Western India Regional Council of
The Institute of Chartered Accountants of India

(Setup by an Act of Parliament)

Anthology on Ind AS Accounting Policies


The last two decades have seen Indian companies expand internationally with operations spanningthe globe. Keeping in mind the need for a global standard and after detailed discussions with theNational Advisory Committee on Accounting Standards, the Ministry of Corporate Affairs gave thego ahead to implement the Indian Accounting Standards (Ind AS) in 2015. Ind AS was introducedto ensure consistent reporting on par with international standards, by harmonising standards withthe IFRS to make reporting by Indian companies more globally accessible.

In the last five years, Ind AS has seen a number of additions like ‘Leases’ and others take place. Iam confident that as implementation of Ind AS matures, we will see increased number of additionstake place.

...

This publication, following several publications on the subject is one more step forward in ourgoal of furthering education of Ind AS for all. The “Anthology of Ind AS Accounting Policies” hasbeen put together by various contributors in order to help members study Ind AS implementationsacross sectors and industries in order to better understand the scale and scope of this application.

I compliment CA Vishal P. Doshi, Vice-Chairman, WIRC; Co-ordinator CA Nikhil Agrawalla and histeam of expert contributors comprising CA. Amit Chheda, CA. Deepak Agarwal, CA. Gaurav Goyal,CA. Kajal Agarwal, CA. Manish Jajoo, CA. Parin Gala, CA. Sachin Khopde & CA. Santosh Jain, whosedeep study and tireless efforts have seen the compilation of 58 companies from 23 differentindustries. I thank them for contributing their valuable time in researching and putting togetherthe information for this anthology.

I am thankful to CA M.P. Vijay Kumar, Chairman – Accounting Standards Board, ICAI, for believingin us and giving us the idea to work on this publication for the benefit of members and students.I take this opportunity to congratulate all the members for enabling us to work on this publication.

I am confident that a deep-dive into Ind AS reporting from the perspective of these differentindustries will help our members develop a better and clearer understanding of the reportingstandards to be adopted. I am pleased to state that this publication will be freely available onthe WIRC website enabling all our members and students to derive maximum benefit from this publication.

Significant accounting policies is an important section of the financial statements. All stakeholdersrefer to the significant accounting policies while deciphering the financial numbers. The disclosureof significant accounting policies gives a conformation that the measurement requirements of theaccounting standards have been complied with. Further, it also gives users the option to comparethe different financial parameters amongst peers within an industry and identifies the need to makesuitable adjustments to make them comparable in case of different accounting policies.

The Indian Accounting Standards (Ind AS) have been successfully implemented in India in astaggered manner since 2016. During the last couple of years new Ind AS “Revenue for Contractswith Customers”

...

and “Leases” have also been introduced. Every year new companies satisfying therequired criteria implement Ind AS. To assist companies and their auditors in ensuring that significant accounting policies under IndAS disclosed are in conformity to the requirements of the standards and also meet stakeholders’expectations WIRC of ICAI has pleasure in presenting “Anthology of Ind AS Accounting Policies”which covers 58 companies spread over 23 different industries. This Anthology is being providedwith a search facility which will facilitate referencing based on company, industry, Ind AS or evena text search.

I would like to compliment the co-ordinator CA Nikhil Agrawalla and a team of 8 contributors whohave worked tirelessly to come out with this compilation for the benefit of members and industries.

I hope all stakeholders will take maximum benefit from this.

Contributors

  • CA. Nikhil Agrawalla
    (Coordinator)
  • CA. Amit Chheda
  • CA. Deepak Agarwal
  • CA. Gaurav Goyal
  • CA. Kajal Agarwal
  • CA. Manish Jajoo
  • CA. Parin Gala
  • CA. Sachin Khopde
  • CA. Santosh Jain

