xvi. Provisions, Contingent Liabilities and Contingent Assets
Provisions are recognised when there is a present legal or constructive obligation as a result of past events and it is probable
that an outflow of resources embodying economic benefits will be required to settle the obligation and the amount can be
reliably estimated. Provisions are not recognized for future operating losses.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the
present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate
that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the
provision due to the passage of time is recognised as interest expense.
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the
occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present
obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the
obligation, or the amount of the obligation cannot be measured with sufficient reliability. The Company does not
recognize a contingent liability but discloses its existence in the financial statements
A contingent asset is a possible asset that arises from past events and whose existence 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.
Contingent assets are not recognized, but its existence is disclosed in the financial statements
xvii. Impairment of Non-Financial Assets
The company assesses at each reporting date whether there is any objective evidence that a non-financial asset or a group
of non-financial assets are impaired. If any such indication exists, the company estimates the amount of impairment loss.
For the purpose of assessing impairment, the smallest identifiable group of assets that generates cash inflows from
continuing use that are largely independent of the cash inflows from other assets or group of assets is considered as cash
generating unit. If any such indication exists, an estimate of the recoverable amount of the individual asset/cash generating
unit is made.
An impairment loss is calculated as the difference between an asset’s carrying amount and recoverable amount. Losses are
recognized in profit or loss and reflected in an allowance account. When the company considers that there are no realistic
prospects of recovery of the asset, the relevant amounts are written off. If the amount of impairment loss subsequently
decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, then the
previously recognized impairment loss is reversed through profit or loss.
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased
to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been in place had there been no impairment loss been recognized for the asset (or cash-generating
unit) in prior years. A reversal of an impairment loss is recognized immediately in Statement of Profit and Loss, taking into
account the normal depreciation/amortization.
xviii. 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 instruments also include derivative contracts such as foreign currency foreign
exchange forward contracts, interest rate swaps and currency options; and embedded derivatives in the host contract.
i. Financial assets
Classification
The Company shall classify financial assets and subsequently measured at amortised cost, fair value through other
comprehensive income (FVOCI) or fair value through profit or loss (FVTPL) on the basis of its business model for
managing the financial assets and the contractual cash flow characteristics of the financial asset.
Initial recognition and measurement
All financial assets are recognised initially at fair value. Transaction costs that are attributable to the acquisition of
the financial asset is adjusted to the fair value, in the case of financial assets not recorded at fair value through profit
or loss. Purchases or sales of financial assets that require delivery of assets within a time frame established by
regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that
the company commits to purchase or sell the asset.
Financial Assets measured at amortised cost
A financial asset is measured at the amortised cost if both the following conditions are met:
a) The asset is held within a business model whose objective is to hold assets for collecting contractual cash
flows, and
b) Contractual terms of the 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 and loss. The losses arising from impairment are recognised in the statement of profit and
loss. This category generally applies to trade and other receivables.
Financial Asset measured at fair value through other comprehensive income (FVOCI)
A financial asset is measured at FVOCI if both of the following criteria are met:
a) The objective of the business model is achieved both by collecting contractual cash flows and selling the
financial assets, and
b) The asset’s contractual cash flows represent SPPI.
Financial assets included within the FVOCI category are measured initially as well as at each reporting date at fair
value. Fair value movements are recognized in the other comprehensive income (OCI). However, the company
recognizes interest income, impairment losses & reversals and foreign exchange gain or loss in the profit and loss.
On derecognition of the non-derivative debt instruments designated at FVOCI, cumulative gain or loss previously
recognised in OCI is reclassified from the equity to profit and loss. Whereas on derecognition of the equity
instruments designated at FVOCI, cumulative gain or loss previously recognised in OCI is reclassified from the
equity to retained earnings.
Interest earned whilst holding FVOCI debt instrument is reported as interest income using the EIR method.
Financial Asset measured at fair value through profit and loss (FVTPL)
FVTPL is a residual category for financial asset. Any financial asset, which does not meet the criteria for categorization as
at amortized cost or as FVOCI, is classified as at FVTPL.
In addition, the company may elect to classify a financial asset, which otherwise meets amortized cost or FVOCI criteria,
as at FVTPL. However, such election is allowed only if doing so reduces or eliminates a measurement or recognition
inconsistency (referred to as ‘accounting mismatch’).
