the gains or losses on
de-recognition are reclassified to Statement
of Profit and Loss.
Measured at Fair Value Through Profit or
Loss (FVTPL)
A financial asset not classified as either
amortized cost or FVOCI, is classified as
FVTPL. Such financial assets are measured
at fair value with all changes in fair value,
including interest income and dividend
income if any, recognized as ‘other income' in
the Statement of Profit and Loss.
The Company measures all its investments in
equity (other than investments in subsidiaries
and joint ventures) and mutual funds at
FVTPL.
Changes in the fair value of financial assets
measured at fair value through profit or loss
are recognized in Statement of Profit and
Loss.
impairment losses (and reversal of
impairment losses) on equity investments
measured at FVTPL are recognised in
Statement of Profit and Loss.
Impairment of Financial Assets
The Company assesses on a forward
looking basis the expected credit losses
associated with its financial assets carried at
amortized cost, FVTPL and FVOCI and debt
instruments. The impairment methodology
applied depends on whether there has been
a significant increase in credit risk.
For trade receivable only, the Company
applies the simplified approach permitted
by Ind AS - 109 “Financial Instruments”,
which requires expected lifetime losses to
be recognised from initial recognition of such
receivables.
De-Recognition
A financial asset is de-recognized only when
i) The Company has transferred the rights
to receive cash flows from the financial
asset or
ii) Retains the contractual rights to receive
the cash flows of the financial asset, but
assumes a contractual obligation to pay
the cash flows to one or more recipients.
Where the entity has transferred an
asset, the Company evaluates whether it
has transferred substantially all risks and
rewards of ownership of the financial asset.
In such cases, the financial asset is de¬
recognized.
Where the entity has not transferred
substantially all risks and rewards of
ownership of the financial asset, the financial
asset is not de-recognized.
Where the entity has neither transferred
a financial asset nor retains substantially
all risks and rewards of ownership of the
financial asset, the financial asset is de¬
recognized if the Company has not retained
control of the financial asset.
Where the Company retains control of the
financial asset, the asset is continued to
be recognized to the extent of continuing
involvement in the financial asset.
(ii) Financial liabilities-
Classification as Debt or Equity
Financial liabilities and equity instruments
issued by the Company are classified
according to the substance of the
contractual arrangements entered into and
the definitions of a financial liability and an
equity instrument.
Initial Recognition and Measurement
Financial liabilities are recognized when
the Company becomes a party to the
contractual provisions of the instrument.
Financial liabilities are initially measured at
fair value.
Subsequent Measurement
Financial liabilities other than those
measured at fair value through Statement of
Profit and Loss are subsequently measured
at amortized cost using the effective interest
rate method. The Company measures all
debt instruments at amortised.
Financial liabilities carried at fair value
through profit or loss are measured at fair
value with all changes in fair value recognized
in Profit and Loss.
De-recognition
A financial liability is derecognized when
the obligation specified in the contract is
discharged, cancelled or expires.
Offsetting Financial Instruments
Financial assets and liabilities are offset and
the net amount is reported in the Balance
Sheet where there is a legally enforceable
right to offset the recognized amounts and
there is an intention to settle on a net basis
or realize the asset and settle the liability
simultaneously. The legally enforceable right
must not be contingent on future events and
must be enforceable in the normal course
of business and in the event of default,
insolvency or bankruptcy of the Company or
the counterparts.
(q) Interests in Joint Arrangements:W
Under Ind AS 111 “Joint Arrangements”,
investments in joint arrangements are classified
as either joint operations or joint ventures. The
classification depends on the contractual rights
and obligations of each investor, rather than
the legal structure of the joint arrangement. The
Company has joint operations.
Joint operations
The Company recognises its direct right to
the assets, liabilities, revenues and expenses
of joint operations and its share of any jointly
held or incurred assets, liabilities, revenues and
expenses. These have been incorporated in the
Financial Statements under the appropriate
headings.
(r) Segment Reporting:
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 Chief Operating
Decision Maker (CODM) to make decisions for
which discrete financial information is available.
Based on the management approach as defined
in Ind AS 108 “Operating Segments”, the CODM
evaluates the Company's performance and
allocates resources based on an analysis of
various performance indicators by business
segments and geographic segments.
3 SIGNIFICANT ACCOUNTING JUDGEMENTS,
ESTIMATES AND ASSUMPTIONS:
The preparation of the Company's Financial
Statements requires management to make
judgements, estimates and assumptions that affect
the reported amounts of revenues, expenses, assets
and liabilities, and the accompanying disclosures, and
the disclosure of contingent liabilities. 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.
Judgements, Estimates and Assumptions
The key assumptions concerning the future and
other key sources of estimation uncertainty at the
reporting date, that have a significant risk of causing
a material adjustment to the carrying amounts
of assets and liabilities within the next financial
year, are described below. The Company based its
assumptions and estimates on parameters available
when the financial statements were prepared.
Existing circumstances and assumptions about
future developments, however, may change due to
market changes or circumstances arising that are
beyond the control of the Company. Such changes
are reflected in the assumptions when they occur.
(a) Impairment of Non-Financial Assets
The Company assesses at each reporting date
whether there is an indication that an asset
may be impaired. If any indication exists, or
when annual impairment testing for an asset
is required, the Company estimates the asset's
recoverable amount.
(b) Estimation of Defined Benefit Obligations/ 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.
(c) Impairment of Financial Assets
The impairment provisions for financial assets
are based on assumptions about risk of default
and expected loss rates. The Company uses
judgement in making these assumptions
and selecting the inputs to the impairment
calculation, based on Company's history, existing
market conditions as well as forward looking
estimates at the end of each reporting period.
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