Guide: The user can apply filters / search to get the requisite results


  • FILTERS BY :
Sr. No Name of Company Industry Type Ind AS Text of Accounting Policy
1 ABB India Ltd. Engineering Ind AS 1 Presentation of Financial Statements Basis of measurement The financial statements have been prepared on the historical cost convention basis except for certain financial instruments (refer accounting policy regarding financial instruments) which are measured at fair values at the end of each reporting period as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services as at the date of respective transactions.
2 ABB India Ltd. Engineering Ind AS 102 Share based Payment Share based compensation The company recognizes compensation expense relating to share-based payments in net profit using fair-value in accordance with Ind AS 102 Share-Based Payment. The estimated fair value of awards is charged to income on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was in-substance multiple awards with a corresponding increase to share options outstanding account. Equity-settled transactions The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model. That cost is recognised together with a corresponding increase in share-based payment (SBP) reserves in equity over the period in which the performance and/or service conditions are fulfilled in employee benefits expense. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Companys best estimate of the number of equity instruments that will ultimately vest. The expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense.
3 ABB India Ltd. Engineering Ind AS 105 Non current Assets Held for Sale and D Non-current assets held for sale and discontinued operations Non-current assets (including disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. Non-current assets classified as held for sale are measured at lower of their carrying amount and fair value less cost to sell. Non-current assets classified as held for sale are not depreciated or amortised from the date when they are classified as held for sale. An impairment loss is recognized for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognized for any subsequent increases in fair value less costs to sell of an asset (or disposal group) but not in excess of any cumulative impairment loss previously recognized. A gain or loss not previously recognized by the date of the sale of the noncurrent asset (or disposal group) is recognized at the date of de-recognition. Non-current assets classified as held for sale and the assets and liabilities of a disposal group classified as held for sale are presented separately from the other assets and liabilities in the balance sheet. A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and: (a) represents a separate major line of business or geographical area of operations and; (b) is part of a single co-ordinated plan to dispose of such a line of business or area of operations. The results of discontinued operations are presented separately in the statement of profit and loss. The comparative statement of profit and loss is re-presented as if the operation had been discontinued from the start of the comparative period.
4 ABB India Ltd. Engineering Ind AS 109 Financial Instruments Financial instruments 2.17.1 Initial recognition The Company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities that are not at fair value through profit or loss are added to the fair value on initial recognition. 2.17.2 Subsequent measurement a. Non-derivative financial instruments (i) Financial assets carried at amortised cost A financial asset is subsequently measured at amortised cost if it is held within a business where the objective is to hold the asset 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 on the principal amount outstanding. (ii) Financial assets at fair value through other comprehensive income A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business where the 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 on the principal amount outstanding. The Company has made an irrevocable election for its investments which are classified as equity instruments to present the subsequent changes in fair value in other comprehensive income based on its business model. Further in cases where the Company has made an irrevocable election based on its business model for its investments which are classified as equity instruments the subsequent changes in fair value are recognized in other comprehensive income. (iii) Financial assets at fair value through profit or loss A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss. (iv) Financial liabilities Financial liabilities are subsequently carried at amortized cost using the effective interest method For trade and other payables maturing within one year from the balance sheet date the carrying amounts approximate fair value due to the short maturity of these instruments. (v) Derecognition A financial asset is primarily derecognised when: The rights to receive cash flows from the asset have expired or 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. 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. b. Derivative financial instruments The company holds derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank. Financial assets or financial liabilities at fair value through profit or loss. This category has derivative financial assets or liabilities which are not designated as hedges. Although the company believes that these derivatives constitute hedges from an economic perspective they may not qualify for hedge accounting under Ind AS 109 Financial Instruments. Any derivative that is either not designated a hedge or is so designated but is ineffective as per Ind AS 109 is categorized as a financial asset or financial liability at fair value through profit or loss. Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs are recognized in the statement of profit and loss. when incurred. Subsequent to initial recognition these derivatives are measured at fair value through profit or loss and the resulting exchange gains or losses are included in other income / expenses. Assets/ liabilities in this category are presented as current assets/current liabilities if they are either held for trading or are expected to be realized within 12 months after the balance sheet date. Certain commercial contracts may grant rights to the Company or the counterparties or contain other provisions that are considered to be derivatives. Such embedded derivatives are assessed at inception of the contract and depending on their characteristics accounted for as separate derivative instruments and shown at their fair value in the balance sheet with changes in their fair value recognized through profit or loss. Impairment- Financial assets Financial assets (other than at fair value) The Company assesses at each date of balance sheet whether a financial asset or a group of financial assets is impaired. Ind AS 109 (Financial Instruments) requires expected credit losses to be measured through a loss allowance. The Company recognises lifetime expected losses for all contract assets and / or all trade receivables that do not constitute a financing transaction. For all other financial assets expected credit losses are measured at an amount equal to the 12-month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. The Company provides for impairment upon the occurrence of the triggering event.
5 ABB India Ltd. Engineering Ind AS 113 Fair Value Measurement Fair value of financial instruments Fair value hierarchy: All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized 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 financial statements on a recurring basis the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
6 ABB India Ltd. Engineering Ind AS 115 Revenue from Contracts with Customers/ Revenue Recognition Effective January 1 2019 the Company has adopted Ind AS 115 Revenue from Contracts with Customers using the cumulative effect approach as the transitional provision option available to the Company. The effect of applying this standard is recognised at the date of application (i.e. January 1 2019) as an adjustment to retained earnings. (Refer note 44) for the overall impact of this change in the accounting policy. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government. The Company has concluded that it is the principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements as it has pricing latitude and is also exposed to inventory and credit risks. Revenue are stated exclusive of goods and service tax and net of trade and quantity discount. Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer usually on delivery of the goods. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable net of returns and allowances trade discounts and volume rebates. In case of large transformers revenue is recognized on achievement of contractual milestone. Revenue recognized in excess of billing has been reflected under Other financial assets as unbilled revenue. Revenues from long-term contracts are recognized on the percentage of completion method in proportion that the contract costs incurred for work performed up to the reporting date bear to the estimated total contract costs. Contract revenue earned in excess of billing has been reflected under Other current assets and billing in excess of contract revenue has been reflected under Other current liabilities in the balance sheet. Full provision is made for any loss in the year in which it is first foreseen. Liquidated damages / penalties are provided for as per the contract terms wherever there is a delayed delivery attributable to the Company. Revenue from the development services is recognised as per the contract terms and when accrued. When the contract outcome cannot be measured reliably revenue is recognised only to the extent that the expenses incurred are eligible to be recovered. Commission income is recognized as per contract terms and when accrued. Revenue Recognition Dividend income is recognised when the Companys right to receive the payment is established which is generally when shareholders approve the dividend. Interest income is recognised on time proportion basis.
7 ABB India Ltd. Engineering Ind AS 116 Leases Leases Leases under which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. When acquired such assets are capitalized at fair value or present value of the minimum lease payments at the inception of the lease whichever is lower. Lease payments under operating leases are charged to statement of profit and loss on straight line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the lessors expected inflationary cost increases.
8 ABB India Ltd. Engineering Ind AS 12 Income Taxes Income Taxes Income tax expense comprises current and deferred income tax. Income tax expense is recognized in net profit in the statement of profit and loss except to the extent that it relates to items recognized directly in equity in which case it is recognized in other comprehensive income. Current income tax for current and prior periods is recognized at the amount expected to be paid to or recovered from the tax authorities using the tax rates and tax laws that have been enacted. Deferred income tax assets and liabilities are recognized for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of changes in tax rates on deferred income tax assets and liabilities is recognized as income or expense in the period that includes the enactment or the substantive enactment date. A deferred income tax asset is recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilized. The Company offsets current tax assets and current tax liabilities where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
9 ABB India Ltd. Engineering " Ind AS 16 Property Property plant and equipment On transition to Ind-AS the Company has elected to continue with the carrying value of all its property plant and equipment recognised as at 1st January 2016 measured as per the previous GAAP and use that carrying value as a deemed cost of property plant and equipment. Property plant and equipment is stated at cost net of accumulated depreciation and accumulated impairment losses if any. Such cost includes the cost of replacing part of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of property plant and equipment are required to be replaced at intervals the Company depreciates them separately based on their specific useful lives. Likewise when a major inspection is performed its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in statement of profit or loss as incurred. The Company identifies and determines cost of each component/ part of Property plant and equipment separately if the component/ part has a cost which is significant to the total cost of the Property plant and equipment and has useful life that is materially different from that of the remaining asset. Advances paid towards the acquisition of property plant and equipment outstanding at each balance sheet date is classified as capital advances and cost of assets not ready for use at the balance sheet date are disclosed under capital work- in- progress. The Company depreciates property plant and equipment over their estimated useful lives using the straightline method. The estimated useful lives of assets are as follows: Useful lives estimated by the management in years: Leasehold land leasehold improvements and other leased assets : 1-10 (over the period of lease) Factory buildings : 15-30 Other buildings : 3-60 Furniture and fixtures : 10 Office equipment : 3-5 Plant and equipment : 2-21 Vehicles : 5 Depreciation methods useful lives and residual values are reviewed periodically including at each financial year end.
10 ABB India Ltd. Engineering Ind AS 19 Employee Benefits Employee benefits 2.20.1 Gratuity & Provident Fund - Defined benefit plans The present value of the obligation under defined benefit plans are determined based on actuarial valuation using the Projected Unit Credit Method. In case of funded plans the fair value of the plan assets is reduced from the gross obligation under the defined benefit plans to recognize the obligation on a net basis. Incase of defined benefit plans remeasurement comprising of actuarial gains and losses is recognized in other comprehensive income (OCI) and is reflected in retained earnings and is not eligible to be reclassified to profit or loss. The Company recognises the following changes in the net defined benefit obligation as an expense in statement of profit and loss: Service cost including current service cost past service cost and gains and losses on curtailments and settlements; and Net interest expense or income. Provident fund has been considered as a defined benefit plan since any additional obligations on account of investment risk and interest rate risk are required to be met by the Company. 2.20.2 Superannuation - Defined contribution scheme Contribution to Superannuation Fund is made at pre-determined rates to the Superannuation Fund Trust and is charged to the statement of profit and loss during the period in which the employee renders the related services. There are no other obligations other than the contribution payable to the Superannuation Fund Trust. 2.20.3 Compensated absences Accumulated leave which is expected to be utilised within the next 12 months is treated as short-term employee benefits. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date. The Company presents the entire accumulated leave as a current liability in the balance sheet since it does not have an unconditional right to defer its settlement for 12 months after the reporting date.
11 ABB India Ltd. Engineering Ind AS 2 Inventories Inventories Inventories are stated at the lower of cost and net realisable value. The cost of various categories of inventories is arrived at as follows: Stores spares raw materials components and traded goods - at rates determined on the moving weighted average method. Goods in Transit at actual cost. Work-in-progress and finished goods - at full absorption cost method which includes direct materials direct labour and manufacturing overheads. Cost is determined on weighted average method. Provision for obsolescence is made wherever necessary. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sale.
12 ABB India Ltd. Engineering Ind AS 21 The Effects of Changes in Foreign Excha Foreign Currency Functional currency The functional currency of the company is the Indian Rupee. Transactions and translations Initial recognition transactions in foreign currencies are recorded by the Company at their respective functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. The gains or losses resulting from such translations are recognised in the statement of profit and loss. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at fair value are translated at the exchange rate prevalent at the date when the fair value was determined. Nonmonetary assets and non-monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of the transaction. Transaction gains or losses realized upon settlement of foreign currency transactions are included in determining net profit for the period in which the transaction is settled. Revenue expense and cash flow items denominated in foreign currencies are translated into the relevant functional currencies using the exchange rate in effect on the date of the transaction.
13 ABB India Ltd. Engineering Ind AS 23 Borrowing Costs Borrowing costs Borrowing costs directly attributable to the acquisition construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
14 ABB India Ltd. Engineering Ind AS 33 Earnings per Share Earnings per share Basic earnings per equity share is computed by dividing the net profit attributable to the equity holders of the Company by the weighted average number of equity shares outstanding during the period. Diluted earnings per equity share is computed by dividing the net profit attributable to the equity holders of the Company by the weighted average number of equity shares considered for deriving basic earnings per equity share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. The dilutive potential equity shares are adjusted for the proceeds receivable had the equity shares been actually issued at fair value (i.e. the average market value of the outstanding equity shares). Dilutive potential equity shares are deemed converted as of the beginning of the period unless issued at a later date. Dilutive potential equity shares are determined independently for each period presented.
15 ABB India Ltd. Engineering Ind AS 36 Impairment of Assets Impairment Non-financial assets Intangible assets and property plant and equipment 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 anthology_newing for an asset is required the Company estimates the assets recoverable amount. An assets recoverable amount is the higher of an assets or cash-generating units (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. Intangible assets and property plant and equipment are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment anthology_newing the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases the recoverable amount is determined for the CGU to which the asset belongs. If such assets are considered to be impaired the impairment to be recognized in the statement of profit and loss is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment loss is reversed in the statement of profit and loss if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years
16 ABB India Ltd. Engineering " Ind AS 37 Provisions Provisions & Contingent liability General A provision is recognized if as a result of a past event the Company has a present legal or constructive obligation that is reasonably estimable and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect of time value of money is material Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Warranty provisions Provisions for warranty-related costs are recognised when the product is sold to the customer. Initial recognition is based on historical experience. The initial estimate of warranty-related costs is revised annually. 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. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements. Contingent assets are not recognised or disclosed in financial statements since this may result in the recognition of income that may never be realised. However when the realisation of income is virtually certain then the related asset is not a contingent asset and is recognised.
17 ABB India Ltd. Engineering Ind AS 38 Intangible Assets Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles excluding capitalised development costs are not capitalised and the related expenditure is reflected in the statement of profit and loss in the period in which the expenditure is incurred. The estimated useful life of assets are as follows: Technical know-how fees 3-10 Capitalized software costs 3-5 Goodwill on business acquisition is not amortized but anthology_newed for impairment. The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method as appropriate and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset. Intangible assets with indefinite useful lives are not amortised but are anthology_newed for impairment annually either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not the change in useful life from indefinite to finite is made on a prospective basis. Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss when the asset is derecognised
18 ABB India Ltd. Engineering Ind AS 7 Statement of Cash Flows Cash flow statement Cash flows are reported using the indirect method whereby profit for the period 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. Cash and cash equivalents Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less which are subject to an insignificant risk of changes in value. For the purpose of statement of cash flows cash and cash equivalents consist of cash and cheque at hand / remittance in transit and cash and deposit with bank.
19 ABB India Ltd. Engineering " Ind AS 8 Accounting Policies Use of estimates The preparation of the financial statements in conformity with Ind AS requires management to make estimates judgments and assumptions. These estimates judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in these financial statements have been disclosed in Note. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and if material their effects are disclosed in the notes to the financial statements. Critical accounting estimates and judgements 2.3.1 Estimates a. Project revenue and costs The Company uses the percentage-of-completion method in accounting for its fixed-price contracts. Use of the percentage-of-completion method requires the Company to estimate the efforts or costs expended to date as a proportion of the total efforts or costs to be expended. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. Provisions for estimated losses if any on uncompleted contracts are recorded in the period in which such losses become probable based on the expected contract estimates at the reporting date. b. Property plant and 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 assets expected useful life and the expected residual value at the end of its life. The useful lives and residual values of Companys assets are determined by 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 technology. c. Employee benefits The cost of the defined benefit gratuity plan and the present value of the gratuity 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 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. The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The mortality rate is based on publicly available mortality tables. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rate and past trends. Further details about gratuity obligations are given in Note 34. d. Provision for litigations and contingencies The provision for litigations and contingencies are determined based on evaluation made by the management of the present obligation arising from past events the settlement of which is expected to result in outflow of resources embodying economic benefits which involves judgements around estimating the ultimate outcome of such past events and measurement of the obligation amount. Due to the judgements involved in such estimations the provisions are sensitive to the actual outcome in future periods. 2.3.2 Judgements Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements is included in the following notes - Note 40 - leases: whether an arrangement contains a lease; and - Note 40 - lease classification; Standards issued but not effective on Balance Sheet date: Ind AS 103 Business Combinations and Ind AS 111 - Joint Arrangements The amendment to Ind AS 103 relating to re-measurement clarify that when an entity obtains control of a business that is a joint operation and had rights to the assets and obligations for the liabilities relating to that joint operation immediately before the acquisition date the transaction is a business combination achieved in stages and the entity shall re-measure its previously held interests in that business. The amendment to Ind AS 111 clarifies that when an entity obtains joint control of a business that is a joint operation the entity does not re-measure previously held interests in that business. The Company will apply the amendment if and when it obtains control / joint control of a business that is a joint operation. Ind AS 28 Long-term Interests in Associates and Joint Ventures The amendment clarifies that an entity shall be required to apply Ind AS 109 - Financial Instruments to long-term interests in an associate or joint venture that form part of the entitys net investment in the associate or joint venture but to which the equity method is not applied. The Company does not expect any significant impact of this amendment on its financial statements. Ind AS 116 - Leases The Company is required to adopt Ind AS 116 Leases from 1 January 2020. Ind AS 116 replaces existing leases guidance including Ind AS 17 Leases. Ind AS 116 introduces a single Balance sheet lease accounting model for lessees. A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are recognition exemptions for short-term leases and leases of low-value items. Lessor accounting remains similar to the current standard i.e. lessors continue to classify leases as finance or operating leases. i. Leases in which the Company is a lessee Under the new standard the Company will be required to recognise new assets and liabilities for its operating leases. The nature of expenses related to those leases will now change because the Company will recognise a depreciation charge for right-of-use assets and interest expense on lease liabilities. Previously the Company recognised operating lease expense on a straight-line basis over the term of the lease and recognised assets and liabilities only to the extent that there was a timing difference between actual lease payments and the expense recognised. The Company is in the process of evaluating the potential impact of the adoption of Ind AS 116 on accounting policies followed in its financial statements. The quantitative impact of adoption of Ind AS 116 on the financial statements in the period of initial application is not reasonably estimable as at present. ii. Leases in which the Company is a lessor No impact is expected for leases in which the Company is a lessor. iii. Transition The Company plans to apply Ind AS 116 using the modified retrospective method with the effect of initially applying this standard recognised at the date of initial application (i.e. 1 January 2020) in retained earnings. As a result the Company will not present individual line items appearing under comparative period presentation.2 Ind AS 12 Income taxes (amendments relating to income tax consequences of dividend and uncertainty over income tax treatments) An entity shall recognise the income tax consequences of dividends when it recognises a liability to pay a dividend. Therefore the entity shall recognise the income tax consequences of dividends in profit or loss other comprehensive income or equity according to where the entity originally recognised those past transactions or events. The Company does not expect any significant impact of this amendment on its financial statements. The amendment to Appendix C of Ind AS 12 outlines the following: a. whether an entity considers uncertain tax treatments separately - The entity shall use judgement to determine whether each tax treatment should be considered separately or together with one or more other uncertain tax treatments based on which approach better predicts the resolution of the uncertainty and in determining the approach an entity might consider how it prepares its income tax filings and supports tax treatments; or how the entity expects the taxation authority to make its examination and resolve issues that might arise from that examination. b. the assumptions an entity makes about the examination of tax treatments by taxation authorities- The entity shall assume that a taxation authority will examine amounts it has a right to examine and have full knowledge of all related information when making those examinations. c. how an entity determines taxable profit (tax loss) tax bases unused tax losses unused tax credits and tax rates - The entity shall consider the probability of the relevant taxation authority accepting the tax treatment and the determination of taxable profit (tax loss) tax bases unused tax losses unused tax credits and tax rates would depend upon the aforesaid probability. The Company does not expect any significant impact of this amendment on its financial statements. Recent Indian Accounting Standards (Ind AS) Ind AS 19 Plan Amendment Curtailment or Settlement The amendment clarifies that when determining past service cost or a gain or loss on settlement due to plan amendment curtailment or settlement an entity shall remeasure the net defined benefit liability (asset) using the current fair value of plan assets and current actuarial assumptions including current market interest rates and other current market prices reflecting: a. the benefits offered under the plan and the plan assets before the plan amendment curtailment or settlement; and b. the benefits offered under the plan and the plan assets before the plan amendment curtailment or settlement; and Further if a plan amendment curtailment or settlement occurs it is mandatory that the current service cost and the net interest for the period after the re-measurement are determined using the assumptions used for the re-measurement. In addition amendments have been included to clarify the effect of a plan amendment curtailment or settlement on the requirements regarding the asset ceiling. The Company does not expect any significant impact of this amendment on its financial statements.
20 Adani Port and Special Economic Zone Infrastructure Ind AS 103 Business Combinations Business Combination have been accounted for using the acquisition method under the provisions of Ind AS 103 Business Combinations. The cost of an acquisition is measured at the fair value of the assets transferred equity instruments issued and liabilities incurred or assumed at the date of acquisition which is the date on which control is transferred to the Group. The cost of acquisition also includes fair value of any contingent considerations. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at the fair value on the date of acquisition. Business Combinations between entities under common control is accounted for at carrying value. Transaction costs that the Group incurs in connection with a business combination such as legal fees due diligence fees and other professional consulting fees are expensed as incurred. If the initial accounting for a business combination is incomplete by the end of reporting period in which the combination occurs the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period or additional assets or liabilities are recognised to reflect new information obtained about facts and circumstances that existed at the acquisition date that if known would have affected the amount recognised at that date. Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses if any.
21 Adani Port and Special Economic Zone Infrastructure Ind AS 109 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 Initial recognition and measurement All financial assets are recognised initially at fair value plus in case of financial asset not recorded at fair value through profit and loss transaction with that are attributable to the acquisition of the financial assets. Subsequent measurement For purposes of subsequent measurement financial assets are classified in three categories: ? Debt instruments at amortised cost ? Debt instruments and derivative instruments and equity instruments at fair value through Profit or loss (FVTPL) ? Equity instruments measured at fair value through other comprehensive income (FVTOCI) Debt instruments at amortised cost A debt instrument is measured at the amortised cost if both the following conditions are met: (i) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows and (ii) 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. This category is the most relevant to the Group. 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 consolidated statement of profit and loss. The losses arising from impairment are recognised in the consolidated statement of profit and loss except where the Company has given temporary waiver of interest not exceeding 12 months period. This category generally applies to trade/loans and other receivables. Debt instrument at FVTPL FVTPL is a residual category for debt instruments. Any debt instrument which does not meet the criteria for categorisation as amortised cost or as FVTOCI is classified as FVTPL. Debt instruments included within the FVTPL category are measured at fair value with all changes recognised in the profit and loss. Equity investments All equity investments in scope of Ind AS 109 are measured at fair value. For all other equity instruments the Group may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Group makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable. If the Group decides to classify an equity instrument as FVTOCI then all fair value changes on the instrument excluding dividends are recognised in the OCI. There is no recycling of the amounts from OCI to profit and loss even on sale of investment. However the Group may transfer the cumulative gain or loss within equity. Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in the profit and loss. Perpetual debt The Company invests in a subordinated perpetual debt redeemable at the issuer's option with a fixed coupon that can be deferred indefinitely if the issuer does not pay a dividend on its equity shares. The Company classifies these instruments as equity under Ind AS 32. Derecognition A financial asset (or where applicable a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Groups consolidated balance sheet) when: ? The rights to receive cash flows from the asset have expired or ? The Group 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 Group has transferred substantially all the risks and rewards of the asset or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset. When the Group 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 Group continues to recognise the transferred asset to the extent of the Groups continuing involvement. In that case the Group 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 Group has retained. 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 Group could be required to repay. Impairment of financial assets The Group 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 trade receivables and bank balances a) Financial assets that are debt instruments are measured at fair value through other comprehensive income (FVTOCI) b) Lease receivables under relevant accounting standard c) Trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115 The Group follows simplified approach for recognition of impairment loss allowance on: Trade receivables or contract revenue receivables; and All lease receivables resulting from transactions within the scope of relevant accounting standard Under the simplified approach the Group does not track changes in credit risk. Rather it recognises impairment loss allowance based on lifetime ECLs at each reporting date right from its initial recognition. For recognition of impairment loss on other financial assets and risk exposure the group 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. ECL is the difference between all contracted cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive discounted at the original EIR. ECL impairment loss allowance (or reversal) recognised during the period is recognised as income / (expense) in the statement of profit and loss (P&L). This amount is reflected under the head "Other Expense" in the statement of profit and loss. The balance sheet presentation for various financial instruments is described below: Financial assets measured at amortised cost contractual revenue receivables and lease receivables: ECL is presented as an allowance i.e. as an integral part of the measurement of those assets in the balance sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria the group does not reduce impairment allowance from the gross carrying amount. For assessing increase in credit risk and impairment loss the Group combines financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increases in credit risk to be identified on a timely basis. Financial liabilities 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 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 Groups 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 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 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. Gains or losses on liabilities held for trading are recognised in the consolidated statement of profit and loss. Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such 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 recognised in OCI. These gains/ loss are not subsequently transferred to profit or loss. However the Group 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 and loss. The Group has not designated any financial liability as FVTPL. Loans and borrowings This is the category most relevant to the Group. After initial recognition interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the consolidated 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 amortization is included as finance costs in the consolidated statement of profit and loss. This category generally applies to borrowings. Financial guarantee contracts Financial guarantee contracts issued by the Group are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value through profit or loss (FVTPL) adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amortisation. Derecognition A financial liability is derecognised 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 and loss. Reclassification of financial assets The Group determines classification of financial assets and liabilities on initial recognition. After initial recognition no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Groups senior management determines change in the business model as a result of external or internal changes which are significant to the Groups operations. Such changes are evident to external parties. A change in the business model occurs when the Group either begins or ceases to perform an activity that is significant to its operations. If the Group reclassifies financial assets it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Group does not restate any previously recognised gains losses (including impairment gains or losses) or interest. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis to realise the assets and settle the liabilities simultaneously.
22 Adani Port and Special Economic Zone Infrastructure Ind AS 110 Consolidated Financial Statements Goodwill on consolidation Goodwill on consolidation as on the date of transition represents the excess of cost of acquisition at each point of time of making the investment in the subsidiary over the Groups share in the net worth of a subsidiary. For this purpose the Groups share of net worth is determined on the basis of the laanthology_new financial statements prior to the acquisition after making necessary adjustments for material events between the date of such financial statements and the date of respective acquisition. Goodwill arising on consolidation is not amortised however it is anthology_newed for impairment annually. In the event of cessation of operations of a subsidiary the unimpaired goodwill is written off fully. Goodwill on consolidation arising on acquisitions on or after the date of transition represents the excess of the cost of acquisition at each point of time of making the investment in the subsidiary over the Groups share in the fair value of the net assets of a subsidiary. Goodwill on consolidation is allocated to cash generating units or group of cash generating units that are expected to benefit from the synergies of the acquisition.