Financial assets included within the FVTPL category are measured at fair value with all changes recognized in the profit
and loss.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a company of similar financial assets) is
primarily derecognised (i.e. removed from the company’s balance sheet) when:
i. The rights to receive cash flows from the asset have expired, or
ii. The company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the
received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a)
the company has transferred substantially all the risks and rewards of the asset, or (b) the company has neither
transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
iii. When the company has transferred its rights to receive cash flows from an asset or has entered into a pass-through
arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither
transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the
company continues to recognise the transferred asset to the extent of the company’s continuing involvement. In that
case, the company also recognises an associated liability. The transferred asset and the associated liability are
measured on a basis that reflects the rights and obligations that the company has retained.
iv. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the
original carrying amount of the asset and the maximum amount of consideration that the company could be required
to repay.
Impairment of financial assets
In accordance with Ind-AS 109, the Company applies expected credit loss (ECL) model for measurement and recognition
of impairment loss on the following financial assets and credit risk exposure:
a) Financial assets that are debt instruments, and are measured at amortised cost e.g., loans, debt securities, deposits,
and bank balance.
b) Trade receivables.
The Company follows ‘simplified approach’ for recognition of impairment loss allowance on:
i. Trade receivables which do not contain a significant financing component.
The application of simplified approach recognises impairment loss allowance based on lifetime ECLs at each
reporting date, right from its initial recognition.
ii. For recognition of impairment loss on other financial assets and risk exposure, the Company determines that
whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased
significantly, 12-month ECL is used to provide for impairment loss. However, if credit risk has increased
significantly, lifetime ECL is used. If, in a subsequent period, credit quality of the instrument improves such that
there is no longer a significant increase in credit risk since initial recognition, then the entity reverts to recognising
impairment loss allowance based on 12-month ECL.
ii. Financial liabilities
Classification
The Company classifies all financial liabilities as subsequently measured at amortised cost, except for financial
liabilities at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, shall be
subsequently measured at fair value.
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at 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, net
of directly attributable transaction costs.
The company’s financial liabilities include trade and other payables, loans and borrowings including bank
overdrafts, financial guarantee contracts and derivative financial instruments.
Financial liabilities measured at fair value through profit or loss.
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair value through profit or loss. 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 profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial
date of recognition, and only if the criteria in Ind-AS 109 are satisfied. For liabilities designated as FVTPL, fair
value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/losses are not
subsequently transferred to P&L. However, the company may transfer the cumulative gain or loss within equity. All
other changes in fair value of such liability are recognised in the statement of profit or loss.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using
the EIR method. Gains and losses are recognised in profit or loss when the liabilities are de-recognised 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.
This category generally applies to interest-bearing loans and borrowings.
Derecognition
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or
the terms of an existing liability are substantially modified, such an exchange or modification is treated as the
derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying
amounts is recognised in the statement of profit or loss.
Offsetting
Financial assets and financial liabilities are offset and the net amount is presented in the balance sheet when, and
when the company has a legally enforceable right to set off the amount and it intends either to settle them on net basis
or to realize the asset and settle the liability simultaneously
xx. Derivative financial instruments
The company uses derivative financial instruments, such as forward currency contracts, interest rate swaps and forward
commodity contracts, to hedge its foreign currency risks, interest rate risks and commodity price risks, respectively. Such
derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered
into and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is
positive and as financial liabilities when the fair value is negative.
xxi. Measurement of fair values
The Company’s accounting policies and disclosures require the measurement of fair values for financial instruments.
The Company has an established control framework with respect to the measurement of fair values. The management
regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker
quotes or pricing services, is used to measure fair values, then the management assesses the evidence obtained from the
third parties to support the conclusion that such valuations meet the requirements of Ind AS, including the level in the fair
value hierarchy in which such valuations should be classified.
When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. Fair
values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as
follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then
the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level
input that is significant to the entire measurement.
The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during
which the change has occurred.
C. Recent Accounting Pronouncement
Ministry of Corporate Affairs (“MCA”) notifies new standards or amendments to the existing standards under
Companies (Indian Accounting Standards) Rules as issued from time to time. For the year ended March 31, 2025,
MCA has notified Ind AS - 117 Insurance Contract and amendments to Ind AS - 116 Leases, relating to sale and
leaseback transactions, these are effective from period beginning on or after 1st April, 2024. The company has
reviewed the new pronouncements and based on its evaluation has determined that it has no impact on the
company’s financial position.
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