23 Adani Port and Special Economic Zone Infrastructure Ind AS 113 Fair Value Measurement The Group measures financial instruments such as derivatives 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 Group. 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 best economic interest. A fair value measurement of a non-financial asset takes into account a market participants 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 Group 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 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 Group's Management determines the policies and procedures for both recurring fair value measurement such as derivative financial instruments and unquoted financial assets measured at fair value and for non recurring fair value measurement such as an assets under the scheme of business undertaking. External valuers are involved for valuation of significant assets such as business undertaking for transfer under the scheme and unquoted financial assets and financial liabilities. Involvement of external valuers is decided upon annually by the Management and in specific cases after discussion with and approval by the respective Company's Audit Committee. Selection criteria includes market knowledge reputation independence and whether professional standards are maintained. The Management decides after discussions with the Groups external valuers which valuation techniques and inputs to use for each case. At each reporting date the management analyses the movements in the values of assets and liabilities which are required to be remeasured or re-assessed as per the Groups accounting policies. For this analysis the Management verifies the major inputs applied in the laanthology_new valuation by agreeing the information in the valuation computation to contracts and other relevant documents. The Management in conjunction with the Groups external valuers also compares the change in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable. For the purpose of fair value disclosures the Group 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. This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes. ? Disclosures for valuation methods significant estimates and assumptions Quantitative disclosures of fair value measurement hierarchy ? Investment in unquoted equity shares ? Financial instruments (including those carried at amortised cost)
24 Adani Port and Special Economic Zone Infrastructure Ind AS 115 Revenue from Contracts with Customers/ Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The specific recognition criteria described below must also be met before revenue is recognised. Port operation and logistics services Revenue from port operation services including cargo handling storage rail infrastructure other ancillary port services and logistics services are recognised in the accounting period in which the services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services. In cases where the contracts include multiple contract obligations the transaction price will be allocated to each performance obligation based on the standalone selling prices. Where these prices are not directly observable they are estimated based on expected cost plus margin. Revenue on take-or-pay charges are recognised for the quantity that is the difference between annual agreed tonnage and actual quantity of cargo handled. The amount recognised as revenue is exclusive of goods and services tax where applicable. Income in the nature of license fees / waterfront royalty and revenue share is recognised in accordance terms and conditions of relevant service agreement with customers/ sub concessionaire. Income towards infrastructure premium is recognised as revenue in the year in which the Company provides access to its common infrastructure. Income from Long-Term leases As a part of its business activity the Group leases/ sub-leases land on Long-Term basis to its customers. Leases are classified as finance lease whenever the terms of lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating lease. In some cases the Company enters into cancellable lease/ sub-lease transaction agreement while in other cases it enters into non-cancellable lease/ sub-lease agreement. The Company recognises the income based on the principles of leases as set out in relevant accounting standard and accordingly in cases where the land lease/ sub-lease agreement are cancellable in nature the income in the nature of upfront premium received/ receivable is recognised on operating lease basis i.e. on a straight line basis over the period of lease / sub-lease agreement / date of memorandum of understanding takes effect over lease period and annual lease rentals are recognised on an accrual basis. In cases where long-term land lease / sub-lease transaction agreement are non-cancellable in nature the income is recognised on finance lease basis i.e. at the inception of lease / sub-lease agreement / date of memorandum of understanding takes effect over lease period the income recognised is equal to the present value of the minimum lease payment over the lease period (including non-refundable upfront premium) which is substantially equal to the fair value of land leased / sub-leased. In respect of land given on finance lease basis the corresponding cost of the land and development costs incurred are expensed off in the statement of profit and loss. Rental income Rental income arising from operating leases on investment properties is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit and loss due to its operating nature. Development of Infrastructure Assets The Companys business operations includes construction and development of infrastructure assets. where the outcome of the project cannot be estimated reasonably. Revenue from contracts for such construction and development activities is recognised on completion of relevant activities under the contract and the transfer of control of the infrastructure when all significant risks and rewards of ownership in the infrastructure assets are transferred to the customer. Non scheduled aircraft services Revenue from chartered services is recognised when the service is performed under contractual obligations. Utilities Services Revenue is recognised as and when the service performed under contractual obligations and the right to receive such income is established. Delayed payment charges are accounted as and when received. Income from SEIS Income from Services Exports from India Scheme ('SEIS') incentives under Government's Foreign Trade Policy 2015-20 on the port services income is recognised based on effective rate of incentive under the scheme provided no significant uncertainty exists for the measurability realisation and utilisation of the credit under the scheme. The receivables related to SEIS licenses are classified as "Other Non-Financial Assets". Revenue recognition from Service Concession arrangements in Agri Logistics Business Once the infrastructure is in operation the treatment of income is as follows: Finance income over financial asset after consideration of fixed storage charges is recognised using effective interest rate method. Variable storage charges revenue is recognised in the period of storage of food grains. Revenues from other variable charges such as loading and unloading charges bagging charges stacking charges etc. as per the rates mentioned in SCA are recognised in each period as and when services are rendered in accordance with "Ind AS 115 - Revenue from Contracts with Customers". Interest income For all financial assets measured either at amortised cost or at fair value through other comprehensive income interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period where appropriate to the gross carrying amount of the financial asset or to the amortised cost of a financial liability. When calculating the effective interest rate the Group estimates the expected cash flows by considering all the contractual terms of the financial instrument (for example prepayment extension call and similar options) but does not consider the expected credit losses. Interest income is included in finance income in the consolidated statement of profit and loss. Dividends Dividend Income is recognised when the Groups right to receive the payment is established which is generally when shareholders approve the dividend. Port concession rights arising from Service Concession/ Sub-Concession Arrangements: The Group recognises port concession rights as "Port Infrastructure Rights" under "Intangible Assets" arising from a service concession arrangement in which the grantor controls or regulates the services provided and the prices charged and also controls any significant residual interest in the infrastructure such as property plant and equipment if the infrastructure is existing infrastructure of the grantor or the infrastructure is constructed or purchased by the Group as part of the service concession arrangement. Such an intangible asset is recognised by the Group at cost (which is the fair value of the consideration received or receivable for the construction service delivered) and is capitalised when the project is complete in all respects and the Group receives the completion certificate from the authorities as specified in the concession agreement. Port concession rights also include certain property plant and equipment which are reclassified as intangible assets in accordance with Appendix C of Ind AS 115 Service Concession Arrangements. These assets are amortised based on the lower of their useful lives or concession period. Gains or losses arising from de-recognition of port concession rights are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the consolidated statement of profit and loss when the asset is de-recognised. The estimated period of port concession arrangements are of 30 years. Service Concession Arrangements ("SCA") in respect of Agri Logistics Business Certain companies in the Group have entered into service concession agreement with Food Corporation of India (FCI) which is an arrangement between the "grantor" (a public sector entity/authority) and the "operator" (a private sector entity) to provide services that give the public access to major economic and social facilities utilising private-sector funds and expertise. With respect to SCA revenue and costs are allocated between those relating to construction services and those relating to operation and maintenance services and are accounted for separately. Consideration received or receivable is allocated by reference to the relative fair value of services delivered when the amounts are separately identifiable. The infrastructure used in a concession are classified as an intangible asset or a financial asset depending on the nature of the payment entitlements established in the SCA. When the amount of consideration under the arrangement for the provision of public services is substantially fixed by a contract the Group recognises the consideration for construction services at its fair value as a financial asset and is classified as "financial asset under service concession arrangements". When the amount of consideration under the arrangement comprises of - ? fixed charges based on Annual Guaranteed Tonnage and ? variable charges based on Actual Utilisation Tonnage then the Group recognises the consideration for construction services at its fair value as the "financial asset under service concession arrangement" to the extent present value of fixed payment to be received discounted at incremental borrowing rate and the residual portion is recognised as an intangible asset.
25 Adani Port and Special Economic Zone Infrastructure Ind AS 116 Leases The Group assesses at contract inception whether a contract is or contains a lease. That is if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Group as a lessee The Group applies a single recognition and measurement approach for all leases except for short-term leases and leases of low-value assets. The Company recognises lease liabilities to make lease payments and right-of use assets representing the right to use the underlying assets. i) Right-of-Use Assets The Group recognises right-of-use assets (RoU Assets) at the commencement date of the lease (i.e. the date the underlying asset is available for use). Right-of-use assets are measured at cost less any accumulated depreciation and impairment losses and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised initial direct costs incurred and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are also subject to impairment. Refer to the accounting policies in section (m) Impairment of non-financial assets. ii) Lease Liabilities At the commencement date of the lease the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable variable lease payments that depend on an index or a rate and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition the carrying amount of lease liabilities is remeasured if there is a modification a change in the lease term a change in the lease payments (e.g. changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset. Lease liabilities has been presented under the head Other Financial Liabilities. iii) Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to its short-term leases (i.e. those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption that are considered to be low value. Lease payments on short-term leases and leases of low-value assetsare recognised as expense on a straight-line basis over the lease term. Group as a lessor Leases in which the Group does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Rental income from operating lease is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned. Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Group to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Groups net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.
26 Adani Port and Special Economic Zone Infrastructure Ind AS 12 Income Taxes Tax expense comprises of current income tax and deferred tax. Current income tax Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. Current income tax (including Minimum Alternate Tax ("MAT")) is measured at the amount expected to be paid to the tax authorities in accordance with the Income-Tax Act 1961 enacted in India. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted at the reporting date. Current income tax relating to items recognised outside the statement of profit and loss is recognised outside the statement of profit and loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. Deferred tax Deferred tax is provided using the balance-sheet approach on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences except:- ? When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and at the time of the transaction affects neither the accounting profit nor taxable profit or loss. ? In respect of taxable temporary differences associated with investments in subsidiaries associates and interests in joint venture entities when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets are recognised for all deductible temporary differences the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilised except: ? When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction affects neither the accounting profit nor taxable profit or loss. ? In respect of deductible temporary differences associated with investments in subsidiaries associates and interests in joint venture entities deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. The Company is eligible and claiming tax deductions available under section 80IAB of the Income Tax Act 1961 for a period of 10 years w.e.f FY 2007-08. Some of the subsidiaries and joint venture entities are also eligible for tax deductions available under section 80IA of the Income Tax Act 1961 for a period of 10 years out of eligible period of 15 years. In view of the Company and some of the subsidiaries and joint venture entities availing tax deduction under Section 80IA/80IAB of the Income Tax Act 1961 deferred tax has been recognised in respect of temporary difference which reverse after the tax holiday period in the year in which the temporary difference originate and no deferred tax (assets or liabilities) is recognised in respect of temporary difference which reverse during tax holiday period to the extent such gross total income is subject to the deduction during the tax holiday period. For recognition of deferred tax the temporary difference which originate first are considered to reverse first. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient future taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. The Group recognises tax credits in the nature of Minimum Alternative Tax ("MAT") credit as an asset only to the extent that there is sufficient taxable temporary difference/convincing evidence that the Group will pay normal income tax during the specified period i.e. the period for which tax credit is allowed to be carried forward. In the year in which the Group recognises tax credits as an asset the said asset is created by way of tax credit to the consolidated statement of profit and loss. The Group reviews such tax credit asset at each reporting date and writes down the asset to the extent the Group does not have sufficient taxable temporary difference/convincing evidence that it will pay normal tax during the specified period. Deferred tax includes MAT tax credit.
27 Adani Port and Special Economic Zone Infrastructure " Ind AS 16 Property Under the previous GAAP (Indian GAAP) Property plant and equipment are stated at cost net of accumulated depreciation and accumulated impairment losses if any. The cost comprises the purchase price borrowing costs (if capitalisation criteria are met) and other cost directly attributable to bringing the asset to its working condition for the intended use. The Group has elected to regard previous GAAP carrying values of property plant and equipment as deemed cost at the date of transition to Ind AS. Property plant and equipment and Capital work-in progress are stated at cost. Such cost includes the cost of replacing parts of the plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of plant and equipment are required to be replaced at intervals the Group depreciates them separately based on their specific useful lives. Likewise when major inspection is performed its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in consolidated statement of profit and loss as incurred. The present value of the expected cost for the decommissioning of the asset after its use is included in the cost of respective asset if recognition criteria for the provision are met. The Group adjusts exchange differences arising on translation difference/settlement of Long-Term foreign currency monetary items outstanding in the Indian GAAP financial statements for the period ending immediately before the beginning of the first Ind AS financial statements i.e. March 31 2016 and pertaining to the acquisition of a depreciable asset to the cost of asset and depreciates the same over the remaining useful life of the asset. The depreciation on such foreign exchange difference is recognised from first day of the financial year. Borrowing cost relating to acquisition / construction of Property Plant and Equipments which take substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as prescribed under Part C of Schedule II of the Companies Act 2013 except for the assets mentioned below for which useful lives estimated by the management. The identified component of fixed assets are depreciated over their useful lives and the remaining components are depreciated over the life of the principal assets. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used. The Group has estimated the following useful life to provide depreciation on its certain Property Plant and Equipment based on assessment made by expert and management estimate. Asset Estimated - useful Life Leasehold Land Development - Over the balance period of Concession Agreement and approved Supplementary Concession Agreement by Gujarat Maritime Board other major port trust authorities State Government authorities etc. as applicable Marine Structure Dredged Channel Building RCC Frame Structure - 50 Years as per concession agreement/over the balance period of concession agreement as applicable Dredging Pipes - Plant and Equipment - 1.5 Years Nylon and Steel coated belt on Conveyor - Plant and Equipment - 4 Years and 10 Years respectively Inner Floating and outer floating hose String of Single Point Mooring - Plant and Equipment - 6 Years Fender Buoy installed at Jetty - Marine Structures - 5 - 10 Years Bridges Drains & Culverts - 25 Years as per concession agreement Carpeted Roads Other than RCC - 10 Years Non Carpeted Roads Other than RCC - 3 Years Tugs - 20 Years An item of property plant and equipment covered under Concession agreement sub-concession agreement and supplementary concession agreement shall be transferred to and shall vest in Grantor (government authorities) at the end of respective concession agreement. In cases where the Group is expected to receive consideration of residual value of property from grantor at the end of concession period the residual value of contracted property is considered as the carrying value at the end of concession period based on depreciation rates as per management estimate/ Schedule II of the Companies Act 2013 and in other cases it is Nil. An item of property plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is derecognised. The residual values useful lives and methods of depreciation of property plant and equipment are reviewed at each financial year end and adjusted prospectively if appropriate.
28 Adani Port and Special Economic Zone Infrastructure Ind AS 19 Employee Benefits Retirement benefit in the form of provident fund is a defined contribution scheme. The Group has no obligation other than the contribution payable to the provident fund. The Group recognises contribution payable to the provident fund scheme as an expense when an employee renders the related service. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid the deficit payable to the scheme is recognised as a liability after deducting the contribution already paid. The Group operates a defined benefit gratuity plan in India which requires contributions to be made to a separately administered fund. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method. Re-measurements comprising of actuarial gains and losses the effect of the asset ceiling excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability) are recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Group recognises the following changes in the net defined benefit obligation as an expense in the consolidated statement of profit and loss: ? Service costs comprising current service costs past-service costs gains and losses on curtailments and non-routine settlements and ? Net interest expense or income Accumulated leave which is expected to be utilised within the next twelve months is treated as short term employee benefits. The Group measures the expected cost of such absence as the additional amount that is expected to pay as a result of the unused estimate that has accumulated at the reporting date. The Group treats accumulated leave expected to be carried forward beyond twelve months as Long-Term compensated absences which are provided for based on actuarial valuation as at the end of the period. Provision for Compensated Absences and its classifications between current and non-current liabilities are based on independent actuarial valuation. The actuarial valuation is done as per projected unit credit method.
29 Adani Port and Special Economic Zone Infrastructure Ind AS 2 Inventories Inventories are valued at lower of cost and net realisable value. Stores and Spares: Valued at lower of cost and net realisable value. Cost is determined on a moving weighted average basis. Cost of stores and spares lying in bonded warehouse includes custom duty payable. Stores and Spares which do not meet the definition of property plant and equipment are accounted as inventories. Costs incurred that relate to future contract activities are recognised as Project Work-in-Progress. Project work-in-progress comprise specific contract costs and other directly attributable overheads including borrowing costs which can be allocated on specific contract cost is valued at lower of cost and net realisable value. Net Realisable Value in respect of stores and spares is the estimated current procurement price in the ordinary course of the business.
30 Adani Port and Special Economic Zone Infrastructure Ind AS 20 Accounting for Government Grants and Di Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item it is recognised as income on a systematic basis over the periods that the related costs for which it is intended to compensate are expensed. When the grant relates to an asset it is recognised either as a income in equal amounts over the expected useful life of the related asset or by deducting from the carrying amount of the asset. Royalty on Cargo Water front royalty under the various concession/sub?concession agreement is paid at concessional rate in terms of rate prescribed by Gujarat Maritime Board (GMB) and notified in official gazette of various state Government authorities wherever applicable
31 Adani Port and Special Economic Zone Infrastructure Ind AS 21 The Effects of Changes in Foreign Excha The Groups consolidated financial statements are presented in INR which is also the parent Companys functional currency. For each entity the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency. However for practical reasons the Group entities use an average rate if the average approximates the actual rate at the date of transaction. The Group uses the direct method of consolidation and on disposal of a foreign operation the gain or loss that is reclassified to profit or loss reflects the amount that arises from using this method. Transactions and balances Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Exchange differences arising on settlement or translation of monetary items are recognised in profit or loss with the exceptions for which below treatment is given as per the option availed under Ind AS 101. i. Exchange differences arising on long-term foreign currency monetary items related to acquisition of a property plant and equipment (including funds used for project work-in-progress) recognised in the Indian GAAP financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period i.e. March 31 2016 are capitalised / decapitalised to cost of fixed assets and depreciated over the remaining useful life of the asset. ii. Exchange differences arising on other outstanding Long-Term foreign currency monetary items recognised in the Indian GAAP financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period i.e. March 31 2016 are accumulated in the Foreign Currency Monetary Item Translation Difference Account (FCMITDA) and amortised over the remaining life of the concerned monetary item or financial year 2019-20 whichever is earlier. The said balance has been completely amortised in the current financial year. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Group companies On consolidation the assets and liabilities of foreign operations are translated into INR at the rate of exchange prevailing at the reporting date and their statements of profit or loss are translated at exchange rates prevailing at the dates of the transactions. For practical reasons the group uses an average rate to translate income and expense items if the average rate approximates the exchange rates at the dates of the transactions. The exchange differences arising on translation for consolidation are recognised in OCI. On disposal of a foreign operation the component of OCI relating to that particular foreign operation is recognised in statement of profit and loss.
32 Adani Port and Special Economic Zone Infrastructure Ind AS 23 Borrowing Costs Borrowing costs directly attributable to the acquisition construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
33 Adani Port and Special Economic Zone Infrastructure Ind AS 28 Investments in Associates and Joint Ven An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but do not control or joint control over those policies. A joint venture entity is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining whether significant influence or joint control are similar to those necessary to determine control over the subsidiaries. The Groups investments in its associate and joint venture entities are accounted for using the equity method. Under the equity method the investment in an associate or a joint venture entities is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Groups share of net assets of the joint venture since the acquisition date. The consolidated statement of profit and loss reflects the Groups share of the results of operations of the joint venture entities. Any change in OCI of those investees is presented as part of the Groups OCI. In addition when there has been a change recognised directly in the equity of the joint venture entities the Group recognises its share of any changes when applicable in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the joint venture entities are eliminated to the extent of the interest in the joint venture entities. If an entitys share of losses of a joint venture equals or exceeds its interest in the associate or joint venture (which includes any Long-Term interest that in substance form part of the Groups net investment in the associate or joint venture) the entity discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the joint venture. If the joint venture subsequently reports profits the entity resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised. The aggregate of the Groups share of profit or loss of a joint venture entities is shown on the face of the consolidated statement of profit and loss. The financial statements of the joint venture entities are prepared for the same reporting period as the Group. When necessary adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method the Group determines whether it is necessary to recognise an impairment loss on its investment in its joint venture entities. At each reporting date the Group determines whether there is objective evidence that the investment in the joint venture entities are impaired. If there is such evidence the Group calculates the amount of impairment as the difference between the recoverable amount of the joint venture entities and its carrying value and then recognises the loss as Share of profit of a joint venture entities in the consolidated statement of profit and loss. Upon loss of significant influence over associate entity/ joint control over the joint venture entities the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associates entity/joint venture entities upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in the statement of profit and loss.
34 Adani Port and Special Economic Zone Infrastructure Ind AS 33 Earnings per Share Basic earnings per share are calculated by dividing the profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. For the purpose of calculating diluted earnings per share the profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
35 Adani Port and Special Economic Zone Infrastructure Ind AS 36 Impairment of Assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists or when annual impairment anthology_newing for an asset is required the Group estimates the assets recoverable amount. An assets recoverable amount is the higher of an assets or cash-generating units (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for individual asset unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. In assessing value in use the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal recent market transactions are taken into account. If no such transactions can be identified an appropriate valuation model is used. These calculations are corroborated by valuation multiples quoted share prices for publicly traded companies or other available fair value indicators. The Group bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the Groups CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods a long-term growth rate is calculated and applied to project future cash flows after the fifth year. Impairment losses including impairment on inventories are recognised in the statement of profit and loss. For assets excluding goodwill an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists the Group estimates the assets or CGUs recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the assets recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount nor exceed the carrying amount that would have been determined net of depreciation had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of profit and loss unless the asset is carried at a revalued amount in which case the reversal is treated as a revaluation increase. Goodwill is anthology_newed for impairment annually as at every year end and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of CGU (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods. Intangible assets with indefinite useful lives are anthology_newed for impairment annually as at year end at the CGU level as appropriate and when circumstances indicate that the carrying value may be impaired.
36 Adani Port and Special Economic Zone Infrastructure " Ind AS 37 Provisions General Provisions are recognised when the Group 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. The expense relating to a provision is presented in the statement of profit and loss. Contingent liabilities are not recognised but disclosed unless the probability of an outflow of resources is remote. Contingent assets are disclosed where inflow of economic benefits is probable. 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. Operational Claim provisions Provisions for operational claims are recognised when the service is provided to the customer. Further recognition is based on historical experience. The initial estimate of operational claim related cost is revised annually.
37 Adani Port and Special Economic Zone Infrastructure Ind AS 38 Intangible Assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value on the date of acquisition. Following initial recognition intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles excluding capitalised development costs are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred. The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method as appropriate and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset. Intangible assets with indefinite useful lives are not amortised but are anthology_newed for impairment annually either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not the change in useful life from indefinite to finite is made on a prospective basis. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the consolidated statement of profit and loss when the asset is derecognised. A summary of the policies applied to the Groups intangible assets is as follows: Intangible Assets - Method of Amortisation Estimated - Useful life Software applications - on straight line basis - 5 Years based on management estimate License Fees paid to Ministry of Railway (MOR) for approval for movement of Container Trains - on straight line basis - Over the license period of 20 years Right to Use of Land on straight line basis - Over the period of agreement - between 10-20 years Right of use to develop and operate the port facilities - on straight line basis - Over the balance period of Sub-Concession Agreement Railway License - on straight line basis - 35 Years based on validity of license
38 Aditya Birla Fashion & Retail Ltd. Retailing Ind AS 1 Presentation of Financial Statements The consolidated financial statements of the Group have been prepared inaccordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules 2015 (as amended) read with Section 133 of the Companies Act 2013 (the Act) and presentation requirements of Division II of Schedule III of the Act and other relevant provisions of the Act as applicable. The consolidated financial statements have been prepared on accrual basis under the historical cost convention except the following assets and liabilities which have been measured at fair value as required by the relevant Ind AS: Certain financial assets and liabilities (refer accounting policy regarding financial instruments); Defined employee benefit plans; Share-based payment; and Derivative financial instruments
39 Aditya Birla Fashion & Retail Ltd. Retailing Ind AS 102 Share based Payment Employees of the Group receive remuneration in the form of equity-settled instruments and stock appreciation rights for rendering services over a defined vesting period. Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date using an appropriate valuation model. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period based on the Groups estimate of equity instruments that will eventually vest with a corresponding increase in equity. At the end of each reporting period the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates if any is recognised in the Consolidated Statement of Profit and Loss such that the cumulative expense reflects the revised estimate with a corresponding adjustment to the equity-settled share options outstanding account. No expense is recognised for awards that do not ultimately vest because non-market performance and/ or service conditions have not been met. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share. For cash-settled share-based payment a liability is recognised for the goods or services acquired measured initially at the fair value of the liability using a binomial method. At the end of each reporting period until the liability is settled and at the date of settlement the fair value of the liability is re-measured with any changes in the fair value recognised in Employee benefits expense in the Consolidated Statement of Profit and Loss for the year. The Group has created an ABFRL Employee Welfare Trust(ESOP Trust) and uses it as a vehicle for distributing shares to employees under the Employee Stock Option Scheme 2019 or any subsequent Stock Option Scheme. The trust purchase shares of the Company from the market for giving shares to employees. The Group treats trust as its extension and shares held by trust are treated as treasury shares. Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from other equity. No gain or loss is recognised in the Consolidated statement of profit and loss on the purchase sale issue or cancellation of the Companys own equity instruments. Any difference between the carrying amount and the consideration if reissued or sold is recognised in capital reserve. Share options exercised during the reporting period are settled with treasury shares.
40 Aditya Birla Fashion & Retail Ltd. Retailing Ind AS 103 Business Combinations Business Combinations are accounted for using the acquisition method. Cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquirees identifiable net assets. Acquisition-related costs are recognised in Consolidated Statement of Profit and Loss as incurred. At the acquisition date the identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured at their fair values. However certain assets and liabilities i.e. deferred tax assets or liabilities assets or liabilities related to employee benefit arrangements liabilities or equity instruments related to share-based payment arrangements and assets or disposal groups that are classified as held for sale acquired or assumed in a business combination are measured as per the applicable Ind-AS. When the Group acquires a business it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms economic circumstances and pertinent conditions as at the acquisition date. If the business combination is achieved in stages any previously held equity interest is re-measured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss or OCI as appropriate. Judgement is applied in determining the acquisition date and determining whether control is transferred from one party to another. Control exists when the Group is exposed to or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through power over the entity. In assessing control potential voting rights are considered only if the rights are substantive. At the acquisition date goodwill on business combination is initially measured at cost being the excess of the sum of the consideration transferred the amount recognised for any non controlling interests in the acquiree and the fair value of the acquirers previously held equity interest in the acquiree (if any) over the net identifiable assets acquired and the liabilities assumed. After initial recognition goodwill is measured at cost less any accumulated impairment losses. For the purposes of impairment anthology_newing goodwill acquired in a business combination is allocated to each of the Groups cash-generating units that are expected to benefit from the synergies of the combination irrespective of whether other assets or liabilities of the acquiree are assigned to those units. A cash-generating unit to which goodwill has been allocated is anthology_newed for impairment annually as at reporting date. When the recoverable amount of the CGU is less than its carrying amount an impairment loss is recognised. On disposal of the relevant cash-generating unit the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Amortisation methods and periods A summary of amortisation policies applied to the Groups intangible assets is as below: Intangible assets : Useful life : Amortisation method used Computer software : 3 years : Amortised on straight-line basis Goodwill arising on acquisition of business division through demerger and business combination : - : No amortisation anthology_newed for impairment Brands/ trademarks : 10 years : Amortised on straight-line basis Technical knowhow : 10 years : Amortised on straight-line basis Franchisee rights :12 years : Amortised on straight-line basis over the period of franchise agreement Non-Compete : 7 years : Amortised on straight-line basis
41 Aditya Birla Fashion & Retail Ltd. Retailing Ind AS 108 Operating Segments Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. Segment assets and liabilities include all operating assets and liabilities. Segment results include all related income and expenditure. Corporate (unallocated) represents assets liabilities income and expenses which relate to the Group as a whole and are not allocated to the segments. Inter-segment transfers The Group generally accounts for inter-segment sales at arms length basis in a manner similar to transactions with third parties. Allocation of common costs Common allocable costs are allocated to each segment according to the relative contribution of each segment to the total common costs. Unallocated items Unallocated items include general corporate income expense and other common assets and liabilities which are not allocated to any business segment. Segment accounting policies The Group prepares its segment information in conformity with the accounting policies adopted for preparing and presenting the financial statements of the Group as a whole.
42 Aditya Birla Fashion & Retail Ltd. Retailing Ind AS 109 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 and financial liabilities are recognised when a Group becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at 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 measured at fair value through profit or loss) 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 the Consolidated Statement of Profit and Loss are recognised immediately in the Consolidated Statement of Profit and 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 are recognised on the trade date. 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. For the purpose of subsequent measurement financial instruments of the Group are classified in the following categories: (a) Non-derivative financial assets (i) Financial assets at amortised cost Financial asset is measured at amortised cost using Effective Interest Rate (EIR) if both the conditions are met: The asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and The contractual terms of the instrument give rise on specified dates to cash flows thatare solely payments of principal and interest on the principal amount outstanding. Effective Interest Rate (EIR) method: The EIR method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. 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 effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate transaction costs and other premiums or discounts) through the expected life of the debt instrument or where appropriate a shorter period to the gross carrying amount on initial recognition. Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at Fair Value Through Profit or Loss (FVTPL). Interest income is recognised in the Consolidated Statement of Profit and Loss and is included in the Other income line item (ii) Financial assets at Fair Value Through Other Comprehensive Income (FVTOCI) An instrument shall be measured at FVTOCI if both of the following conditions are met: The objective of the business model is achieved by both collecting contractual cash flows and selling financial assets; and The assets contractual cash flows represent Solely Payments of Principal and Interest (SPPI). Financial assets included within FVTOCI category are measured initially as well as at each reporting period at fair value plus transaction cost. Fair value movements are recognised in other comprehensive income. However the Group recognises interest income impairment losses and reversals and foreign exchange gain/ (loss) in the Consolidated Statement of Profit and Loss. On de-recognition of the asset cumulative gain or loss previously recognised in OCI is reclassified from equity to the Consolidated Statement of Profit and Loss. (iii) Financial assets at Fair Value Through Profit or Loss (FVTPL) Financial assets that do not meet the amortised cost criteria or FVTOCI criteria (see above) are measured at FVTPL. In addition financial assets that meet the amortised cost criteria or the FVTOCI criteria but are designated as at FVTPL are measured at FVTPL. A financial asset that meets the amortised cost criteria or financial assets that meet the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on different bases. The Group has not designated any debt instrument as at FVTPL. Financial assets at FVTPL are measured at fair value at the end of each reporting period with any gains or losses arising on re-measurement recognised in the Consolidated Statement of Profit and Loss. The net gain or loss recognised in the Consolidated Statement of Profit and Loss incorporates any dividend or interest earned on the financial asset and is included in the Other income line item. Dividend on financial assets at FVTPL is recognised when the Groups right to receive the dividends is established it is probable that the economic benefits associated with the dividend will flow to the entity the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably. (iv) Equity investments All equity investments are measured at fair value as per Ind AS 109. Equity instruments whichare held for trading are classified as at FVTPL. For all other equity instruments the Group has an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Group makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable. If the Group decides to classify an equity instrument as at FVTOCI then all fair value changes on the instrument excluding dividends are recognised in the OCI. There is no recycling of the amounts from OCI to the Consolidated Statement of Profit and Loss even on sale of investment. However the Group may transfer the cumulative gain or loss within equity. Impairment of financial assets: The Group applies simplified approach of expected credit loss model for recognising impairment loss on lease receivables trade receivables other contractual rights to receive cash or other financial asset. Expected credit losses are the weighted average of credit losses with the respective risks of default occurring as the weights. Expected credit loss is the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive (i.e. all cash shortfalls) discounted at the original effective interest rate (or credit adjusted effective interest rate for purchased or originated creditimpaired financial assets). The Group measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition. If the credit risk on a financial instrument has not increased significantly since initial recognition the Group measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. 12-month expected credit losses are portion of the lifetime expected credit losses and represent the lifetime cash shortfalls that will result if default occurs within 12 months after the reporting date and thus are not cash shortfalls that are predicted over the next 12 months. If the Group measured loss allowance for a financial instrument at lifetime expected credit loss model in the previous period but determines at the end of a reporting period that the credit risk has not increased significantly since initial recognition due to improvement in credit quality as compared to the previous period the Group again measures the loss allowance based on 12-month expected credit losses. When making the assessment of whether there has been a significant increase in credit risk since initial recognition the Group uses the change in the risk of a default occurring over the expected life of the financial instrument instead of the change in the amount of expected credit losses. To make that assessment the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and considers reasonable and supportable information that is available without undue cost or effort that is indicative of significant increases in credit risk since initial recognition. For trade receivables or any contractual right to receive cash or another financial asset that results from transactions that are within the scope of Ind AS 115 the Group always measures the loss allowance at an amount equal to lifetime expected credit losses. Further for the purpose of measuring lifetime expected credit loss allowance for trade receivables the Group has used a practical expedient as permitted under Ind AS 109. This expected credit loss allowance is computed based on a provision matrix which takes into account historical credit loss experience and adjusted for forward looking information. The impairment requirements for the recognition and measurement of a loss allowance are equally applied to debt instruments at FVTOCI except that the loss allowance is recognised in OCI and is not reduced from the carrying amount in the Consolidated Balance Sheet. (b) Non derivative financial liabilities (i) Classification as debt or equity Debt and equity instruments issued by the Group are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. (1) Equity instruments: An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received net of direct issue costs. Repurchase of the Groups own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in the Consolidated Statement of Profit and Loss on the purchase sale issue or cancellation of the Groups own equity instruments. (2) Compound financial instruments: The component parts of compound financial instruments (convertible notes) issued by the Group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. A conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Groups own equity instruments is an equity instrument. At the date of issue the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible instruments. This amount is recognised as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instruments maturity date. (3) Financial liabilities: All financial liabilities are measured at amortised cost using the effective interest method or at FVTPL. However financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies financial guarantee contracts issued by the Group and commitments issued by the Group to provide a loan at below-market interest rate are measured in accordance with the specific accounting policies set out below. Financial liabilities at FVTPL: Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL. A financial liability is classified as held for trading if: It has been acquired or incurred principally for the purpose of selling or repurchasing it in the near term; or On initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or It is a derivative that is not a financial guarantee contract or designated and effective as a hedging instrument. A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if: Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; The financial liability forms part of a group of financial assets or financial liabilities or both which is managed and its performance is evaluated on a fair value basis in accordance with the Groups documented risk management or investment strategy and information about the Group is provided internally on that basis; or It forms part of a contract containing one or more embedded derivatives and Ind AS 109 permits the entire combined contracts to be designated as at FVTPL in accordance with Ind AS 109. Financial liabilities at FVTPL are stated at fair value with any gains or losses arising on re-measurement recognised in the Consolidated Statement of Profit and Loss. However financial liabilities that are not held-for-trading and are designated as at FVTPL the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognised in other comprehensive income unless the recognition of the effects of changes in the liabilitys credit risk in other comprehensive income would create or enlarge an accounting mismatch in the Consolidated Statement of Profit and Loss in which case these effects of changes in credit risk are recognised in the Consolidated Statement of Profit and Loss. The remaining amount of change in the fair value of liability is always recognised in the Consolidated Statement of Profit and Loss. Changes in fair value attributable to a financial liabilitys credit risk that are recognised in other comprehensive income are reflected immediately in other comprehensive income under other equity and are not subsequently reclassified to the Consolidated Statement of Profit and Loss. Gains or losses on financial guarantee contracts and loan commitments issued by the Group that are designated by the Group as at fair value through profit or loss are recognised in the Consolidated Statement of Profit and Loss. Financial liabilities subsequently measured at amortised cost: Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortised cost at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included in the Finance costs line item. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate transaction costs and other premiums or discounts) through the expected life of the financial liability or (where appropriate) a shorter period to the gross carrying amount on initial recognition. (ii) Loans and borrowings Borrowings are initially recognised at fair value net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the Consolidated Statement of Profit and Loss over the period of borrowings using the EIR method. Fees paid on the establishment of loan facilities are recognised as the transaction cost of the loan to the extent it is probable that some or all of the facility will be drawn down the fees are deferred until the draw down occurs. To the extent that there is no evidence that is probable that some or all of the facility will be drawn down the fee is capitalised as a prepayment for liquidity and amortised over the period of facility to which it relates. Preference shares which are mandatorily redeemable on a specific date are classified as liabilities. The dividends on these preference shares are recognised in the Consolidated Statement of Profit and Loss as Finance costs (iii) Foreign exchange gains and losses The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period. For foreign currency denominated financial assets measured at amortised cost and FVTPL the exchange differences are recognised in the Consolidated Statement of Profit and Loss except for those which are designated as hedging instruments in a hedging relationship. For the purposes of recognising foreign exchange gains and losses FVTOCI financial assets are treated as financial assets measured at amortised cost. Thus the exchange differences on the amortised cost are recognised in the Consolidated Statement of Profit and Loss and other changes in the fair value of FVTOCI financial assets are recognised in OCI. For financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each reporting period the foreign exchange gains and losses are determined based on the amortised cost of the instruments and are recognised in Other income. The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period. For financial liabilities that are measured as at FVTPL the foreign exchange component forms part of the fair value gains or losses and is recognised in the Consolidated Statement of Profit and Loss. De-recognition of financial assets and financial liabilities The Group de-recognises 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 Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset the Group recognises its retained interest in the asset and an associated liability for the amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. On de-recognition of a financial asset in its entirety the difference between the assets carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in OCI and accumulated in equity is recognised in the Consolidated Statement of Profit and Loss if such gain or loss would have otherwise been recognised in the Consolidated Statement of Profit and Loss on disposal of that financial asset. On de-recognition of a financial asset other than in its entirety (for example: when the Group retains an option to repurchase part of a transferred asset) the Group 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 the Consolidated Statement of Profit and Loss if such gain or loss would have otherwise been recognised in the Consolidated Statement of Profit and 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. The Group de-recognises financial liabilities only when the Groups obligations are discharged cancelled or have expired. An exchange with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly a substantial modification of the terms of an existing financial liability (whether or not attributable to the financial difficulty of the debtor) is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability de-recognised and the consideration paid and payable is recognised in the Consolidated Statement of Profit and Loss Offsetting financial instruments Financial assets and liabilities are offset and the net amount is reported in the Consolidated Balance Sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise 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. Derivative Financial Instruments The Group uses derivative financial instruments such as forward currency contracts to hedge its foreign currency risks. Such derivative financial instruments are initially recognised 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. Any gains or losses arising from changes in the fair value of derivatives are taken directly to the Consolidated Statement of Profit and Loss except for the effective portion of cash flow hedges which is recognised in OCI and later reclassified to the Consolidated Statement of Profit and Loss when the hedge item affects the Consolidated Statement of Profit and Loss or treated as basis adjustment if a hedged forecast transaction subsequently results in the recognition of a non-financial asset or nonfinancial liability
43 Aditya Birla Fashion & Retail Ltd. Retailing Ind AS 110 Consolidated Financial Statements Principles of consolidation The consolidated financial statements comprise the financial statements of the Company and its Subsidiaries. Subsidiaries are entities controlled by the Group. The Group controls an investee only if the Group has: Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee) Exposure or rights to variable returns from its involvement with the investee and The ability to use its power over the investee to affect its returns. The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets liabilities income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances. If a member of the Group uses accounting policies other than those adopted in the consolidated financial statements for like transactions and events in similar circumstances appropriate adjustments are made to that Group members financial statements in preparing the consolidated financial statements to ensure conformity with the Groups accounting policies. The financial statements of all entities used for the purpose of consolidation are drawn up to same reporting date as that of the parent company i.e. year ended on March 31. When the end of the reporting period of the parent is different from that of a subsidiary the subsidiary prepares for consolidation purposes additional financial information as of the same date as the financial statements of the parent to enable the parent to consolidate the financial information of the subsidiary unless it is impracticable to do so. Consolidation Procedures: Combine like items of assets liabilities equity income expenses and cash flows of the parent with those of its subsidiaries. For this purpose income and expenses of the subsidiary are based on the amounts of the assets and liabilities recognised in the consolidated financial statements at the acquisition date. Offset (eliminate) the carrying amount of the parents investment in each subsidiary and the parents portion of equity of each subsidiary. Business combinations policy explains how to account for any related goodwill. Eliminate in full intragroup assets and liabilities equity income expenses and cash flows relating to transactions between entities of the group (profits or losses resulting from intragroup transactions that are recognised in assets are eliminated in full). Intragroup losses may indicate an impairment that requires recognition in the consolidated financial statements. Ind AS 12 Income Taxes applies to temporary differences that arise from the elimination of profits and losses resulting from intragroup transactions. Profit or loss and each component of Other Comprehensive Income (OCI) are attributed to the equity holders of the Parent of the Group and to the non- controlling interests even if this results in the noncontrolling interests having a deficit balance. Changes in the Groups ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Groups interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.
44 Aditya Birla Fashion & Retail Ltd. Retailing Ind AS 113 Fair Value Measurement Fair value measurements and hierarchy The Group measures financial instruments such as investments and derivatives at fair value at eachBalance 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: (a) In the principal market for the asset or liability; or (b) 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 Group. 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 best economic interest. A fair value measurement of a non-financial asset takes into account a market participants 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 Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure the 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 consolidated financial statements are categorised within the fair value hierarchy based on its nature characteristics and risks: Level 1 - inputs are quoted (unadjusted) market prices in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2 - valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and 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 consolidated financial statements on a recurring basis the Group determines whether transfers have occurred between levels in the hierarchy by re assessing categorization (based on the lowest level of input that is significant to the fair value measurement as a whole) at the end of each reporting period.
45 Aditya Birla Fashion & Retail Ltd. Retailing Ind AS 115 Revenue from Contracts with Customers/ Revenue from contracts with customers is recognised upon transfer of control of promised goods/ services to customers at an amount that reflects the consideration to which the Group expect to be entitled for those goods/ services. To recognize revenues the Group applies the following five-step approach: Identify the contract with a customer; Identify the performance obligations in the contract; Determine the transaction price; Allocate the transaction price to the performance obligations in the contract; and Recognise revenues when a performance obligation is satisfied. Revenue from sale of products Revenue is measured at the fair value of the consideration received or receivable net of returns and allowances trade discounts and volume rebates taking into account contractually defined terms of payment excluding taxes or duties collected on behalf of the government. Goods and Service Tax (GST) is not received by the Group in its own account. Rather it is tax collected on value added to the commodity by the seller on behalf of the government. Accordingly it is excluded from revenue. Assets and liabilities arising from right to return The Group has contracts with customers which entitles them the unconditional right to return. Right to return assets A right of return gives an entity a contractual right to recover the goods from a customer (return asset) if the customer exercises its option to return the goods and obtain a refund. The asset is measured at the carrying amount of the inventory less any expected costs to recover the goods including any potential decreases in the value of the returned goods. Refund liabilities A refund liability is the obligation to refund part or all of the consideration received (or receivable) from the customer. The Group has therefore recognised refund liabilities in respect of customers right to return. The liability is measured at the amount the Group ultimately expects it will have to return to the customer. The Group updates its estimate of refund liabilities (and the corresponding change in the transaction price) at the end of each reporting period. The Group has presented its right to return assets and refund liabilities as required under Ind AS 115 in the consolidated financial statements. Income from gift voucher Gift voucher sales are recognised when the vouchers are redeemed and the goods are sold to the customer. Loyalty points programme The Group operates a loyalty programme which allows customers to accumulate points on purchases made in retail stores. The points give rise to a separate performance obligation as it entitles them for redemption as settlement of future purchase transaction price. Consideration received is allocated between the sale of products and the points issued with the consideration allocated to the points equal to their fair value. Fair value of points is determined by applying statistical techniques based on the historical trends. Consideration allocated to reward points is deferred and recognised when points are redeemed or when the points expire. The amount of revenue is based on the value of points redeemed/ expired. Income from services Income from services is recognised as they are rendered based on agreements/ arrangements with the concerned parties and recognised net of goods and services tax/ applicable taxes. Interest income Interest income on all debt instruments is measured either at amortised cost. Interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period where appropriate to the gross carrying amount of the financial asset. When calculating the EIR the Group estimates the expected cash flows by considering all the contractual terms of the financial instrument. Interest income is included in other income in the Consolidated Statement of Profit and Loss. Export incentives income Export incentives under various schemes notified by government are accounted for in the year of exports based on eligibility and when there is no uncertainty in receiving the same. Commission income In case of sales of goods where the Group is an agent in the transaction the difference between the revenue and the cost of the goods sold is disclosed as commission income in other operating income.
46 Aditya Birla Fashion & Retail Ltd. Retailing Ind AS 116 Leases The Groups lease asset classes primarily consist of leases for land and buildings. At inception of a contract the Group assesses whether a contract is or contains a lease. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset the Group assess whether: The contract involves the use of an identified asset this may be specified explicitly or implicitly and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right then the asset is not identified; The Group has the right to obtain substantially all of the economic benefits from the use of the asset throughout the period of use; and The Group has the right to direct the use of the asset. The Group has the right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined the Group has the right to direct the use of the asset either the Group has the right to operate the asset; or the Group designed the asset in a way that predetermines how and for what purpose it will be used. At inception or on reassessment of a contract that contains a lease component the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. Where the Group is the lessee Right-of-use assets The Group recognises a right-of-use asset and a lease liability at the lease commencement date except for short-term leases which are less than 12 months and leases of low value assets. The right-of-use asset is initially measured at cost which comprises the initial amount of the lease liability plus any initial direct costs incurred less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option depreciation is calculated using the estimated useful life of the asset. The estimated useful lives of right-of-use assets are determined on the same basis as those of property. In addition the right-of-use asset is periodically reduced by impairment losses if any adjusted for certain remeasurements of the lease liability. Lease liabilities The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date. 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 Group uses incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise of fixed payments including in-substance fixed payments. The lease liabilities are measured at amortised cost using the effective interest method. In addition the carrying amount of lease liabilities is re-measured if there is a modification arising due to change in the lease term change in the lease payments or a change in the assessment of an option to purchase the underlying asset. when the lease liability is re-measured in this way a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. The Group presents right-of-use assets that do not meet the definition of investment property and lease liabilities separately in the Consolidated Balance Sheet. Short-term leases and leases of low value assets The Group applies the short-term lease recognition exemption to its short-term leases (i.e. those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term. Where the Group is the lessor Leases in which the Group does not transfer substantially all the risks and rewards of ownership of an asset is classified as an operating lease. Assets subject to operating leases are included in the property plant and equipment. Rental income on an operating lease is recognised in the Consolidated Statement of Profit and Loss on a straight-line basis over the lease term. Costs including depreciation are recognised as an expense in the Consolidated Statement of Profit and Loss. Transition to Ind AS 116 The Group has adopted Ind AS 116 effective April 01 2019 and has applied the standard to its leases retrospectively with the cumulative effect of initially applying the standard recognised on the date of initial application. Accordingly the Group has not restated comparative information instead the cumulative effect of initially applying this standard has been recognised as an adjustment to the opening balance of retained earnings as on April 01 2019. As a practical expedient the Group has applied Ind AS 116 to contracts that were previously identified as leases under Ind AS 17 and Appendix C of Ind AS 17. Refer Note 2.2 (XII) Significant accounting policies Leases in the annual report of the Company for the year ended March 31 2019 for the policy as per Ind AS 17. On application of Ind AS 116 the nature of expenses has changed from lease rent in previous periods to depreciation cost for the right-of-use asset and finance cost for interest accrued on lease liability. The weighted average incremental borrowing rate of 9.05% p.a. has been applied to lease liabilities recognised in the Consolidated balance sheet at the date of initial application. The following is the summary of practical expedients elected on initial application: Applied a single discount rate to a portfolio of leases of similar assets in similar economic environment with similar characteristics. Applied the exemption not to recognize rights-of-use assets and liabilities for leases with less than 12 months of lease term on the date of initial application. Excluded the initial direct costs from the measurement of the rights-of-use asset at the date of initial application. Applied hindsight approach for determining the lease term for the contract contains options to extend or terminate the lease.
47 Aditya Birla Fashion & Retail Ltd. Retailing Ind AS 12 Income Taxes Current tax The Income tax expense or credit for the period is the tax payable on the current periods taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Income 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 India. The management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate. Deferred tax Deferred tax is recognised on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences except when the deferred tax liability arises from the initial recognition of goodwill or an asset or a liability in a transaction that is not a business combination and at the time of the transaction affects neither the accounting profit nor the taxable profit or loss. Deferred tax assets are recognised for all deductible temporary differences the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilised except when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or a liability in a transaction that is not a business combination and at the time of the transaction affects neither the accounting profit nor the taxable profit or loss. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Tax benefits acquired as a part of business combination but not satisfying the criteria for separate recognition at that date are recognised subsequently if new information is received or circumstances change. Acquired deferred tax benefits recognised within the measurement period reduce goodwill related to that acquisition if they result from new information obtained about facts and circumstances existing at the acquisition date. Minimum Alternate Tax (MAT) paid in a year is charged to the Consolidated Statement of Profit and Loss as current tax for the year. Deferred tax assets include MAT paid in accordance with the tax laws in India which is likely to give future economic benefits in the form of availability of set off against future income tax liability. Accordingly MAT is recognised as deferred tax asset in the Consolidated Balance Sheet when the asset can be measured reliably and it is probable that the future economic benefit associated with the asset will be realised. The Group reviews the MAT credit entitlement asset at each reporting date and writes down the asset to the extent that it is no longer probable that it will pay normal tax during the specified period. Current tax and deferred tax relating to items recognised outside the Consolidated Statement of Profit and Loss are recognised outside the Consolidated Statement of Profit and Loss (either in OCI or in equity). Current tax and deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
48 Aditya Birla Fashion & Retail Ltd. Retailing " Ind AS 16 Property Freehold land is carried at historical cost. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Property plant and equipment is stated at cost net of accumulated depreciation and accumulated impairment losses if any. Cost includes borrowing costs for long-term construction projects if the recognition criteria is met. Subsequent costs are included in the assets carrying amount or recognised as a separate asset as appropriate only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is de-recognised when replaced. All other repairs and maintenance are charged to the Consolidated Statement of Profit and Loss during the reporting period in which they are incurred. Capital work-in-progress is stated at cost net of accumulated impairment losses if any. Depreciation methods estimated useful lives and residual value Depreciation on property plant and equipment is calculated on a straight-line basis over the useful life of the asset estimated by the management. Depreciation on additions is provided on a pro rata basis from the month of installation or acquisition. Depreciation on deletions/ disposals is provided on a pro rata basis upto the month preceding the month of deletions/ disposals. The management believes that these estimated useful lives reflect fair approximation of the period over which the assets are likely to be used. The Group has used the following rates to provide depreciation on its tangible fixed assets: (a) Assets where useful life is same as Schedule II Assets : Useful life as prescribed by Schedule II of the Companies Act 2013 Factory buildings : 30 years Fences wells tube wells : 5 years Borewells (pipes tubes and other fittings) : 5 years Other office equipment : 5 years Electrical installations and equipment (at factory) : 10 years (b) Assets where useful life differ from Schedule II Assets : Useful life as prescribed by Schedule II of the Companies Act 2013 : Estimated useful life Other than continuous process plant (single shift) : 15 years : 20 years Plant and machinery retail stores : 15 years : 5 6 years Furniture and fittings retail stores :10 years :5 6 years Motorcycles scooters and other mopeds : 10 years : 5 years Motor buses motor lorries and motor cars other than those used in a business of running them on hire :6 years for motor cars and 8 years for motor buses and motor lorries : 4 - 5 Years Servers end user devices such as desktops laptops etc. : 3 years for end user devices and 6 years for servers : 4 years Furniture and fittings (other than retail stores): 10 years : 7 years Office electrical equipment : 5 years : 4 years Electrically operated vehicles including battery powered or fuel cell powered vehicles : 8 years : 5 years Useful life of assets different from that prescribed in Schedule II has been estimated by the management supported by technical assessment. Leasehold assets Assets : Estimated useful life Leasehold improvements at stores : 5 to 6 years or period of lease whichever is shorter Leasehold improvements other than stores : Period of lease Based on managements assessment items of property plant and equipment individually costing less than five thousand rupees are depreciated within one year from the date the asset is ready to use or useful life of class of asset to which these assets belong. Gains or losses on disposal of property plant and equipment are determined by comparing proceeds with carrying amount. These are included in the Consolidated Statement of Profit and Loss within other gains/ losses. The residual values useful lives and methods of depreciation of property plant and equipment are reviewed at each financial year end and adjusted prospectively if appropriate.
49 Aditya Birla Fashion & Retail Ltd. Retailing Ind AS 19 Employee Benefits (a) Short-term employee benefits Short-term employee benefits are recognised as an expense on accrual basis. (b) Defined contribution plan The Group makes defined contribution to the Government Employee Provident Fund and superannuation fund which are recognised in the Consolidated Statement of Profit and Loss on accrual basis. The Group recognises contribution payable to the provident fund scheme as an expense when an employee renders the related service. The Group has no obligation other than the contribution payable to the provident fund. (c) Defined benefit plan The Group operates a defined benefit gratuity plan in India. The Group contributes to a gratuity fund maintained by an independent insurance company. The Groups liabilities under The Payment of Gratuity Act 1972 are determined on the basis of actuarial valuation made at the end of each financial year using the projected unit credit method. Obligation is measured at the present value of estimated future cash flows using a discounted rate that is determined by reference to market yields at the Balance Sheet date on Government bonds where the terms of the Government bonds are consistent with the estimated terms of the defined benefit obligation. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and fair value of plan assets. This cost is included in the Employee benefits expense in the Consolidated Statement of Profit and Loss. Re-measurement gains or losses and return on plan assets (excluding amounts included in net Interest on the net defined benefit liability) arising from changes in actuarial assumptions are recognised in the period in which they occur directly in OCI. These are presented as re-measurement gains or losses on defined benefit plans under other comprehensive income in other equity. Remeasurements gains or losses are not reclassified subsequently to the Consolidated Statement of Profit and Loss. (d) Compensated absences The employees of the Group are entitled to compensated absences. The employees can carry forward a portion of the unutilised accumulating compensated absences and utilise it in future periods or receive cash at retirement or termination of employment. The Group records an obligation for compensated absences in the period in which the employee renders the services that increases this entitlement. The Group measures the expected cost of compensated absences as the additional amount that the Group expects to pay as a result of the unused entitlement that has accumulated at the end of the reporting period. The Group recognises accumulated compensated absences based on actuarial valuation in the Consolidated Statement of Profit and Loss. The Group presents the entire leave as a current liability in the Consolidated Balance Sheet since it does not have any unconditional right to defer its settlement for twelve months after the reporting date
50 Aditya Birla Fashion & Retail Ltd. Retailing Ind AS 2 Inventories Raw materials components stores and spares and packing materials are valued at lower of cost or net realisable value. However these items are considered to be realisable at cost if the finished products in which they will be used are expected to be sold at or above cost. Cost includes cost of purchase and other costs in bringing the inventories to their present location and condition. Cost is determined on weighted average cost basis. Traded goods work-in-progress and finished goods are valued at cost or net realisable value whichever is lower. Work-in-progress and finished goods include costs of direct materials labour and a proportion of manufacturing overheads based on the normal operating capacity but excluding borrowing cost. Traded goods cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average cost basis. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and the estimated costs necessary to make the sale. Proceeds in respect of sale of raw materials/ stores are credited to the respective heads. Obsolete and defective inventory are duly provided for basis the management estimates (Refer Note - 41)
51 Aditya Birla Fashion & Retail Ltd. Retailing Ind AS 20 Accounting for Government Grants and Di Government grants are recognised where there is a reasonable assurance that the grant will be received and all attached conditions will be complied with: When the grant relates to an expense item it is recognised as income on a systematic basis over the periods that the related costs for which it is intended to compensate are expensed. When the grant relates to an asset it is recognised as income in equal amounts over the expected useful life of the related asset. When loans or similar assistance are provided by governments or related institutions at a belowmarket rate of interest the effect of this favourable interest is treated as a government grant. The loan or assistance is initially recognised and measured at fair value and the government grant is measured as the difference between the proceeds received and the initial carrying value of the loan. The loan is subsequently measured as per the accounting policies applicable to financial liabilities.
52 Aditya Birla Fashion & Retail Ltd. Retailing Ind AS 21 The Effects of Changes in Foreign Excha Transactions and balances: In preparing the financial statements of each individual group entity transactions in currencies other than the entitys functional currency (foreign currencies) are recorded applying the exchange rate at the date of transaction. Monetary assets and liabilities denominated in foreign currency remaining unsettled at the end of the year are translated at the closing exchange rates prevailing on the Balance Sheet date. Exchange differences arising on settlement or translation of monetary items are recognised in the Consolidated Statement of Profit and Loss. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e. translation differences on items whose fair value gain or loss is recognised in Other Comprehensive Income (OCI) or the Consolidated Statement of Profit and Loss are also reclassified in OCI or the Consolidated Statement of Profit and Loss respectively). For the purposes of presenting these consolidated financial statements the assets and liabilities offoreign operations including goodwill and fair value adjustments arising on acquisition are translated into Indian Rupees the functional currency of the Company at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into Indian Rupees at the exchange rates at the dates of the transactions or an average rate if the average rate approximates the actualrate at the date of the transaction. Exchange differences arising on translation for consolidation are recognised in OCI and accumulated in other equity (as exchange differences on translating the financial statements of a foreign operation) except to the extent that the exchange differences are allocated to non-controlling interest.
53 Aditya Birla Fashion & Retail Ltd. Retailing Ind AS 23 Borrowing Costs Borrowing costs directly attributable to the acquisition construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use are capitalised as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur in the Consolidated Statement of Profit and Loss. Borrowing cost includes interest and other costs incurred in connection with the arrangement of borrowings. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the interest costs.
54 Aditya Birla Fashion & Retail Ltd. Retailing Ind AS 33 Earnings per Share Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Earnings considered in ascertaining the Groups earnings per share is the net profit for the period after deducting preference dividends and any attributable tax thereto for the period. The weighted average number of equity shares outstanding during the year is adjusted for treasury shares. For the purpose of calculating diluted earnings per share the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares
55 Aditya Birla Fashion & Retail Ltd. Retailing Ind AS 36 Impairment of Assets At the end of each reporting period the Group reviews the carrying amounts of its assets to determine whether there is any indication of impairment based on internal/ external factors. An impairment loss if any is charged to the Consolidated Statement of Profit and Loss in the year in which an asset is identified as impaired. An assets recoverable amount is higher of an assets or cash-generating units (CGUs) fair value less costs of disposal and its value in use. In assessing value in use the estimated future cash flows are discounted to their present value using a pre-tax discount rates that reflects current market assessment of the time value of money and the risks specific to the asset for which estimates of future cash flows have not been adjusted. Recoverable amount is determined for an individual asset unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. Impairment losses of continuing operations including impairment on inventories are recognised in the Consolidated Statement of Profit and Loss. A cash-generating unit to which goodwill has been allocated is anthology_newed for impairment annually as at reporting date. If the recoverable amount of the cash-generating unit is less than its carrying amount the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in the Consolidated Statement of Profit and Loss. Reversal of impairment losses except on goodwill is recorded when there is an indication that the impairment losses recognised for the assets no longer exist or have decreased. An impairment loss recognised for goodwill is not reversed in subsequent periods.
56 Aditya Birla Fashion & Retail Ltd. Retailing " Ind AS 37 Provisions 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). Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events 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. The expense relating to a provision is presented in the Consolidated Statement of Profit and Loss net of any reimbursements. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably (Refer Note - 41). A present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made is disclosed as a contingent liability. 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 Group (Refer Note 46). Claims against the Group where the possibility of any outflow of resources in settlement is remote are not disclosed as contingent liabilities. Contingent assets are not recognised in the consolidated financial statements since this may result in the recognition of income that may never be realised. However when the realisation of income is virtually certain then the related asset is not a contingent asset and is recognised.
57 Aditya Birla Fashion & Retail Ltd. Retailing Ind AS 38 Intangible Assets Intangible assets are stated at cost less accumulated amortisation and impairment. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Internally generated intangibles excluding capitalised development costs are not capitalised and the related expenditure is reflected in the Consolidated Statement of Profit and Loss in the period in which the expenditure is incurred. The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite life are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period and changes if any made on prospective basis. The amortisation expense on intangible assets with finite lives is recognised in the Consolidated Statement of Profit and Loss. Intangible assets with indefinite useful life are not amortised but are anthology_newed for impairment annually either individually or at the cash generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not the change in useful life from indefinite to finite is made on a prospective basis. Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Consolidated Statement of Profit and Loss when the asset is de-recognised. Amortisation methods and periods A summary of amortisation policies applied to the Groups intangible assets is as below: Intangible assets : Useful life : Amortisation method used Computer software : 3 years : Amortised on straight-line basis Goodwill arising on acquisition of business division through demerger and business combination : - : No amortisation anthology_newed for impairment Brands/ trademarks : 10 years : Amortised on straight-line basis Technical knowhow : 10 years : Amortised on straight-line basis Franchisee rights :12 years : Amortised on straight-line basis over the period of franchise agreement Non-Compete : 7 years : Amortised on straight-line basis
58 Aditya Birla Fashion & Retail Ltd. Retailing Ind AS 7 Statement of Cash Flows Cash and cash equivalents in the Consolidated Balance Sheet and for the purpose of the Consolidated Statement of Cash Flows comprise cash on hand and cash at bank including fixed deposits with original maturity period of three months and short-term highly liquid investments with an original maturity of three months or less net of outstanding bank overdrafts as they are considered an integral part of the Groups cash management
59 Apollo Hospitals Enterprise Ltd. Healthcare Ind AS 102 Share based Payment 1 Share-based payment transactions Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in the notes to accounts. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period based on the Groups estimate of equity instruments that will eventually vest with a corresponding increase in equity. At the end of each reporting period the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates if any is recognised in profit and loss such that the cumulative expense reflects the revised estimate with a corresponding adjustment to the equity-settled employee benefits reserve. Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received except where that fair value cannot be estimated reliably in which case they are measured at the fair value of the equity instruments granted measured at the date the entity obtains the goods or the counterparty renders the service. For cash-settled share-based payments a liability is recognised for the goods or services acquired measured initially at the fair value of the liability. At the end of each reporting period until the liability is settled and at the date of settlement the fair value of the liability is re-measured with any changes in fair value recognised in profit and loss for the year.
60 Apollo Hospitals Enterprise Ltd. Healthcare Ind AS 103 Business Combinations Business combinations Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange of control of the acquiree. Acquisition-related costs are generally recognised in Statement of profit and loss as incurred. At the acquisition date the identifiable assets acquired and the liabilities assumed are recognised at their fair value except that: deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with Ind AS 12 Income Taxes and Ind AS 19 Employee Benefits respectively; liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with Ind AS 102 Share-based Payment at the acquisition date assets (or disposal groups) that are classified as held for sale in accordance with Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard On acquisition the Group assesses the classification of the acquirees assets and liabilities and reclassifies them where the classification is inappropriate for Group purposes. Goodwill is measured as the excess of the sum of the consideration transferred the amount of any non-controlling interests in the acquiree and the fair value of the acquirers previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entitys net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests proportionate share of the recognised amounts of the acquirees identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or when applicable on the basis specified in another Ind AS. When a business combination is achieved in stages the Groups previously held equity interest in the acquiree is remeasured to its acquisition-date fair value and the resulting gain or loss if any is recognised in Statement of statement of profit and loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to Statement of statement of profit and loss where such treatment would be appropriate if that interest were disposed off.
61 Apollo Hospitals Enterprise Ltd. Healthcare Ind AS 105 Non current Assets Held for Sale and D Non Current Asset Held for Sale The Group classifies non-current assets held for sale if their carrying amounts will be principally recovered through a sale rather than through continuing use of assets and action required to complete such sale indicate that it is unlikely that significant changes to the plan to sell will be made or that the decision to sell will be withdrawn. Also such assets are classified as held for sale only if the management expects to complete the sale within one year from the date of classification. Discontinued operations A discontinued operation is a component of the group business that represents a separate line of business that has been disposed of or is held for sale or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon the earlier of disposal or when the operation meets the criteria to be classified as held for sale. The group considers the guidance in Ind AS 105 Non-Current assets held for sale and discontinued operations to assess whether a divestment asset would qualify the definition of component prior to classification into discontinued operation.
62 Apollo Hospitals Enterprise Ltd. Healthcare Ind AS 108 Operating Segments Segment reporting In accordance with Ind AS 108 Segment Reporting the Groups chief operating decision maker (CODM) has been identified as the board of directors. The Groups CODM evaluates segment performance based on revenues and profit by the hospital pharmacy and clinic segments.
63 Apollo Hospitals Enterprise Ltd. Healthcare Ind AS 109 Financial Instruments Financial instruments Financial assets and financial liabilities are recognised when a Group entity becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at 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 and loss) 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 are recognised immediately in the consolidated statement of profit and loss. 1 Financial assets The Company classifies its financial instruments in accordance with Ind AS 109 in the following measurement categories: at amortized cost at fair value through profit and loss (FVPL) and at fair value through other comprehensive income (FVOCI). Financial assets are classified depending on the business model in which the financial assets are held and the contractual terms of the cash flows. Financial assets are only reclassified when the business model for managing those assets changes. During the reporting period no financial instruments were reclassified. Purchases and sales of financial assets are accounted for on the trading day. The Company does not make use of the fair value option which allows financial liabilities to be classified at FVPL upon initial recognition. At initial recognition financial asset and financial liabilities are measured at fair value. Excluded are trade accounts receivables. At initial recognition trade accounts receivables (in accordance with Ind AS 115) are measured at their transaction price. Subsequent measurement is either at cost FVPL or FVOCI. In general financial liabilities are classified and subsequently measured at amortized cost with the exception of contingent considerations resulting from a business combination noncontrolling interests subject to put provisions as well as derivative financial liabilities. Investments in equity instruments are recognized and subsequently measured at fair value. The Companys equity investments are not held for trading. In general changes in the fair value of equity investments are recognized in the income statement. However at initial recognition the Company elected on an instrument-by-instrument basis to represent subsequent changes in the fair value of individual strategic equity investments in other comprehensive income (loss) (OCI). The Groups investment in debt securities with the objective to achieve both collecting contractual cash flows and selling the financial assets and initially measured at fair value. Some of these securities give rise on specified dates to cash flows that are solely payments of principle and interest. These securities are subsequently measured at FVOCI. Other securities are measured at FVPL. Amortised Cost and Effective interest method The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate transaction costs and other premiums or discounts) through the expected life of the debt instrument or where appropriate a shorter period to the net carrying amount on initial recognition. Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL. Interest income is recognised in profit and loss and is included in the Other income line item. Instruments at FVTOCI On initial recognition the Group can make an irrevocable election (on an instrument-by-instrument basis) to present the subsequent changes in fair value in other comprehensive income pertaining to investments in equity instruments. This election is not permitted if the equity investment is held for trading. These elected investments are initially measured at fair value plus transaction costs. Subsequently they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the Reserve for equity instruments through other comprehensive income. The cumulative gain or loss is not reclassified to statement of profit and loss on disposal of the investments. A financial asset is held for trading if: it has been acquired principally for the purpose of selling it in the near term; or on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or it is a derivative that is not designated and effective as a hedging instrument or a financial guarantee. Dividends on these investments in equity instruments are recognised in profit and loss when the Groups right to receive the dividends is established it is probable that the economic benefits associated with the dividend will flow to the entity the dividend does not represent a recovery of part of cost of the investment and the amount of dividend can be measured reliably. Dividends recognised in the consolidated statement of profit and loss are included in the Other income line item. 2 Impairment of financial assets The Group applies the expected credit loss model for recognising impairment loss on financial assets measured at amortised cost debt instruments at FVTOCI lease receivables trade receivables other contractual rights to receive cash or other financial asset and financial guarantees not designated as at FVTPL. The expected credit loss approach requires that all impacted financial assets will carry a loss allowance based on their expected credit losses. Expected credit losses are a probability-weighted estimate of credit losses over the contractual life of the financial assets. For trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115 Revenue from Contracts with customers the Group measures the loss allowance at an amount equal to lifetime expected credit losses. The impairment provisions for trade receivables is based on reasonable and supportable information including historic loss rates present developments such as liquidity issues and information about future economic conditions to ensure foreseeable changes in the customer-specific or macroeconomic environment are considered. 3 Derecognition of financial assets The Group 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 Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. 4 Foreign exchange gains and losses The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period. For foreign currency denominated financial assets measured at amortised cost and FVTPL the exchange differences are recognised in statement of profit and loss except for those which are designated as hedging instruments in a hedging relationship. Changes in the carrying amount of investments in equity instruments at FVTOCI relating to changes in foreign currency rates are recognised in other comprehensive income. Net gain / (loss) on foreign currency transactions and translation during the year recognised in the consolidated statement of Profit and Loss account is presented under Other income. Financial liabilities and equity instruments 1 Classification as debt or equity Debt and equity instruments issued by a Group are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. 2 Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by a group entity are recognised at the proceeds received net of direct issue costs. Repurchase of the Groups own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in statement of profit and loss on the purchase sale issue or cancellation of the Groups own equity instruments. 3 Financial liabilities All financial liabilities are subsequently measured at amortised cost using the effective interest method. Financial liabilities are classified as at FVTPL when the financial liability is either contingent consideration recognised by the Group as an acquirer in a business combination to which Ind AS 103 applies or is held for trading or it is designated as at FVTPL. A financial liability is classified as held for trading if: it has been incurred principally for the purpose of repurchasing it in the near term; or on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or it is a derivative that is not designated and effective as a hedging instrument. A financial liability other than a financial liability held for trading or contingent consideration recognised by the Group as an acquirer in a business combination to which Ind AS 103 applies may be designated as at FVTPL upon initial recognition if: such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; the financial liability forms part of a Group of financial assets or financial liabilities or both which is managed and its performance is evaluated on a fair value basis in accordance with the Groups documented risk management or investment strategy and information about the grouping is provided internally on that basis; or it forms part of a contract containing one or more embedded derivatives and Ind AS 109 permits the entire combined contract to be designated as at FVTPL in accordance with Ind AS 109. Financial liabilities at FVTPL are stated at fair value with any gains or losses arising on remeasurement recognised in profit and loss. The net gain or loss recognised in profit and loss incorporates any interest paid on the financial liability and is included in the Other income line item. However for not-held-for-trading financial liabilities that are designated as at FVTPL the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognised in other comprehensive income unless the recognition of the effects of changes in the liabilitys credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit and loss in which case these effects of changes in credit risk are recognised in profit and loss. The remaining amount of change in the fair value of liability is always recognised in profit and loss. Changes in fair value attributable to a financial liabilitys credit risk that are recognised in other comprehensive income are reflected immediately in retained earnings and are not subsequently reclassified to profit and loss. Gains or losses on financial guarantee contracts and loan commitments issued by the Group that are designated by the Group as at fair value through profit and loss are recognised in profit and loss. 4 Financial liabilities subsequently measured at amortised cost The carrying amounts of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included in the Finance costs line item. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate transaction costs and other premiums or discounts) through the expected life of the financial liability or (where appropriate) a shorter period to the net carrying amount on initial recognition. 5 Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.Financial guarantee contracts issued by a group entity are initially measured at their fair values and if not designated as at FVTPL are subsequently measured at the higher of: the amount of loss allowance determined in accordance with impairment requirements of Ind AS 109; and the amount initially recognised less when appropriate the cumulative amount of income recognised in accordance with the principles of Ind AS 115. 6 Derecognition of financial liabilities The Group derecognises financial liabilities when and only when the Groups obligations are discharged cancelled or have expired. An exchange between with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly a substantial modification of the terms of an existing financial liability is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit and loss. 7 Derivative financial instruments The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks including interest rate swaps and cross currency swaps. Derivatives are initially recognised 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. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative The change in fair value of derivatives is recorded in the statement of profit and loss. Derivatives embedded in host contracts are accounted for as separate derivatives if their economic characteristics and risks are not closely related to those of the host contracts. These embedded derivatives are measured at fair value with changes in fair value recognized in the statement of profit and loss. Put Options The Group has issued written put option to non-controlling interests in certain subsidiaries of the Group in accordance with the terms of underlying agreement with such option holders. Should the option be exercised the Group has to settle such liability by payment of cash.Accounting on Initial Recognition: The amount that may become payable under the option on exercise is recognised as a financial liability at fair value on the transaction date with a corresponding charge directly to the shareholders equity. Subsequent Measurement: The liability is subsequently accreted through finance charges recognised under finance cost in the Statement of Profit and Loss up to the redemption amount that is payable at the date on which the option first becomes exercisable. In the event that the option expires unexercised the liability is derecognised with a corresponding adjustment to equity.
64 Apollo Hospitals Enterprise Ltd. Healthcare Ind AS 110 Consolidated Financial Statements The consolidated financial statements incorporate the financial statements of the Group and its subsidiaries. Control is achieved when the Group: has power over the investee; is exposed or has rights to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the Group has less than a majority of the voting rights of an investee it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Group considers all relevant facts and circumstances in assessing whether or not the Groups voting rights in an investee are sufficient to give it power including: the size of the Groups holding of voting rights relative to the size and dispersion of holdings of the other vote holders; potential voting rights held by the Group other vote holders or other parties; rights arising from other contractual arrangements; and any additional facts and circumstances that indicate that the Group has or does not have the current ability to direct the relevant activities at the time that decisions need to be made including voting patterns at previous shareholders meetings. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Specifically income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit and loss from the date the Group gains control until the date when the Group ceases to control the subsidiary. Profit or loss and each component of other comprehensive income are attributed to the owners of the Group and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Group and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. When necessary adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Groups accounting policies. All intragroup assets and liabilities equity income expenses and cash flows relating to transactions between members of the Group are eliminated. Profits and losses on items of property plant and equipment and inventory acquired from other group entities are also eliminated.
65 Apollo Hospitals Enterprise Ltd. Healthcare Ind AS 112 Disclosure of Interests in Other Entit Changes in the Groups ownership interests in existing subsidiaries Changes in the Groups ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Groups interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Group. When the Group loses control of a subsidiary a gain or loss is recognised in statement of profit and loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill) and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit and loss or transferred to another category of equity as specified/permitted by applicable Ind AS). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under Ind AS 109 or when applicable the cost on initial recognition of an investment in an associate or a joint venture.
66 Apollo Hospitals Enterprise Ltd. Healthcare Ind AS 113 Fair Value Measurement The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at fair values at the end of each reporting period as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. 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 regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis except for share-based payment transactions that are within the scope of Ind AS 102 leasing transactions that are within the scope of Ind AS 17 and measurements that have some similarities to fair value but are not fair value such as net realisable value in Ind AS 2 or value in use in Ind AS 36. In addition for financial reporting purposes fair value measurements are categorized into Level 1 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety which are described as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly; and Level 3 inputs are unobservable inputs for the asset or liability.
67 Apollo Hospitals Enterprise Ltd. Healthcare Ind AS 115 Revenue from Contracts with Customers/ Revenue recognition The group earns revenue primarily by providing healthcare services and sale of pharmaceutical products. Other sources of revenue include revenue earned through Operation and Management (O&M) contracts brand license agreements and contracts for clinical trials. Effective April 1 2018 the Group has applied Ind AS 115 - Revenue from Contract with customers which establishes a comprehensive framework for revenue recognition. Ind AS 115 replaces Ind AS 18 Revenue and Ind AS 11 Construction Contracts. The Group has adopted Ind AS 115 using the cumulative effect method(modified retrospective approach). The effect of initially applying this standard was recognised at the date of initial application (i.e. April 1 2018). The impact of the adoption of the standard on the financial statements of the Group was insignificant. Revenue is recognised upon transfer of control of promised products or services to customers in an amount that reflects the consideration which the Group expects to receive in exchange for those products or services. When there is uncertainty on ultimate collectability revenue recognition is postponed until such uncertainty is resolved. 1 Healthcare Services The Healthcare services income include revenue generated from outpatients which mainly consist of activities for physical examinations treatments surgeries and anthology_news as well as that generated from inpatients which mainly consist of activities for clinical examinations and treatments surgeries and other fees such as room charges and nursing care. The performance obligations for this stream of revenue include food & beverage accommodation surgery medical/ clinical professional services supply of equipment investigation and supply of pharmaceutical and related products. The patient is obligated to pay for healthcare services at amounts estimated to be receivable based upon the Companys standard rates or at rates determined under reimbursement arrangements. The reimbursement arrangements are generally with third party administrators. The reimbursement is also made through national international or local government programs with reimbursement rates established by statute or regulation or through a memorandum of understanding. Revenue is recognised at the transaction price when each performance obligation is satisfied at a point in time when inpatient/ outpatients has actually received the service except for few specific services in the dialysis and oncology specialty where the performance obligation is satisfied over a period of time. Revenue from healthcare patients third party payors and other customers are billed at our standard rates net of disallowances discounts or rebates to reflect the estimated amounts to be receivable from these payors. Heathcare Services performed for patients where the collection of the billed amount or a portion of the billed amount cannot be determined at the time services are performed the Company concludes that the consideration is variable (implicit price concession) and records the difference between the billed amount and the amount estimated to be collectible as a reduction to healthcare services revenue. Implicit price concessions include such items as amounts due from patients without adequate insurance coverage patient co-payment and deductible amounts due from patients with healthcare coverage. The Company determines implicit price concessions primarily upon past collection history. Upon receipt of new information relevant for the determination of the implicit price concession the Company constrains or adjusts the constraints for the variable consideration of the transaction price. 2 Pharmaceutical Products In respect of sale of pharmaceutical products where the performance obligation is satisfied at a point in time revenue is recognised when the control of goods is transferred to the customer. 3 Project Consultancy Income In respect of project consultancy income i.e. the revenue arising from the Operating & Maintenance (O&M) contracts where the performance obligation is satisfied over time revenue is recognised along the period when the services are received and accepted by the customer. 4 Clinical trials In respect of clinical trials where the performance obligation is satisfied at a point in time revenue is recognised when the service has been received and accepted by the customer. 5 Other Services (i) Hospital Project Consultancy income is recognised as and when it becomes due on percentage completion method on achievement of milestones. (ii) Income from Clinical Trials on behalf of Pharmaceutical Companies is recognized on completion of the service based on the terms and conditions specified to each contract. (iii) One-time franchise license fees is recognised based on achievement of the milestones as per the terms of the contract and where ever there is no bifurcation of total fee then over the period of the agreement. (iv) Other Franchisee license fee is recognised on accrual basis as per the terms of the contracts. (v) Other services fee is recognized on basis of the services rendered and as per the terms of the agreement. (vi) Royalty income is recognised on an accrual basis in accordance with the terms of the relevant agreement. 6 Contract assets and liabilities Revenue recognised by the Company where services are rendered to the customer and for which invoice has not been raised (which we refer as unbilled revenue) are classified as contract assets. Amount collected from the customer and services have not yet been rendered are classified as contract liabilities. 7 Transaction Price Revenue is measured based on the transaction price which is the fixed consideration adjusted for discounts estimated disallowances amounts payable to customer in the nature of commissions principal versus agent considerations loyalty credits and any other rights and obligations as specified in the contract with the customer. Revenue also excludes taxes collected from customers and deposited back to the respective statutory authorities. Subsequent changes resulting from a patients ability to pay are recorded as bad debt expense which is included as an expense in the consolidated statements of profit and loss. Principal versus agent considerations The Group is a principal and records revenue on a gross basis when the Group is primarily responsible for fulfilling the service has discretion in establish pricing and controls the promised service before transferring that service to customers. In limited instances the patient services are provided by visiting consultants who are doctors/medical experts and not considered as the Groups employees. As the visiting consultants have the discretion to take their patients to other hospital for the required treatment and set their own consultation fee charged to patients the Group is an agent in such arrangement. The Group collects fees on behalf of the visiting consultants and records revenue at the net amounts as commissions. Sometimes the Group engages third-party providers to provide medical examination and disease screening services. The Group evaluates the services provided by third parties to determine whether to recognize the revenues on a gross or net basis. The determination is based upon an assessment as to whether the Group acts as a principal or agent when providing the services. Some of the revenues involving third-party providers providing medical examination or disease screening services are accounted for on a net basis since the third-party providers are the primary obligor have the latitude in establishing prices and the customer has discretion in third-party provider selection. 8 Contract modifications Contract modifications are accounted for when additions deletions or changes are approved either to the contract scope or contract price. The accounting for modifications of contracts involves assessing whether the services added to an existing contract are distinct and whether the pricing is at the stand alone selling price. Services added that are not distinct are accounted for on a cumulative catch-up basis while those that are distinct are accounted for prospectively either as a separate contract if the additional services are priced at the standalone selling price or as a termination of the existing contract and creation of a new contract if not priced at the standalone selling price. 9 Revenue from Insurance business a. Premium: Premium (net of service tax) is recognized as income over the contract period or period of risk whichever is appropriate. Any subsequent revision or cancellation of premium is accounted for in the year in which they occur. b. Commission on Reinsurance Premium: Commission on reinsurance ceded is recognized as income in the year of cession of reinsurance premium. Profit commission under reinsurance treaties wherever applicable is recognized in the year of determination of the profits and as intimated by the reinsurer. c. Premium Deficiency: Premium deficiency is recognized whenever the ultimate amount of expected claims related expenses and maintenance costs exceeds the related sum of premium carried forward to the subsequent accounting period as reserve for unexpired risk. d. Reserve for Unexpired Risk: Reserve for unexpired risk represents that part of the net premium (premium net of reinsurance ceded) attributable to the succeeding accounting period subject to a minimum amount of reserves as required by Section 64V (1) (ii) (b) of the Insurance Act 1938. e. Interest / Dividend Income: Interest income is recognized on accrual basis. Dividend is recognized when the right to receive the dividend is established. f. Accretion / Amortization of Discounts/ Premium Accretion of discounts and amortization of premium relating to debt securities is recognized over the holding / maturity period. 10 Revenue from Third Party Administrator (TPA) Inpatient services rendered to TPA are paid according to a fee-for-service schedule. These rates vary according to a patient classification system that is based on clinical diagnostic and other factors. Inpatient services generated through TPA are recorded on an accrual basis in the period in which services are provided at established rates. The Group determines the transaction price on the TPA contracts based on established billing rates reduced by contractual adjustments provided to TPAs. Contractual adjustments and discounts are based on contractual agreements discount policies and historical experience. Implicit price concessions are based on historical collection experience. Most of our TPA contracts contain variable consideration. However it is unlikely a significant reversal of revenue will occur when the uncertainty is resolved and therefore the Company has included the variable consideration in the estimated transaction price. 11 Trade accounts and other receivables and allowance for doubtful accounts Trade receivables from healthcare services are recognized and billed at amounts estimated to be collectable under government reimbursement programs reimbursement arrangements with third party administrators and contracutal arrangements with corporates including public sector undertakings. The billing on government reimbursement programs are at pre-determined net realizable rates per treatment that are established by statute or regulation. Revenues for non-governmental payors with which the Group has contracts are recognized at the prevailing contract rates. The remaining non-governmental payors are billed at the Groups standard rates for services and a contractual adjustment is recorded to recognize revenues based on historic reimbursement. The contractual adjustment and the allowance for doubtful accounts are reviewed quarterly for their adequacy. The collectability of receivables is reviewed on a regular basis. Receivables where the expected credit losses are not assessed individually are grouped based on similar credit characteristics and the impairment is assessed based on historical default rates and macroeconomic indicators. Write offs are taken on a claim-by-claim basis. Due to the fact that a large portion of its reimbursement is provided by public healthcare organizations and private insurers the Company expects that most of its accounts receivables will be collectible. A significant change in the Companys collection experience deterioration in the aging of receivables and collection difficulties could require that the Company increases its estimate of the allowance for doubtful accounts. Any such additional bad debt charges could materially and adversely affect the Companys future operating results. When all efforts to collect a receivable have been exhausted and after appropriate management review a receivable deemed to be uncollectible is considered a bad debt and written off. 12 Revenue from export benefit schemes Other Income Under the Served from India Scheme introduced by the Government of India an exporter of service is entitled to certain export benefits on foreign currency earned. The revenue in respect of export benefits is recognized on the basis of the foreign exchange earned at the rate at which the said entitlement accrues to the extent there is no significant uncertainty as to the amount of consideration that would be derived and as to its ultimate collection. 13 Dividend and interest income Dividend income from investments is recognised when the shareholders right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably). Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that assets net carrying amount on initial recognition. 14 Rental income The Groups policy for recognition of revenue from operating leases is described under Ind As 116
68 Apollo Hospitals Enterprise Ltd. Healthcare Ind AS 116 Leases Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. 1 The Group as lessor Amounts due from lessees under finance leases are recognised as receivables at the amount of the Groups net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Groups net investment outstanding in respect of the leases. Rental income from operating leases is generally recognised on a straight-line basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the Groups expected inflationary cost increases such increases are recognised in the year in which such benefits accrue. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term. 2 The Group as lessee The Group enters into an arrangement for lease of land buildings plant and machinery including computer equipment and furnitures. Such arrangements are generally for a fixed period but may have extension or termination options. The Group assesses whether the contract is or contains a lease at its inception. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset obtain substantially all the economic benefits from use of the identified asset and direct the use of the identified asset. The Group determines the lease term as the non-cancellable period of a lease together with periods covered by an option to extend the lease where the Company is reasonably certain to exercise that option The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease agreements in which it is the lessee except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. This expense is presented within other expenses in statement of profit and loss. Lease Liabilities: The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date discounted by using the rate implicit in the lease. If this rate cannot be readily determined the Company uses its incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise: fixed lease payments (including in-substance fixed payments) less any lease incentives; variable lease payments that depend on an index or rate initially measured using the index or rate at the commencement date; the amount expected to be payable by the lessee under residual value guarantees; lease payments in optional renewal periods where exercise of extension options is reasonably certain and payments of penalties for terminating the lease if the lease term reflects the exercise of an option to terminate the lease. The lease liability is presented as a separate line in the Balance Sheet under Other Financial Liabilities. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. Lease liability payments are classified as cash used in financing activities in the Statement of cash flows. Right-of-Use Assets: The Group recognises right-of-use asset at the commencement date of the respective lease. Right-of-use asset are stated at cost less accumulated depreciation. Upon initial recognition cost comprises of: the initial lease liability amount initial direct costs incurred when entering into the lease (lease) payments before commencement date of the respective lease and an estimate of costs to dismantle and remove the underlying asset less any lease incentives received. Prepaid lease payments (including the difference between nominal amount of the deposit and the fair value) are also included in the initial carrying amount of the right of use asset. They are subsequently measured at cost less accumulated depreciation and impairment losses. Right-of-use assets are depreciated on a straight line basis over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the Right-of-use asset reflects that the Group expects to exercise a purchase option the related Right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease The Right-of-use assets are presented as a separate line in the Balance Sheet. The Group applies Ind AS 36 to determine whether a ROU asset is impaired and accounts for any identified impairment loss as described in the impairment of non-financial assets below. The Group incurs obligation for costs to dismantle and remove a leased asset restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease. The Group has assessed that such restoration costs are negligible and hence no provision under Ind-AS 37 has been recognised. Variable rents that do not depend on an index or rate are not included in the measurement the lease liability and the Right-of- use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in the line other expenses in the statement of profit and loss. Lease policy applicable before April 1 2019 Rental expense from operating leases is generally recognised on a straight-line basis over the term of the relevant lease. Where the rentals are structured solely to increase in line with expected general inflation to compensate for the lessors expected inflationary cost increases such increases are recognised in the year in which such benefits accrue. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
69 Apollo Hospitals Enterprise Ltd. Healthcare Ind AS 12 Income Taxes Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. 1. Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the statement of profit and loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Groups current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Advance taxes and provisions for current income taxes are presented in the Balance Sheet after off-setting advance tax paid and income tax provision 2. Deferred tax Deferred tax is recognised 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 are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the relevant entity intends to settle its current tax assets and liabilities on a net basis The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. 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. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects at the end of the reporting period to recover or settle the carrying amount of its assets and liabilities. 3 Current and deferred tax for the year Current and deferred tax are recognised in statement of profit and loss except when they relate to items that are recognised in other comprehensive income or directly in equity in which case the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination the tax effect is included in accounting for the business combination.
70 Apollo Hospitals Enterprise Ltd. Healthcare " Ind AS 16 Property Land and buildings mainly comprise of hospitals and offices. Land and buildings held for use in the production or supply of goods or services or for administrative purposes are stated in the balance sheet at cost less accumulated depreciation and accumulated impairment losses. Freehold land is not depreciated. Expenses in the nature of general repairs and maintenance i.e. in the nature of day to day service costs are charged to income statement during the financial period in which they are incurred. Parts of some items of property plant and equipment may require replacement at regular intervals and this would enhance the life of the asset. The Group recognises these in the carrying value of property plant & equipment and amortised over the period which is lower of replacement period and its useful life. The carrying amount of those parts that are replaced is derecognized in accordance with the derecognition provisions of Ind AS 16. Depreciation is recognised so as to write off the cost of assets (other than freehold land and properties under construction) less their residual values over their useful lives using the straight-line method. The estimated useful lives residual values and depreciation method are reviewed at the end of each reporting period with the effect of any changes in estimate accounted for on a prospective basis. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However when there is no reasonable certainty that ownership will be obtained by the end of the lease term assets are depreciated over the shorter of the lease term and their useful lives. The management believes that these estimated useful lives that reflect fair approximation of the period over which the assets are likely to be used. An item of property plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit and loss.
71 Apollo Hospitals Enterprise Ltd. Healthcare Ind AS 19 Employee Benefits 1.Retirement benefit costs and termination benefits Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions. For defined benefit retirement benefit plans the cost of providing benefits is determined using the projected unit credit method with actuarial valuations being carried out at the end of each annual reporting period. Re-measurement comprising actuarial gains and losses is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. Re-measurement recognised in other comprehensive income is reflected in retained earnings and is not reclassified to statement of profit and loss. Past service cost is recognised in statement of profit and loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows: service cost (including current service cost past service cost as well as gains and losses on curtailments and settlements); net interest expense or income; and remeasurement The Group presents the first two components of defined benefit costs in statement of profit and loss in the line item Employee benefits expense. The retirement benefit obligation recognised in the balance sheet represents the actual deficit or surplus in the Groups 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. 2. Short-term and other long-term employee benefits Leave Encashment The employees of the Company are entitled to encash the unutlised leave. The employees can carry forward a portion of the unutilized accumulating leave and utilize it in future periods or receive cash as per the Companies policy upon accumulation of minimum number of days. The Company records an obligation for leave encashment in the period in which the employee renders the services that increases this entitlement. The Company measures the expected cost of leave encashment as the additional amount that the Company expects to pay as a result of the unused entitlement that has accumulated at the end of the reporting period. The Company recognizes accumulated leave entitlements based on actuarial valuation using the projected unit credit method. Non-accumulating leave balances are recognized in the period in which the leaves occur. Other short term employee benefits Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service. Liabilities recognised in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Group in respect of services provided by employees up to the reporting date.
72 Apollo Hospitals Enterprise Ltd. Healthcare Ind AS 2 Inventories Inventories of medical consumables drugs and stores & spares are valued at lower of cost or net realizable value. Net Realizable Value represents the estimated selling price in the ordinary course of business less estimated costs necessary to make the sale. Cost is determined as follows: a. Medicines under healthcare segment is valued on First in First Out (FIFO) basis. b. Stock in Trade under retail pharmacies segment is valued on weighted average rates. c. Stores and spares is valued on First in First Out (FIFO) basis. d. Other consumables (including laboratory consumables) is valued on First in First Out (FIFO) basis.
73 Apollo Hospitals Enterprise Ltd. Healthcare Ind AS 20 Accounting for Government Grants and Di Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attached to them and that the grants will be received. Government grants are recognised in the statement of profit and loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. Specifically government grants whose primary condition is that the Group should purchase construct or otherwise acquire non-current assets are recognised as deferred revenue in the consolidated balance sheet and transferred to statement of profit and loss on a systematic and rational basis over the useful lives of the related assets. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in statement of profit and loss in the period in which they become receivable. The benefit of a government loan at a below-market rate of interest is treated as a government grant measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.
74 Apollo Hospitals Enterprise Ltd. Healthcare Ind AS 21 The Effects of Changes in Foreign Excha Foreign currencies Exchange differences on monetary items are recognised in the statement of profit and loss in the period in which they arise except for exchange differences on 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.
75 Apollo Hospitals Enterprise Ltd. Healthcare Ind AS 23 Borrowing Costs Borrowings are recognised initially at fair value net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the statement of profit and loss over the period of the borrowings using the effective interest rate method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Borrowing costs directly attributable to the acquisition construction or production of qualifying assets which are assets that necessarily take a substantial period of time to get ready for their intended use or sale are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in the statement of profit and loss in the period in which they are incurred.
76 Apollo Hospitals Enterprise Ltd. Healthcare Ind AS 28 Investments in Associates and Joint Ven Investments in associates and joint ventures An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but does not denote control or joint control over those policies. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The results and assets and liabilities of associates or joint ventures are incorporated in these consolidated financial statements using the equity method of accounting except when the investment or a portion thereof is classified as held for sale in which case it is accounted for in accordance with Ind AS 105. Under the equity method an investment in an associate or a joint venture is initially recognised in the consolidated balance sheet at cost and adjusted thereafter to recognise the Groups share of profit and loss and other comprehensive income of the associate or joint venture. Distributions received from an associate or a joint venture reduce the carrying amount of the investment. When the Groups share of losses of an associate or a joint venture exceeds the Groups interest in that associate or joint venture the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint venture any excess of the cost of the investment over the Groups share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill which is included within the carrying amount of the investment. Any excess of the Groups share of the net fair value of the identifiable assets and liabilities over the cost of the investment after reassessment is recognised directly in equity as capital reserve in the period in which the investment is acquired. When necessary the entire carrying amount of the investment (including goodwill) is anthology_newed for impairment in accordance with Ind AS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with Ind AS 36 to the extent that the recoverable amount of the investment subsequently increases. The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests.
77 Apollo Hospitals Enterprise Ltd. Healthcare Ind AS 36 Impairment of Assets Impairment of tangible and intangible assets other than goodwill The carrying values of property plant and equipment and intangible assets with finite life are reviewed for possible impairment whenever events circumstances or operating results indicate that the carrying amount of an asset may not be recoverable. If any such indication exists the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in statement of profit and loss. If at the reporting date there is an indication that a previously assessed impairment loss no longer exists the recoverable amount is reassessed and the impairment losses previously recognized are reversed such that the asset is recognized at its recoverable amount but not exceeding written down value which would have been reported if the impairment losses had not been recognized initially. An impairment in respect of goodwill is not reversed. Impairment of Goodwill and indefinite useful lives Goodwill and identifiable intangibles with indefinite useful lives are not amortized but anthology_newed for impairment annually or when an event becomes known that could trigger an impairment. To perform the annual impairment anthology_new of goodwill the Company identified its groups of cash generating units (CGUs) and determined their carrying value by assigning the assets and liabilities including the existing goodwill and intangible assets to those CGUs. CGUs reflect the lowest level on which goodwill is monitored for internal management purposes. For the purpose of goodwill impairment anthology_newing all corporate assets and liabilities are allocated to the CGUs. At least once a year the Group compares the recoverable amount of each CGU to the CGUs carrying amount. To evaluate the recoverability of intangible assets with indefinite useful lives the Group compares the fair values of intangible assets with their carrying values.
78 Apollo Hospitals Enterprise Ltd. Healthcare " Ind AS 37 Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event it is probable that the Group will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. 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). When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Onerous contracts Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract. Contingent liabilities Contingent liability is a possible obligation arising 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 entity or a present obligation that arises from past events but is not recognized because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability. Contingent liabilities acquired in a business combination are initially measured at fair value at the acquisition date. At the end of subsequent reporting periods such contingent liabilities are measured at the higher of the amount that would be recognised in accordance with Ind AS 37 and the amount initially recognised less cumulative amortisation recognised in accordance with Ind AS 115 Revenue from contracts with customers.
79 Apollo Hospitals Enterprise Ltd. Healthcare Ind AS 38 Intangible Assets Intangible assets 1 Intangible assets acquired separately Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period with the effect of any changes in estimates being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses. Intangible assets with finite useful lives are evaluated for impairment when events have occurred that may give rise to an impairment. 2 Intangible assets acquired in a business combination Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses on the same basis as intangible assets that are acquired separately. 3 Derecognition of intangible assets An intangible asset is derecognised on disposal or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset measured as the difference between the net disposal proceeds and the carrying amount of the asset are recognised in statement of profit and loss when the asset is derecognised. 4 Useful lives of intangible assets Estimated useful lives of the intangible assets are as follows: Category of assets Useful Life (in years) Software License 3 years Non Compete Fees 3 years Trademarks 3 years 5 Review of useful life and method of depreciation Estimated useful lives are periodically reviewed and when warranted changes are made to them. The effect of such change in estimates are accounted for prospectively. 6 Capital work in progress Amounts paid towards the acquisition of property plant and equipment outstanding as of each reporting date are recognized as capital advance and the cost of property plant and equipment not ready for intended use before such date are disclosed under capital work- in-progress Commencement of Depreciation related to property plant and equipment classified as Capital work in progress (CWIP) involves determining when the assets are available for their intended use. The criteria the Group uses to determine whether CWIP are available for their intended use involves subjective judgments and assumptions about the conditions necessary for the assets to be capable of operating in the intended manner. 7 Internally generated intangibles Research costs are expensed as incurred. Software product development costs are expensed as incurred unless technical and commercial feasibility of the project is demonstrated future economic benefits are probable the Company has an intention and ability to complete and use the software and the costs can be measured reliably. The costs which can be capitalized include the cost of material direct labour overhead costs that are directly attributable to preparing the asset for its intended use.
80 Asian Paints Ltd. Paints Ind AS 1 Presentation of Financial Statements These financial statements are the consolidated financial statements of the Group prepared in accordance with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act 2013 read together with the Companies (Indian Accounting Standards) Rules 2015 (as amended). These consolidated financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting except for certain financial assets and financial liabilities that are measured at fair values at the end of each reporting period as stated in the accounting policies set out below. The accounting policies have been applied consistently over all the periods presented in these consolidated financial statements except as mentioned below in 1.2. The Group has applied the following Ind AS pronouncements pursuant to issuance of the Companies (Indian Accounting Standards) Amendment Rules 2019 and the Companies (Indian Accounting Standards) Second Amendment Rules 2019. Accordingly the Group has adopted Ind AS 116 Leases retrospectively to each prior reporting period presented with effect from 1st April 2019 and it is detailed in note 1.4(r). Any asset or liability is classified as current if it satisfies any of the following conditions: i. the asset/liability is expected to be realized/ settled in the Groups normal operating cycle; ii. the asset is intended for sale or consumption; iii. the asset/liability is held primarily for the purpose of trading; iv. the asset/liability is expected to be realized/ settled within twelve months after the reporting period; v. the asset is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting date; vi. in the case of a liability the Group does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting date. All other assets and liabilities are classified as non-current. For the purpose of current/non-current classification of assets and liabilities the Group has ascertained its normal operating cycle as twelve months. This is based on the nature of services and the time between the acquisition of assets or inventories for processing and their realization in cash and cash equivalents. Measurement of EBITDA The Group has opted to present earnings before interest (finance cost) tax depreciation and amortization (EBITDA) as a separate line item on the face of the Consolidated Statement of Profit and Loss for the period. The Group measures EBITDA on the basis of profit/(loss) from continuing operations.
81 Asian Paints Ltd. Paints Ind AS 10 Events after the Reporting Period Events after reporting date Where events occurring after the balance sheet date provide evidence of conditions that existed at the end of the reporting period the impact of such events is adjusted within the consolidated financial statements. Otherwise events after the balance sheet date of material size or nature are only disclosed.
82 Asian Paints Ltd. Paints Ind AS 103 Business Combinations Business combinations are accounted for using the acquisition method. At the acquisition date identifiable assets acquired and liabilities assumed are measured at fair value. For this purpose the liabilities assumed include contingent liabilities representing present obligation and they are measured at their acquisition date fair values irrespective of the fact that outflow of resources embodying economic benefits is not probable. The consideration transferred is measured at fair value at acquisition date and includes the fair value of any contingent consideration. However deferred tax asset or liability and any liability or asset relating to employee benefit arrangements arising from a business combination are measured and recognized in accordance with the requirements of Ind AS 12 Income Taxes and Ind AS 19 Employee Benefits respectively. Where the consideration transferred exceeds the fair value of the net identifiable assets acquired and liabilities assumed the excess is recorded as goodwill. Alternatively in case of a bargain purchase wherein the consideration transferred is lower than the fair value of the net identifiable assets acquired and liabilities assumed the difference is recorded as a gain in other comprehensive income and accumulated in equity as capital reserve. The costs of acquisition excluding those relating to issue of equity or debt securities are charged to the Statement of Profit and Loss in the period in which they are incurred. In case of business combinations involving entities under common control the above policy does not apply. Business combinations involving entities under common control are accounted for using the pooling of interests method. The net assets of the transferor entity or business are accounted at their carrying amounts on the date of the acquisition subject to necessary adjustments required to harmonise accounting policies. Any excess or shortfall of the consideration paid over the share capital of transferor entity or business is recognised as capital reserve under equity. Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Goodwill is initially measured at cost being the excess of the consideration transferred over the net identifiable assets acquired and liabilities assumed measured in accordance with Ind AS 103 Business Combinations. Goodwill is considered to have indefinite useful life and hence is not subject to amortization but anthology_newed for impairment at least annually. After initial recognition goodwill is measured at cost less any accumulated impairment losses.
83 Asian Paints Ltd. Paints Ind AS 105 Non current Assets Held for Sale and D Non-current Assets held for sale The Group classifies non-current assets as held for sale if their carrying amounts will be recovered principally through a sale rather than through continuing use of the assets and actions required to complete such sale indicate that it is unlikely that significant changes to the plan to sell will be made or that the decision to sell will be withdrawn. Also such assets are classified as held for sale only if the management expects to complete the sale within one year from the date of classification. Non-current assets classified as held for sale are measured at the lower of their carrying amount and the fair value less cost to sell. Non-current assets are not depreciated or amortized.
84 Asian Paints Ltd. Paints Ind AS 108 Operating Segments Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM) of the Parent Company. The CODM is responsible for allocating resources and assessing performance of the operating segments of the Group.
85 Asian Paints Ltd. Paints Ind AS 109 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 Initial recognition and measurement: The Group recognizes a financial asset in its balance sheet when it becomes party to the contractual provisions of the instrument. All financial assets are recognized initially at fair value plus in the case of financial assets not recorded at fair value through profit or loss (FVTPL) transaction costs that are attributable to the acquisition of the financial asset. Where the fair value of a financial asset at initial recognition is different from its transaction price the difference between the fair value and the transaction price is recognized as a gain or loss in the consolidated statement of profit and loss at initial recognition if the fair value is determined through a quoted market price in an active market for an identical asset (i.e. level 1 input) or through a valuation technique that uses data from observable markets (i.e. level 2 input). In case the fair value is not determined using a level 1 or level 2 input as mentioned above the difference between the fair value and transaction price is deferred appropriately and recognized as a gain or loss in the consolidated statement of profit and loss only to the extent that such gain or loss arises due to a change in factor that market participants take into account when pricing the financial asset. However trade receivables that do not contain a significant financing component are measured at transaction price. Subsequent measurement: For subsequent measurement the Group classifies a financial asset in accordance with the below criteria: i. The Groups business model for managing the financial asset and ii. The contractual cash flow characteristics of the financial asset. Based on the above criteria the Group classifies its financial assets into the following categories: i. Financial assets measured at amortized cost ii. Financial assets measured at fair value through other comprehensive income (FVTOCI) iii. Financial assets measured at fair value through profit or loss (FVTPL) i. Financial assets measured at amortized cost: A financial asset is measured at the amortized cost if both the following conditions are met: a) The Groups business model objective for managing the financial asset is to hold financial assets in order to collect contractual cash flows and b) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. This category applies to cash and bank balances trade receivables loans and other financial assets of the Group (Refer note 30 for further details). Such financial assets are subsequently measured at amortized cost using the effective interest method. Under the effective interest method the future cash receipts are exactly discounted to the initial recognition value using the effective interest rate. The cumulative amortization using the effective interest method of the difference between the initial recognition amount and the maturity amount is added to the initial recognition value (net of principal repayments if any) of the financial asset over the relevant period of the financial asset to arrive at the amortized cost at each reporting date. The corresponding effect of the amortization under effective interest method is recognized as interest income over the relevant period of the financial asset. The same is included under other income in the consolidated statement of profit and loss. The amortized cost of a financial asset is also adjusted for loss allowance if any. ii. Financial assets measured at FVTOCI: A financial asset is measured at FVTOCI if both of the following conditions are met: a) The Groups business model objective for managing the financial asset is achieved both by collecting contractual cash flows and selling the financial assets and b) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. This category applies to certain investments in debt instruments (Refer note 30 for further details). Such financial assets are subsequently measured at fair value at each reporting date. Fair value changes are recognized in the Other Comprehensive Income (OCI). However the Group recognizes interest income and impairment losses and its reversals in the consolidated statement of profit and loss. On Derecognition of such financial assets cumulative gain or loss previously recognized in OCI is reclassified from equity to consolidated statement of profit and loss. Further the Group through an irrevocable election at initial recognition has measured certain investments in equity instruments at FVTOCI (Refer note 30 for further details). The Group has made such election on an instrument by instrument basis. These equity instruments are neither held for trading nor are contingent consideration recognized under a business combination. Pursuant to such irrevocable election subsequent changes in the fair value of such equity instruments are recognized in OCI. However the Group recognizes dividend income from such instruments in the Consolidated Statement of Profit and Loss when the right to receive payment is established it is probable that the economic benefits will flow to the Group and the amount can be measured reliably. On Derecognition of such financial assets cumulative gain or loss previously recognized in OCI is not reclassified from equity to Consolidated Statement of Profit and Loss. However the Group may transfer such cumulative gain or loss into retained earnings within equity. iii. Financial assets measured at FVTPL: A financial asset is measured at FVTPL unless it is measured at amortized cost or at FVTOCI as explained above. This is a residual category applied to all other investments of the Group excluding investments in associate (Refer note 30 for further details). Such financial assets are subsequently measured at fair value at each reporting date. Fair value changes are recognized in the Consolidated Statement of Profit and Loss. Derecognition: A financial asset (or where applicable a part of a financial asset or part of a group of similar financial assets) is derecognized (i.e. removed from the Groups balance sheet) when any of the following occurs: i. The contractual rights to cash flows from the financial asset expires; ii. The Group transfers its contractual rights to receive cash flows of the financial asset and has substantially transferred all the risks and rewards of ownership of the financial asset; iii. The Group retains the contractual rights to receive cash flows but assumes a contractual obligation to pay the cash flows without material delay to one or more recipients under a pass-through arrangement (thereby substantially transferring all the risks and rewards of ownership of the financial asset); iv. The Group neither transfers nor retains substantially all risk and rewards of ownership and does not retain control over the financial asset. In cases where Group has neither transferred nor retained substantially all of the risks and rewards of the financial asset but retains control of the financial asset the Group continues to recognize such financial asset to the extent of its continuing involvement in the financial asset. In that case the Group also recognizes D14an associated liability. The financial asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. On Derecognition of a financial asset (except as mentioned in ii above for financial assets measured at FVTOCI) the difference between the carrying amount and the consideration received is recognized in the Consolidated Statement of Profit and Loss. Impairment of financial assets: The Group applies expected credit losses (ECL) model for measurement and recognition of loss allowance on the following: i. Trade receivables and lease receivables ii. Financial assets measured at amortized cost (other than trade receivables and lease receivables) iii. Financial assets measured at fair value through other comprehensive income (FVTOCI) In case of trade receivables and lease receivables the Group follows a simplified approach wherein D14an amount equal to lifetime ECL is measured and recognised as loss allowance. In case of other assets (listed as ii and iii above) the Group determines if there has been a significant increase in credit risk of the financial asset since initial recognition. If the credit risk of such assets has not increased significantly an amount equal to 12-month ECL is measured and recognized as loss allowance. However if credit risk has increased significantly an amount equal to lifetime ECL is measured and recognised as loss allowance. Subsequently if the credit quality of the financial asset improves such that there is no longer a significant increase in credit risksince initial recognition the Group reverts torecognizing impairment loss allowance basedon 12-month ECL. ECL is the difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the entity expects to receive (i.e. all cash shortfalls) discounted at the original effective interest rate. Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial asset. 12-month ECL are a portion of the lifetime ECL which result months from the reporting date. ECL are measured in a manner that they reflect unbiased and probability weighted amounts determined by a range of outcomes taking into account the time value of money and other reasonable information available as a result of past events current conditions and forecasts of future economic conditions. As a practical expedient the Group uses a provision matrix to measure lifetime ECL on its portfolio of trade receivables. The provision matrix is prepared based on historically observed default rates over the expected life of trade receivables and is adjusted for forwardlooking estimates. At each reporting date the historically observed default rates and changes in the forward-looking estimates are updated. ECL impairment loss allowance (or reversal) recognized during the period is recognized as income/ expense in the Consolidated Statement of Profit and Loss under the head Other expenses. Financial Liabilities Initial recognition and measurement: The Group recognizes a financial liability in its balance sheet when it becomes party to the contractual provisions of the instrument. All financial liabilities are recognized initially at fair value minus in the case of financial liabilities not recorded at fair value through profit or loss (FVTPL) transaction costs that are attributable to the acquisition of the financial liability. Where the fair value of a financial liability at initial recognition is different from its transaction price the difference between the fair value and the transaction price is recognized as a gain or loss in the Consolidated Statement of Profit and Loss at initial recognition if the fair value is determined through a quoted market price in an active market for an identical asset (i.e. level 1 input) or through a valuation technique that uses data from observable markets (i.e. level 2 input). In case the fair value is not determined using a level 1 or level 2 input as mentioned above the difference between the fair value and transaction price is deferred appropriately and recognized as a gain or loss in the Consolidated Statement of Profit and Loss only to the extent that such gain or loss arises due to a change in factor that market participants take into account when pricing the financial liability. Subsequent measurement: All financial liabilities of the Group are subsequently measured at amortized cost using the effective interest method (Refer note 30 for further details). Under the effective interest method the future cash payments are exactly discounted to the initial recognition value using the effective interest rate. The cumulative amortization using the effective interest method of the difference between the initial recognition amount and the maturity amount is added to the initial recognition value (net of principal repayments if any) of the financial liability over the relevant period of the financial liability to arrive at the amortized cost at each reporting date. The corresponding effect of the amortization under effective interest method is recognized as interest expense over the relevant period of the financial liability. The same is included under finance cost in the Consolidated Statement of Profit and Loss. Derecognition: A financial liability is derecognized 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 between the carrying amount of the financial liability derecognized and the consideration paid is recognized in the Consolidated Statement of Profit and Loss. Derivative financial instruments and hedge accounting The Group enters into derivative financial contracts in the nature of forward currency contracts with external parties to hedge its foreign currency risks relating to foreign currency denominated financial liabilities measured at amortized cost. The Group 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 Groups risk management objective and strategy. The hedge relationship so designated is accounted for in accordance with the accounting principles prescribed for a fair value hedge under Ind AS 109 Financial Instruments. 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 Consolidated 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 Consolidated Statement of Profit and Loss. Derecognition: On Derecognition of the hedged item the unamortized fair value of the hedging instrument is recognized in the Consolidated Statement of Profit and Loss.
86 Asian Paints Ltd. Paints Ind AS 110 Consolidated Financial Statements Basis of Consolidation The consolidated financial statements comprise the financial statements of the Parent Company (the Company) and its subsidiaries. Control is achieved when the Company has: Power over the investee Is exposed or has rights to variable returns from its involvement with the investee and Has the ability to use its power over the investee to affect its returns. Generally there is a presumption that a majority of voting rights result in control. To support this presumption and when the Company has less than a majority of the voting or similar rights of an investee the Company considers all relevant facts and circumstances in assessing whether it has power over an investee including: The contractual arrangement with the other vote holders of the investee Rights arising from other contractual arrangement The Companys voting rights and potential voting rights The size of the Companys holding of voting rights relative to the size and dispersion of the holdings of the other voting rights holders. The Company re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Assets liabilities income and expenses of a subsidiary acquired or disposed off during the year are included in the consolidated financial statements from the date the Company gains control until the date the Company ceases to control the subsidiary. Consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances. If a member of the Group uses accounting policies other than those adopted in the consolidated financial statements for like transactions and events in similar circumstances appropriate adjustments are made to that Group members financial statements in preparing the consolidated financial statements to ensure conformity with the Groups accounting policies. The financial statements of all entities used for the purpose of consolidation are drawn up to same reporting date as that of the Parent company i.e. year ended on 31st March. When the end of the reporting period of the Parent is different from that of a subsidiary the subsidiary prepares for consolidation purposes additional financial information as of the same date as the financial statements of the Parent to enable the Parent to consolidate the financial information of the subsidiary unless it is impracticable to do so. Consolidation procedure: (a) Combine like items of assets liabilities equity income expenses and cash flows of the Parent with those of its subsidiaries. For this purpose income and expenses of the subsidiary are based on the amounts of the assets and liabilities recognised in the consolidated financial statements at the acquisition date. (b) Offset (eliminate) the carrying amount of the Parents investment in each subsidiary and the Parents portion of equity of each subsidiary. Business combinations policy explains how to account for any related goodwill. (c) Eliminate in full intra-group assets and liabilities equity income expenses and cash flows relating to transactions between entities of the group (profits or losses resulting from intra-group transactions that are recognised in assets such as inventory and fixed assets are eliminated in full). Intragroup losses may indicate an impairment that requires recognition in the consolidated financial statements. Ind AS 12 Income Taxes applies to temporary differences that arise from the elimination of profits and losses resulting from intragroup transactions. Profit or loss and each component of other comprehensive income (OCI) are attributed to the owners of the Company and to the noncontrolling interests even if this results in the non-controlling interests having a deficit balance. When necessary adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Groups accounting policies. All intra-group assets and liabilities equity income expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary without a loss of control is accounted for as an equity transaction.
87 Asian Paints Ltd. Paints Ind AS 115 Revenue from Contracts with Customers/ Revenue from contracts with customers is recognized on transfer of control of promised goods or services to a customer at an amount that reflects the consideration to which the Group is expected to be entitled to in exchange for those goods or services. Revenue towards satisfaction of a performance obligation is measured at the amount of transaction price (net of variable consideration) allocated to that performance obligation. The transaction price of goods sold and services rendered is net of variable consideration on account of various discounts and schemes offered by the Group as part of the contract. This variable consideration is estimated based on the expected value of outflow. Revenue (net of variable consideration) is recognized only to the extent that it is highly probable that the amount will not be subject to significant reversal when uncertainty relating to its recognition is resolved. Sale of Products: Revenue from sale of products is recognized when the control on the goods have been transferred to the customer. The performance obligation in case of sale of product is satisfied at a point in time i.e. when the material is shipped to the customer or on delivery to the customer as may be specified in the contract. Rendering of Services: Revenue from rendering services is recognized over time by measuring progress towards satisfaction of performance obligation for the services rendered. The Group uses output method for measurement of revenue from home solution operations/ painting and related services and royalty income as it is based on milestone reached or units delivered. Input method is used for measurement of revenue from processing and other service as it is directly linked to the expense incurred by the Group.
88 Asian Paints Ltd. Paints Ind AS 116 Leases Lease accounting Assets taken on lease: The group mainly has various lease arrangements for land and building for its offices warehouse spaces and retail stores. In addition it has vehicle and other lease agreements. The group assesses whether a contract is or contains a lease at inception of a contract. The assessment involves the exercise of judgement about whether (i) the contract involves the use of an identified asset (ii) the group has substantially all of the economic benefits from the use of the asset through the period of the lease and (iii) the group has the right to direct the use of the asset. The group recognises a right-of-use assets (ROU) and a corresponding lease liability at the lease commencement date. The ROU asset is initially recognised at cost which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses. The ROU asset is depreciated using the straightline method from the commencement date to the earlier of the end of the useful life of the ROU asset or the end of the lease term. If a lease transfers ownership of the underlying asset or the cost of the ROU asset reflects that the Group expects to exercise a purchase option the related ROU asset is depreciated over the useful life of the underlying asset. The estimated useful lives of ROU assets are determined on the same basis as those of property and equipment. In addition the right-of-use asset is periodically reduced by impairment losses if any and adjusted for certain re- easurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date discounted using the interest rate implicit in the lease or if that rate cannot be readily determined the group uses an incremental borrowing rate specific to the country term and currency of the contract. Generally the Group uses the incremental borrowing rate as the discount rate. Lease payments included in the measurement of the lease liability include fixed payments variable lease payments that depend on an index or a rate known at the commencement date; and extension option payments or purchase options payments which the group is reasonably certain to exercise. Variable lease payments that do not depend on an index or rate are not included in the measurement the lease liability and the ROU asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in the line other expenses in the statement of profit or loss. After the commencement date the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made and remeasured (with a corresponding adjustment to the related ROU asset) when there is a change in future lease payments in case of renegotiation changes of an index or rate or in case of reassessment of options. Short-term leases and leases of low-value assets: The Group has elected not to recognize ROU assets and lease liabilities for short term leases as well as low value assets and recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term. Assets given on lease: Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee the contract is classified as a finance lease. All other leases are classified as operating leases. In respect of assets provided on finance leases amounts due from lessees are recorded as receivables at the amount of the Groups net investment in the leases. Finance lease income is allocated to accounting periods to reflect constant periodic rate of return on the Groups net investment outstanding in respect of the leases. In respect of assets given on operating lease lease rentals are accounted in the Statement of Profit and Loss on accrual basis in accordance with the respective lease agreements.
89 Asian Paints Ltd. Paints Ind AS 12 Income Taxes Income Tax: Tax expense is the aggregate amount included in the determination of profit or loss for the period in respect of current tax and deferred tax. Current tax: Current tax is the amount of income taxes payable in respect of taxable profit for a period. Taxable profit differs from profit before tax as reported in the Consolidated Statement of Profit and Loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible in accordance with applicable tax laws. Current tax is measured using tax rates that have been enacted by the end of reporting period for the amounts expected to be recovered from or paid to the taxation authorities. Deferred tax: Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit under Income tax Act 1961. Deferred tax liabilities are generally recognized for all taxable temporary differences. However in case of temporary differences that arise from initial recognition of assets or liabilities in a transaction (other than business combination) that affect neither the taxable profit nor the accounting profit deferred tax liabilities are not recognized. Also for temporary differences if any that may arise from initial recognition of goodwill deferred tax liabilities are not recognized. Deferred tax assets are generally recognized for all deductible temporary differences to the extent it is probable that taxable profits will be available against which those deductible temporary difference can be utilized. In case of temporary differences that arise from initial recognition of assets or liabilities in a transaction (other than business combination) that affect neither the taxable profit nor the accounting profit deferred tax assets are not recognized. The carrying amount of deferred tax assets is reviewed at the end of each reporting period D28and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the benefits of part or all of such deferred tax assets to be utilized. Deferred tax assets and liabilities are measured at the tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The deferred tax assets (net) and deferred tax liabilities (net) are determined separately for the Parent and each subsidiary company as per their applicable laws and then aggregated. Minimum Alternate Tax (MAT) credit is recognised as an asset only when and to the extent that it is probable that the respective group company will pay normal income tax during the specified period. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent that it is no longer probable that the respective group company will pay normal income tax during the specified period. Presentation of current and deferred tax: Current and deferred tax are recognized as income or an expense in the Consolidated Statement of Profit and Loss except when they relate to items that are recognized in Other Comprehensive Income in which case the current and deferred tax income/expense are recognized in Other Comprehensive Income. The Group offsets current tax assets and current tax liabilities where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. In case of deferred tax assets and deferred tax liabilities the same are offset if the Group has a legally enforceable right to set off corresponding current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority on the Group.
90 Asian Paints Ltd. Paints " Ind AS 16 Property Measurement at recognition: An item of property plant and equipment that qualifies as an asset is measured on initial recognition at cost. Following initial recognition items of property plant and equipment are carried at its cost less accumulated depreciation and accumulated impairment losses. The Group identifies and determines cost of each part of an item of property plant and equipment separately if the part has a cost which is significant to the total cost of that item of property plant and equipment and has useful life that is materially different from that of the remaining item. The cost of an item of property plant and equipment comprises of its purchase price including import duties and other nonrefundable purchase taxes or levies directly attributable cost of bringing the asset to itsworking condition for its intended use and the initial estimate of decommissioning restoration and similar liabilities if any. Any trade discounts and rebates are deducted in arriving at the purchase price. Cost includes cost of replacing a part of a plant and equipment if the recognition criteria are met. Expenses directly attributable to new manufacturing facility during its construction period are capitalized if the recognition criteria are met. Expenses related to plans designs and drawings of buildings or plant and machinery is capitalized under relevant heads of property plant and equipment if the recognition criteria are met. Items such as spare parts stand-by equipment and servicing equipment that meet the definition of property plant and equipment are capitalized at cost and depreciated over their useful life. Costs in nature of repairs and maintenance are recognized in the Statement of Profit and Loss as and when incurred. The Group had elected to consider the carrying value of all its property plant and equipment appearing in the financial statements prepared in accordance with Accounting Standards notified under the section 133 of the Companies Act 2013 read together with Rule 7 of the Companies (Accounts) Rules 2014 and used the same as deemed cost in the opening Ind AS Balance sheet prepared on 1st April 2015. Capital work in progress and Capital advances: Cost of assets not ready for intended use as on the balance sheet date is shown as capital work in progress. Advances given towards acquisition of fixed assets outstanding at each balance sheet date are disclosed as Other Non-Current Assets. Depreciation: Depreciation on each item of property plant and equipment is provided using the Straight- Line Method based on the useful lives of the assets as estimated by the management and is charged to the Consolidated Statement of Profit and Loss. The estimate of the useful life of the assets has been assessed based on technical advice which considers the nature of the asset the usage of the asset expected physical wear and tear the operating conditions of the asset anticipated technological changes manufacturers warranties and maintenance support etc. Significant components of assets identified separately pursuant to the requirements under Schedule II of the Companies Act 2013 are depreciated separately over their useful life. Depreciation on tinting systems leased to dealers is provided under Straight Line Method over the estimated useful life of nine years as per technical evaluation. The estimated useful life of items of property plant and equipment is mentioned below: Factory Buildings; 30 to 60 Buildings (other than factory buildings); 30 to 61 Plant and Equipment; 4 to 21 Scientific research equipment; 8 Furniture and Fixtures; 5 to 10 Office Equipment and Vehicles; 4 to 8 Tinting system; 9 Freehold land is not depreciated. Leasehold improvements are amortized over the period of lease. The Group based on technical assessment made by technical expert and management estimate depreciates property plant and equipment (other than building and factory building) over estimated useful lives which are different from the useful lives prescribed under Schedule II to the Companies Act 2013. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used. The useful lives residual values of each part of an item of property plant and equipment and the depreciation methods are reviewed at the end of each financial year. If any of these expectations differ from previous estimates such change is accounted for as a change in an accounting estimate. Derecognition: The carrying amount of an item of property plant and equipment is derecognized on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the Derecognition of an item of property plant and equipment is measured as the difference between the net disposal proceeds and the carrying amount of the item and is recognized in the consolidated Statement of Profit and Loss when the item is derecognized. Items of property plant and equipment and acquired intangible assets utilized for research and development are capitalized and depreciated in accordance with the policies stated for Property plant and equipment and Intangible Assets.
91 Asian Paints Ltd. Paints Ind AS 19 Employee Benefits Employee Benefits Short Term Employee Benefits: All employee benefits payable wholly within twelve months of rendering the service areclassified as short term employee benefits and they are recognized in the period in which the employee renders the related service. The Group recognizes the undiscounted amount of short term employee benefits expected to be paid in exchange for services rendered as a liability (accrued expense) after deducting any amount already paid. Post-Employment Benefits: I. Defined contribution plans: Defined contribution plans are postemployment benefit plans under which the Group pays fixed contributions into state managed retirement benefit schemes and will have no legal or constructive obligation to pay further contributions if any if the state managed funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years. The Groups contributions to defined contribution plans are recognised in the Consolidated Statement of Profit and Loss in the financial year to which they relate. The Parent Company and its Indian subsidiaries operate defined contribution plans pertaining to Employee State Insurance Scheme and Government administered Pension Fund Scheme for all applicable employees and the Parent Company operates a Superannuation scheme for eligible employees. A few Indian Subsidiaries also operate Defined Contribution Plans pertaining to Provident Fund Scheme. Recognition and measurement of defined contribution plans: The Group recognizes contribution payable to a defined contribution plan as an expense in the Consolidated Statement of Profit and Loss when the employees render services to the Group during the reporting period. If the contributions payable for services received from employD18ees before the reporting date exceeds the contributions already paid the deficit payable is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the reporting date the excess is recognized as an asset to the extent that the prepayment will lead to for example a reduction in future payments or a cash refund. II. Defined benefit plans: i) Provident fund scheme: The Parent Company operates a provident fund scheme by paying contribution into separate entities funds administrated by the Parent Company. The minimum interest payable by the trust to the beneficiaries is being notified by the Government every year. These entities have an obligation to make good the shortfall if any between the return on investments of the trust and the notified interest rate. ii) Gratuity scheme: The Parent Company its Indian subsidiaries and some of its foreign subsidiaries operate a gratuity scheme for employees. The contribution is paid to a separate entity (a fund) or to a financial institution towards meeting the Gratuity obligations. iii) Pension and Leaving Indemnity Scheme: The Parent Company and some of its foreign subsidiaries operate a pension and leaving indemnity plan for certain specified employees and is payable upon the employee satisfying certain conditions as approved by the Board of Directors. iv) Post-Retirement Medical benefit plan: The Parent Company and some of its foreign subsidiaries operate a postretirement medical benefit plan for certain specified employees and is D18payable upon the employee satisfying certain conditions. Recognition and measurement of defined benefit plans: The cost of providing defined benefits is determined using the Projected Unit Credit method with actuarial valuations being carried out at each reporting date. The defined benefit obligations recognized in the Balance Sheet represent the present value of the defined benefit obligations as reduced by the fair value of plan assets if applicable. Any defined benefit asset (negative defined benefit obligations resulting from this calculation) is recognized representing the present value of available refunds and reductions in future contributions to the plan. All expenses represented by current service cost past service cost if any and net interest on the defined benefit liability (asset) are recognized in the Consolidated Statement of Profit and Loss. Remeasurements of the net defined benefit liability (asset) comprising actuarial gains and losses and the return on the plan assets (excluding amounts included in net interest on the net defined benefit liability/asset) are recognized in Other Comprehensive Income. Such remeasurements are not reclassified to the Consolidated Statement of Profit and Loss in the subsequent periods. The Group presents the above liability/(asset) as current and non-current in the balance sheet as per actuarial valuation by the independent actuary; however the entire liability towards gratuity is considered as current as the Group will contribute this amount to the gratuity fund within the next twelve months. Other Long Term Employee Benefits: Entitlements to annual leave and sick leave are recognized when they accrue to employees. Sick leave can only be availed while annual leave can either be availed or encashed subject to a restriction on the maximum number of accumulation of leave. The Group determines the liability for such accumulated leaves using the Projected Accrued Benefit method with actuarial valuations being carried out at each Balance Sheet date. Expenses related to other long term employee benefits are recognized in the Statement of Profit and loss (including actuarial gain and loss).
92 Asian Paints Ltd. Paints Ind AS 2 Inventories Raw materials work-in-progress finished goods packing materials stores spares components consumables and stock-in-trade are carried at the lower of cost and net realizable value. However materials and other items held for use in production of inventories are not written down below cost if the finished goods in which they will be incorporated are expected to be sold t or above cost. The comparison of cost and net realizable value is made on an item-by item basis. Net realizable value is the estimated selling price in the ordinary course of business less estimated cost of completion and estimated costs necessary to make the sale. In determining the cost of raw materials packing materials stock-in-trade stores spares components and consumables weighted average cost method is used. Cost of inventory comprises all costs of purchase duties taxes (other than those subsequently recoverable from tax authorities) and all other costs incurred in bringing the inventory to their present location and condition. Cost of finished goods and work-in-progress includes the cost of raw materials packing materials an appropriate share of fixed and variable production overheads excise duty as applicable and other costs incurred in bringing the inventories to their present location and condition. Fixed production overheads are allocated on the basis of normal capacity of production facilities.
93 Asian Paints Ltd. Paints Ind AS 20 Accounting for Government Grants and Di Recognition and Measurement: The parent is entitled to subsidies from government in respect of manufacturing units located in specified regions. Such subsidies are measured at amounts receivable from the government which are non-refundable and are recognized as income when there is a reasonable assurance that the parent will comply with all necessary conditions attached to them. Income from subsidies is recognized on a systematic basis over the periods in which the related costs that are intended to be compensated by such subsidies are recognized. The parent has received refundable government loans at below-market rate of interest which are accounted in accordance with the recognition and measurement principles of Ind AS 109 Financial Instruments. The benefit of belowmarket rate of interest is measured as the difference between the initial carrying value of loan determined in accordance with Ind AS 109 and the proceeds received. It is recognized as income when there is a reasonable assurance that the parent will comply with all necessary conditions attached to the loans. Income from such benefit is recognized on a systematic basis over the period in which the related costs that are intended to be compensated by such grants are recognized. Presentation: Income from the above grants and subsidies are presented under Revenue from Operations.
94 Asian Paints Ltd. Paints Ind AS 21 The Effects of Changes in Foreign Excha Initial Recognition: On initial recognition transactions in foreign currencies entered into by the Group are recorded in the functional currency (i.e. Indian Rupees) by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. Exchange differences arising on foreign exchange transactions settled during the year are recognized in the Consolidated Statement of Profit and Loss. Measurement of foreign currency items at reporting date: Foreign currency monetary items of the Group are translated at the closing exchange rates. Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is measured. Exchange differences arising out of these translations are recognized in the Consolidated Statement of Profit and Loss. Translation of financial statements of foreign entities: On consolidation the assets and liabilities of foreign operations are translated into ` (Indian Rupees) at the exchange rate prevailing at the reporting date and their statements of profit and loss are translated at exchange rates prevailing at the dates of the transactions. For practical reasons the group uses an average rate to translate income and expense items if the average rate approximates the exchange rates at the dates of the transactions. The exchange differences arising on translation for consolidation are recognised in Consolidated Statement of OCI. On disposal of a foreign operation the component of OCI relating to that particular foreign operation is reclassified to Consolidated Statement of Profit and Loss. Any goodwill arising in the acquisition/ business combination of a foreign operation on or after adoption of Ind AS 103 Business Combination and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the spot rate of exchange at the reporting date. Any goodwill or fair value adjustments arising in business combinations/ acquisitions which occurred before the date of adoption of Ind AS 103 Business Combination are treated as assets and liabilities of the entity rather than as assets and liabilities of the foreign operation. Therefore those assets and liabilities are non-monetary items already expressed in the functional currency of the parent and no further translation differences occur.
95 Asian Paints Ltd. Paints Ind AS 23 Borrowing Costs Borrowing Cost Borrowing cost includes interest amortization of ancillary costs incurred in connection with the arrangement of borrowings and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Borrowing costs if any directly attributable to the acquisition construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized if any. All other borrowing costs are expensed in the period in which they occur.
96 Asian Paints Ltd. Paints Ind AS 28 Investments in Associates and Joint Ven Investment in associate An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. The considerations made in determining whether significant influence or joint control are similar to those necessary to determine control over the subsidiaries. The Groups investments in its associate is accounted for using the equity method. Under the equity method the investment in an associate is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Groups share of net assets of the associate since the acquisition date. Goodwill relating to the associate is included in the carrying amount of the investment and is not anthology_newed for impairment individually. The statement of profit and loss reflects the Groups share of the results of operations of the associate. Any change in OCI of those investees is presented as part of the Groups OCI. In addition when there has been a change recognised directly in the equity of the associate the Group recognises its share of any changes when applicable in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate. If Groups share of losses of an associate exceeds its interest in that associate (which includes any long term interest that in substance form part of the Groups net investment in the associate) the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. If the associate subsequently reports profits the Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognized. The financial statements of the associate are prepared for the same reporting period as the Group. When necessary adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate. At each reporting date the Group determines whether there is objective evidence that the investment in the associate is impaired. If there is such evidence the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and then recognises the loss as Share of profit of an associate in the consolidated statement of Profit and loss. Upon loss of significant influence over the associate the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit and loss.
97 Asian Paints Ltd. Paints Ind AS 36 Impairment of Assets Assets that have an indefinite useful life for example goodwill are not subject to amortization and are anthology_newed for impairment annually and whenever there is an indication that the asset may be impaired. Assets that are subject to depreciation and amortization and assets representing investments in associate are reviewed for impairment whenever events or changes in circumstances indicate that carrying amount may not be recoverable. Such circumstances include though are not limited to significant or sustained decline in revenues or earnings and material adverse changes in the economic environment. An impairment loss is recognized whenever the carrying amount of an asset or its cash generating unit (CGU) exceeds its recoverable amount. The recoverable amount of an asset is the greater of its fair value less cost to sell and value in use. To calculate value in use the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market rates and the risk specific to the asset. For an asset that does not generate largely independent cash inflows the recoverable amount is determined for the CGU to which the asset belongs. Fair value less cost to sell is the best estimate of the amount obtainable from the sale of an asset in an arms length transaction between knowledgeable willing parties less the cost of disposal. Impairment losses if any are recognized in the consolidated statement of profit and loss and included in depreciation and amortization expenses. Impairment losses on assets other than goodwill are reversed in the consolidated statement of profit and loss only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had previously been recognized. For the purpose of impairment anthology_newing goodwill acquired in a business combination is from the acquisition date allocated to each of the Groups cash generating units (CGUs) that are expected to benefit from the combination. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. Each CGU or a combination of CGUs to which goodwill is so allocated represents the lowest level at which goodwill is monitored for internal management purpose and it is not larger than an operating segment of the Group. A CGU to which goodwill is allocated is anthology_newed for impairment annually and whenever there is an indication that the CGU may be impaired by comparing the carrying amount of the CGU including the goodwill with the recoverable amount of the CGU. If the recoverable amount of the CGU exceeds the carrying amount of the CGU the CGU and the goodwill allocated to that CGU is regarded as not impaired. If the carrying amount of the CGU exceeds the recoverable amount of the CGU the Group recognizes an impairment loss by first reducing the carrying amount of any goodwill allocated to the CGU and then to other assets of the CGU pro-rata based on the carrying amount of each asset in the CGU. Any impairment loss on goodwill is recognized in the Statement of Profit and Loss. An impairment loss recognized on goodwill is not reversed in subsequent periods. On disposal of a CGU to which goodwill is allocated the goodwill associated with the disposed CGU is included in the carrying amount of the CGU when determining the gain or loss on disposal.
98 Asian Paints Ltd. Paints " Ind AS 37 Provisions The Group recognizes provisions when a present obligation (legal or constructive) as a result of a past event exists and it is probable that an outflow of resources embodying economic benefits will be required to settle such obligation and the amount of such obligation can be reliably estimated. If the effect of time value of money is material provisions are discounted using a current pretax 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 recognized as a finance cost. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may but probably will not require an outflow of resources embodying economic benefits or the amount of such obligation cannot be measured reliably. When there is a possible obligation or a present obligation in respect of which likelihood of outflow of resources embodying economic benefits is remote no provision or disclosure is made.
99 Asian Paints Ltd. Paints Ind AS 38 Intangible Assets Measurement at recognition: Intangible assets acquired separately are measured on initial recognition at cost. Intangible assets arising on acquisition of business are measured at fair value as at date of acquisition. Internally generated intangibles including research cost are not capitalized and the related expenditure is recognized in the Consolidated Statement of Profit and Loss in the period in which the expenditure is incurred. Following initial recognition intangible assets with finite useful life are carried at cost less accumulated amortization and accumulated impairment loss if any. The Group had elected to consider the carrying value of all its intangible assets appearing in the financial statements prepared in accordance with Accounting Standards notified under the section 133 of the Companies Act 2013 read together with Rule 7 of the Companies (Accounts) Rules 2014 and used the same as deemed cost in the opening Ind AS Balance sheet prepared on 1st April 2015. Amortization: Intangible Assets with finite lives are amortized on a Straight Line basis over the estimated useful economic life. The amortization expense on intangible assets with finite lives is recognized in the Consolidated statement of profit and loss. The estimated useful life of intangible assets is mentioned below: (Refer Annual Report) The amortization period and the amortization method for an intangible asset with finite useful life is reviewed at the end of each financial year. If any of these expectations differ from previous estimates such change is accounted for as a change in an accounting estimate. Derecognition: The carrying amount of an intangible asset is derecognized on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the Derecognition of an intangible asset is measured as the difference between the net disposal proceeds and the carrying amount of the intangible asset and is recognized in the Consolidated Statement of Profit and Loss when the asset is derecognized. Research and Development Expenditure on research is recognized as an expense when it is incurred. Expenditure on development which does not meet the criteria for recognition as an intangible asset is recognized as an expense when it is incurred.
100 Asian Paints Ltd. Paints Ind AS 7 Statement of Cash Flows Cash and Cash Equivalents Cash and cash equivalents for the purpose of Cash Flow Statement comprise cash and cheques in hand bank balances demand deposits with banks where the original maturity is three months or less and other short term highly liquid investments net of bank overdrafts which are repayable on demand as these form an integral part of the Groups cash management.
101 Asian Paints Ltd. Paints Ind AS 113 Fair Value Measurement Fair Value The Group measures financial instruments at fair value in accordance with the accounting policies mentioned above. 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. All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchy that categorizes into three levels described as follows the inputs to valuation techniques used to measure value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs). Level 1 quoted (unadjusted) market prices in active markets for identical assets or liabilities Level 2 inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly Level 3 inputs that are unobservable for the asset or liability. For assets and liabilities that are recognized in the consolidated financial statements at fair value on a recurring basis the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization at the end of each reporting period and discloses the same.
102 Asian Paints Ltd. Paints "Ind AS 8 Accounting Policies Key accounting estimates and judgements: The preparation of the Groups consolidated financial statements requires the 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. Critical accounting 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: a. Income taxes: Significant judgments are involved in estimating budgeted profits for the purpose of paying advance tax determining the provision for income taxes including amount expected to be paid/recovered for uncertain tax positions. Also Refer note 20. b. Business combinations and intangible assets: Business combinations are accounted for using Ind AS 103 Business Combinations. Ind AS 103 requires the identifiable intangible assets and contingent consideration to be fair valued in order to ascertain the net fair value of identifiable assets liabilities and contingent liabilities of the acquiree. Significant estimates are required to be made in determining the value of contingent consideration and intangible assets. These valuations are conducted by independent valuation experts. c. Property plant and equipment: Property plant and equipment represent a significant proportion of the asset base of the Group. The charge in respect of periodic depreciation is derived after determining an estimate of an assets expected useful life and the expected residual value at the end of its life. The useful lives and residual values of Groups 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. d. Impairment of Goodwill and Other Intangible: Assets with Indefinite Life Goodwill and other intangible assets with indefinite life are anthology_newed for impairment on an annual basis and whenever there is an indication that the recoverable amount of a cash generating unit is less than its carrying amount based on a number of factors including operating results business plans future cash flows and economic conditions. The recoverable amount of cash generating units is determined based on higher of value-in-use and fair value less cost to sell. The goodwill impairment anthology_new is performed at the level of the cash-generating unit or groups of cash-generating units which are benefitting from the synergies of the acquisition and which represents the lowest level at which goodwill is monitored for internal management purposes. Market related information and estimates are used to determine the recoverable amount. Key assumptions on which management has based its determination of recoverable amount include estimated long term growth rates weighted average cost of capital and estimated operating margins. Cash flow projections take into account past experience and represent managements best estimate about future developments. e. Defined Benefit Obligation The costs of providing pensions and other post-employment benefits are charged to the Consolidated Statement of Profit and Loss in accordance with Ind AS 19 Employee benefits over the period during which benefit is derived from the employees services. The costs are assessed on the basis of assumptions selected by the management. These assumptions include salary escalation rate discount rates expected rate of return on assets and mortality rates. The same is disclosed in Note 33 Employee benefits. f. 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. g. Right of Use assets and lease liability The Group has exercised judgement in determining the lease term as the noncancellable term of the lease together with the impact of options to extend or terminate the lease if it is reasonably certain to be exercised. Where the rate implicit in the lease is not readily available an incremental borrowing rate is applied. This incremental borrowing rate reflects the rate of interest that the lessee would have to pay to borrow over a similar term with a similar security the funds necessary to obtain an asset of a similar nature and value to the ROU asset in a similar economic environment. Determination of the incremental borrowing rate requires estimation.
103 Avenue Supermarts Ltd. Retailing Ind AS 1 Presentation of Financial Statements Basis of preparation The Consolidated financial statements have been prepared in accordance with the Indian Accounting Standards (hereinafter referred to as the Ind AS) as notified by Ministry of Corporate Affairs pursuant to Section 133 of the Companies Act 2013 (the Act) read with the Companies (Indian Accounting standards) Rules 2015 and other relevant provisions of the Act. The accounting policies are applied consistently to all the periods presented in the consolidated financial statements. (i) Historical cost convention The consolidated financial statements have been prepared on a historical cost basis except for the following: 1) certain financial assets and liabilities that are measured at fair value; 2) defined benefit plans - plan assets measured at fair value; 3) share based payments. (ii) Current non-current classification The Group presents assets and liabilities in the balance sheet based on current and non-current classification. As asset is treated as current when it is: - Expected to be realised or intended to be sold or consumed in normal operating cycle - Held primarily for the purpose of trading - Expected to be realised within twelve months after the reporting period or - Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period All other assets are classified as non-current. A liability is current when: - It is expected to be settled in normal operating cycle - It is held primarily for the purpose or trading - It is due to be settled within twelve months after the reporting period or - There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The Group classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities. The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Group has identified twelve months as its operating cycle. (iii) Rounding off amounts The Consolidated financial statements are presented in ` and all values are rounded to the nearest crores (` 0 000 000) except when otherwise indicated.
104 Avenue Supermarts Ltd. Retailing Ind AS 103 Business Combinations Business combinations and goodwill The Group has accounted business combinations using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value. Acquisition-related costs are expensed as incurred. At the acquisition date the identifiable assets acquired and the liabilities assumed are recognised at their acquisition date fair values. If the business combination is achieved in stages any previously held equity interest is re-measured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss or OCI as appropriate. Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred then the gain is recognised in OCI and accumulated in equity as capital reserve. However if there is no clear evidence of bargain purchase the entity recognises the gain directly in equity as capital reserve without routing the same through OCI. After initial recognition goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment anthology_newing goodwill acquired in a business combination is from the acquisition date allocated to each of the Groups cash-generating units that are expected to benefit from the combination irrespective of whether other assets or liabilities of the acquiree are assigned to those units. A cash generating unit to which goodwill has been allocated is anthology_newed for impairment annually or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than its carrying amount the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.
105 Avenue Supermarts Ltd. Retailing Ind AS 108 Operating Segments Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker being Managing Director of The Group . The Managing Director assesses the financial performance and position of The Group as a whole and makes strategic decisions.
106 Avenue Supermarts Ltd. Retailing Ind AS 109 Financial Instruments Financial instruments A Financial instrument is any contract that gives rise to a financial assets of one entity and a financial liability or equity instrument of another entity. Financial asset (i) Classification The Group classifies its financial assets in the following measurement categories: * those to be measured subsequently at fair value (either through other comprehensive income or through the Statement of Profit and Loss) and * those measured at amortised cost. The classification depends on The Groups 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 the Statement of Profit and Loss or other comprehensive income. For investments in debt instruments this will depend on the business model in which the investment is held. For investments in equity instruments this will depend on whether The Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income. The Group reclassifies debt investments when and only when its business model for managing those assets changes. (ii) Measurement At initial recognition The Group measures a financial asset at its fair value plus in the case of a financial asset not at fair value through the Statement of Profit and Loss transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through the Profit and Loss are expensed in the Statement of Profit and Loss. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest. Debt instruments: Subsequent measurement of debt instruments depends on The Groups business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which The Group classifies its debt instruments: * Amortised cost: A debt instrument 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. This category is the most relevant to The Group. 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 profit or loss. The losses arising from impairment are recognised in the statement of profit and loss account. This category generally applies to trade and other receivables * Fair value through other comprehensive income(FVTOCI): A debt instrument is classified as at the FVTOCI 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 assets contractual cash flows represent SPPI. Debt instruments included within the FVTOCI 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 Group recognizes interest income impairment losses & reversals and foreign exchange gain or loss in the statement of profit and loss account. On derecognition of the asset cumulative gain or loss previously recognised in OCI is reclassified from the equity to statement of profit and loss account. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method. * Fair value through profit and loss: FVTPL is a residual category for debt instruments. Any debt nstrument which does not meet the criteria for categorization as at amortized cost or as FVTOCI is classified as at FVTPL. In addition The Group may elect to designate a debt instrument which otherwise meets amortized cost or FVTOCI 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). The Group has not designated any debt instrument as at FVTPL. Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the P&L. Equity instruments: The Group subsequently measures all equity investments at fair value. Where The Groups 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 recognised in the Statement of Profit and Loss as other income when The Groups right to receive payments is established. Changes in the fair value of financial assets at fair value through the Statement of Profit and Loss are recognised in other income / other expenses in the Statement of Profit and Loss. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value. (iii) Impairment of financial assets The Group assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and FVOCI debt instruments. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables only The Group applies the simplified approach permitted by Ind AS 109 Financial Instruments which requires expected lifetime losses to be recognised from initial recognition of the receivables. (iv) Derecognition of financial assets A financial asset is derecognised only when * The Group has transferred the rights to receive cash flows from the financial asset or * 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 Group has transferred an asset The Group evaluates whether it has transferred substantially all risks and rewards of the financial asset. In such cases the financial asset is derecognised. Where The Group has not transferred substantially all risks and rewards of ownership of the financial asset the financial asset is not derecognised. Where The Group has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset the financial asset is derecognised if The Group has not retained control of the financial asset. Where The Group retains control of the financial asset the asset is continued to be recognised to the extent of continuing involvement in the financial asset. Financial liabilities 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 recognised amounts and there is an intention to settle on a net basis or realise 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 Group or the counterparty Trade and other payables These amounts represent liabilities for goods and services provided to The Group prior to the end of financial year which are unpaid. The amounts are unsecured. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. Borrowings and other financial liabilities Borrowings and other financial liabilities are initially recognised at fair value (net of transaction costs incurred). Difference between the fair value and the transaction proceeds on initiation is recognised as an asset / liability based on the underlying reason for the difference. Subsequently all financial liabilities are measured at amortised cost using the effective interest rate method. Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid including any non-cash transferred or liabilities assumed is recognised in the Statement of Profit and Loss. Borrowings are classified as current liabilities unless The Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. Where there is a breach of a material provision of a long-term loan arrangement on or before the end of the reporting period with the effect that the liability becomes payable on demand on the reporting date the entity does not classify the liability as current if the lender agreed after the reporting period and before the approval of the financial statements for issue not to demand payment as a consequence of the breach. Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less provision for impairment.
107 Avenue Supermarts Ltd. Retailing Ind AS 110 Consolidated Financial Statements Basis of consolidation The consolidated financial statements comprise the financial statements of the company and its subsidiaries as at 31st March 2020. Control is achieved when the Group is exposed or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically the Group controls an investee if and only if the Group has: - Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee) - Exposure or rights to variable returns from its involvement with the investee and - The ability to use its power over the investee to affect its returns Generally there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee the Group considers all relevant facts and circumstances in assessing whether it has power over an investee including: - The contractual arrangement with the other vote holders of the investee - Rights arising from other contractual arrangements - The Groups voting rights and potential voting rights - The size of the Groups holding of voting rights relative to the size and dispersion of the holdings of the other voting rights holders The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets liabilities income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances. If a member of the Group uses accounting policies other than those adopted in the consolidated financial statements for like transactions and events in similar circumstances appropriate adjustments are made to that Group members financial statements in preparing the consolidated financial statements to ensure conformity with the Groups accounting policies. The financial statements of all entities used for the purpose of consolidation are drawn up to same reporting date as that of the parent company i.e. year ended on 31st March 2020. When the end of the reporting period of the parent is different from that of a subsidiary the subsidiary prepares for consolidation purposes additional financial information as of the same date as the financial statements of the parent to enable the parent to consolidate the financial information of the subsidiary unless it is impracticable to do so. Consolidation procedure: (a) Combine like items of assets liabilities equity income expenses and cash flows of the parent with those of its subsidiaries. For this purpose income and expenses of the subsidiary are based on the amounts of the assets and liabilities recognised in the consolidated financial statements at the acquisition date. (b) Offset (eliminate) the carrying amount of the parents investment in each subsidiary and the parents portion of equity of each subsidiary. Business combinations policy explains how to account for any related goodwill. (c) Eliminate in full intragroup assets and liabilities equity income expenses and cash flows relating to transactions between entities of the Group (profits or losses resulting from intragroup transactions that are recognised in assets such as inventory and fixed assets are eliminated in full). Intragroup losses may indicate an impairment that requires recognition in the consolidated financial statements. Ind AS 12 Income Taxes applies to temporary differences that arise from the elimination of profits and losses resulting from intragroup transactions. Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. When necessary adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Groups accounting policies. All intra-group assets and liabilities equity income expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary without a loss of control is accounted for as an equity transaction. If the Group loses control over a subsidiary it: - Derecognises the assets (including goodwill) and liabilities of the subsidiary - Derecognises the carrying amount of any non-controlling interests - Derecognises the cumulative translation differences recorded in equity - Recognises the fair value of the consideration received - Recognises the fair value of any investment retained - Recognises any surplus or deficit in profit or loss - Reclassifies the parents share of components previously recognised in OCI to profit or loss or retained earnings as appropriate as would be required if the Group had directly disposed of the related assets or liabilities.
108 Avenue Supermarts Ltd. Retailing Ind AS 113 Fair Value Measurement Fair value measurement The Group measures financial instrument at fair value at each Balance sheet date. Fair value is the price that would received to sell an assets or paid to transfer a liability in an orderly transaction between market participant at the measurement date. The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values: 1. Fair value of cash and deposits trade and other receivables trade payables other current liabilities short term loans from banks approximate their carrying amounts largely due to short term maturities of these instruments. 2. The fair values of non-current borrowings are based on discounted cash flows using a current borrowing rate. They are classified as level 3 fair values in the fair value hierarchy due to the use of unobservable inputs including own credit risk. 3. For financial assets and liabilities that are measured at fair value the carrying amounts are equal to the fair values. The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities. Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable either directly or indirectly. Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.
109 Avenue Supermarts Ltd. Retailing Ind AS 115 Revenue from Contracts with Customers/ Revenue from Operations Revenue from operations is recognised to the extent that it is probable that economic benefit will flow to The Group and the revenue can be reliably measured regardless of when the payment is being made as per IND AS 115. Revenue is measured at the fair value of the consideration received or receivable taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government Sale of goods Revenue from sale of goods is recognised on delivery of merchandise to the customer when the property in the goods is transferred for a price and significant risks and rewards have been transferred and no effective ownership control is retained. Revenue from the sale of goods is measured at the fair value of the consideration received or receivable net of returns and allowances trade discounts and volume rebates. It is The Parent Companys policy to sell its products to the end customers with a right of return within 7 days. Historical experience is used to estimate and provide for such returns at the time of sales. The Group has generally concluded that it is the principal in its revenue arrangements except for the agency services below because it typically controls the goods or services before transferring them to the customer Principal versus agent consideration The inventory of third party does not pass to The Group till the product is sold. At the time of sale of such inventory the sales value along with the cost of inventory is disclosed seprately as sale of goods on approval basis and cost of goods sold on approval basis and forms part of Revenue in the Statement of Profit and Loss. Only the net revenue earned i.e. margin is recorded as a part of revenue. Rental income Rental income arising from operating lease on investment properties is accounted for on a straight line basis over lease terms unless the receipts are structured to increase in line with expected general inflation to compensate for the expected inflationary cost increases and is included in the Statement of profit or loss due to its operating nature. Interest income Interest income is recognised based on time proportion basis considering the amount outstanding and rate applicable (EIR). Interest income in included in the Other Income in the statement of Profit and Loss.
110 Avenue Supermarts Ltd. Retailing Ind AS 116 Leases Leases As per Ind AS 116 Leases 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 to use the asset or assets even if that right is not explicitly specified in an arrangement. As a lessee Finance leases are capitalised at the commencement of the lease at the inception date fair value of the leased property or if lower at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the statement of profit and loss unless they are directly attributable to qualifying assets in which case they are capitalized in accordance with the companys general policy on the borrowing costs. Contingent rentals are recognised as expenses in the periods in which they are incurred. A leased asset is depreciated over the useful life of the asset. However if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term. Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the Statement of Profit and Loss on a straight-line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate for the lessors expected inflationary cost increases. Amortisation on right to use assets Amortisation is provided on straight line method over the useful life of asset as assessed by the management. Amortisation is charged on pro-rata basis for asset purchased / sold during the year. As a lessor Leases in which the Company does not transfer substantially all the risks and rewards of ownership of an asset are classified as operating leases. Rental income from operating lease is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned unless the receipts are structured to increase in line with expected general inflation to compensate for the expected inflationary cost increases. Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Company to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Companys net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease. Ind AS 17 also contains similar requirements for recognition of lease rental income under operating leases. The company has determined that it does not meet criteria for recognition of lease rental expense/ income on a basis other than straight-line basis.
111 Avenue Supermarts Ltd. Retailing Ind AS 12 Income Taxes Income tax Current income 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 enacted or substantively enacted at the reporting date in the countries where The Group operates and generates taxable income. Deferred income tax is provided using the liability method on temporary differences arising between the tax bases of assets and liabilities and their carrying amount for financial reporting purpose at the reporting date. Deferred tax assets and liabilities are determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the asset is realised or the liability is settled. Deferred tax assets are recognised for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are off set where The Group has a legally enforceable right to offset and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. Current and deferred tax is recognised in the Statement of Profit and Loss except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or directly in equity respectively.
112 Avenue Supermarts Ltd. Retailing " Ind AS 16 Property Property plant and equipment (PPE) On transition to Ind AS The Group has elected to continue with the carrying value of all its property plant and equipment recognized as at 1st April 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of the property plant and equipment. (Referred to as historical cost in this section) Freehold land is carried at historical cost. All other item of property plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of items. Capital work-in-progress property plant and equipment is stated at cost net of accumulated depreciation. Such cost includes the cost of replacing part of the property plant and equipment and borrowing cost for long-term construction projects if the recognition criteria are met. When significant parts of property plant and equipment are required to be replaced at intervals The Group depreciates them separately based on thier specific useful lifes. Likewise when a major inspection is performed its cost is recognised in the carrying amount of the property plant and equipment as a replacement if the recognition criteria are satisfied. All other repairs and maintenance costs are recognised in profit or loss as incurred. Capital work-in-progress comprises cost of property plant and equipment (including related expenses) that are not yet ready for their intended use at the reporting date. Subsequent costs are included in the assets carrying amount or recognized as a separate asset as appropriate only when it is probable that future economic benefits associated with the item will flow to The Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred Depreciation on property plant and equipment Depreciation is provided to the extent of depreciable amount on written down value method over the useful life of asset as assessed by the management and the same is similar to the useful lives as prescribed in Part-C of Schedule II to the Companies Act 2013. Depreciation is charged on pro-rata basis for asset purchased / sold during the year. The assets residual values useful life and method of depreciation of PPE are reviewed and adjusted if appropriate at the end of each reporting period.
113 Avenue Supermarts Ltd. Retailing Ind AS 19 Employee Benefits Retirement and other employee benefits (i) Short-term obligations Liabilities for wages and salaries including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. Retirement benefit in the form of provident fund is a defined contribution plan. The Group has no obligation other than the contribution payable to the provident fund. The Group recognises contribution payable to the provident fund scheme as an expense when an employee renders the related services. If the Contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid the deficit payable to the scheme is recognised as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date then excess is recognised as an asset to the extent that the prepayment will lead to for example a reduction in future payment or a cash refund ii) Other long-term employee benefit obligations The liabilities for earned leave and sick leave that are not expected to be settled wholly within 12 months are measured at the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the Government Securities (G-Sec) at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in the Statement of Profit and Loss. The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least 12 months after the reporting period regardless of when the actual settlement is expected to occur. iii) Post-employment obligations Defined benefit plans Gratuity The liability or asset recognised in the balance sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuary using the projected unit credit method. The present value of the defined benefit obligation denominated in INR is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the Statement of Profit and Loss. Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in the Statement of profit or loss as past service cost. Share based payment Equity settled share based payments to employees and other providing similar services are measured at fair value of the equity instruments at grant date. The fair value determined at the grant date of the equity-settled share based payment is expensed on a straight line basis over the vesting period based on The Groups estimate of equity instruments that will eventually vest with a corresponding increase in equity. At the end of each reporting period The Group revises its estimates of the number of equity instruments expected to vest. The impact of the revision of the original estimates if any is recognised in Statement of Profit and Loss such that the cumulative expenses reflects the revised estimate with a corresponding adjustment to the shared option outstanding account. No expense is recognised for options that do not ultimately vest because non market performance and/or service conditions have not been met. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share. Expense relating to options granted to employees of the subsidiaries under The Groups share based payment plan is recovered from the subsidiary. Such recovery is reduced from employee benefit expense.
114 Avenue Supermarts Ltd. Retailing Ind AS 2 Inventories Inventories Inventories are valued at lower of cost and net realizable value. Cost of inventories comprise costs of purchase and other costs incurred in bringing the inventories to their present condition and location. Cost is determined by the weighted average cost method. Costs of purchased inventory are determined after deducting rebates and discounts. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated cost necessary to make the sale.
115 Avenue Supermarts Ltd. Retailing Ind AS 21 The Effects of Changes in Foreign Excha Foreign currency transactions (a) Functional and presentation currency: Items included in the financial statements of The Group are measured using the currency of the primary economic environment in which the entity operates. The Consolidated Financial statements are presented in INR which is functional and presentational currency. (b) Transaction and balances : Transaction in currencies other than than entitys functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transaction. Exchange differences arising on settlement or translation of monetary items are recognised in the Statement of Profit and Loss. Non monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retransacted. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item.
116 Avenue Supermarts Ltd. Retailing Ind AS 23 Borrowing Costs Borrowing costs General and specific borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are capitalized during the period of time that is required to complete and prepare the asset for its intended use. Other borrowing costs are expensed in the period in which they are incurred. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. Borrowing cost consist of interest and other cost that an entity incurs in connection with borrowing of funds.
117 Avenue Supermarts Ltd. Retailing Ind AS 33 Earnings per Share Earnings Per Share Basic earnings per share Basic earnings per share is calculated by dividing: - the profit attributable to equity shareholder of The Group - by the weighted average number of equity shares outstanding during the financial year Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account: - the after income tax effect of interest and other financing costs associated with dilutive potential equity shares and - the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
118 Avenue Supermarts Ltd. Retailing Ind AS 36 Impairment of Assets Impairment of non financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists or when annual impairment anthology_newing for an asset is required The Group estimates the assets recoverable amount. An assets recoverable amount is the higher of an assets or cash-generating units (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset unless the asset does not generate cash inflows that are largely independent of those from other assets or Groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. In assessing value in use the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal recent market transactions are taken into account. Impairment losses are recognised in the statement of profit and loss except for properties previously revalued with the revaluation surplus taken to OCI. For assets an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists The Group estimates the assets or CGUs recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the assets recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount nor exceed the carrying amount that would have been determined net of depreciation had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of profit or loss unless the asset is carried at a revalued amount in which case the reversal is treated as a revaluation increase. A cash generating unit to which goodwill has been allocated is anthology_newed for impairment annually or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than its carrying amount the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.
119 Avenue Supermarts Ltd. Retailing " Ind AS 37 Provisions Provisions and contingent liabilities Provisions are recognised when The Group has a present legal or constructive obligation as a result of past events it is probable that an outflow of resources embodying economic benefit will be required to settle the obligation and the amount can be reliably estimated. Provisions are measured at the present value of managements 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 finance cost. Contingent Liabilities are disclosed in respect of possible obligations that arise from past events but their existence will be confirmed by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of The Group or where any present obligation cannot be measured in terms of future outflow of resources or where a reliable estimate of the obligation cannot be made. A contingent asset is disclosed where an inflow of economic benefits is probable. An entity shall not recognize a contingent asset unless the recovery is virtually certain.
120 Avenue Supermarts Ltd. Retailing Ind AS 38 Intangible Assets Intangible assets On transition to Ind AS The Group has elected to continue with the carrying value of all its intangible assets recognized as at 1st April 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of intangible assets. Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.Intangible assets are amortised on a written down value basis over the economic useful life estimated by the management. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method as appropriate and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss unless such expenditure forms part of carrying value of another asset. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised. Amortisation on intangible assets Amortisation is provided on straight line method over the useful life of asset as assessed by the management and the same is similar to the useful lives as prescribed in Part-C of Schedule II to the Companies Act 2013. Amortisation is charged on pro-rata basis for asset purchased / sold during the year. Estimated useful life of assets are as follows: Computer Software - 5 years Trademarks - 5 - 10 years
121 Avenue Supermarts Ltd. Retailing Ind AS 40 Investment Property Investment properties On transition to Ind AS The Group has elected to continue with the carrying value of all its investment properties recognized as at 1st April 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of investment properties. Investments in property that are not intended to be occupied substantially for use by or in the operations of The Group have been classified as investment property. Investment properties are measured initially at its cost including transaction cost and where applicable borrowing costs. Subsequent to initial recognition investment properties are stated at cost less accumulated depreciation and accumulated impairment loss if any. Subsequent cost are included in the assets carrying amount or recognized as a separate asset as appropriate only when it is probable that future economic benefits associated with the item will flow to The Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred. Though The Group measures investment property using cost based measurement the fair value of investment property is disclosed in the notes. Fair values are determined based on an annual evaluation performed by an accredited external independent valuer applying a valuation model recommended by the International Valuation Standards Committee. The Group depreciates its investment properties over the useful life which is similar to that of Property Plant and Equipment. Investment properties are derecognised either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in profit or loss in the period of derecognition.
122 Avenue Supermarts Ltd. Retailing Ind AS 7 Statement of Cash Flows Cash and cash equivalents Cash and cash equivalent in the balance sheet comprises cash at banks and on hand and short term deposits with an original maturity of three months or less which are subject to an insignificant risk of change in value. For the purpose of consolidated financial statement of cash flow cash and cash equivalent consists of cash and short term deposits as defined above net of outstanding bank overdrafts as they are considered an integral part of The Groups cash management. Cash flow The investing and financing activities in cash flow statement do not have a direct impact on current cash flows although they do affect the capital and asset structure of an entity. The Group has disclosed these transactions to the extent material in notes to cash flow statement.
123 Avenue Supermarts Ltd. Retailing " Ind AS 8 Accounting Policies Significant accounting judgement estimates and assumption The preparation of consolidated financial statements requires the use of accounting estimates which by definition will seldom equal the actual results. Management also need to exercise judgement in applying The Groups accounting policies. Share based payment The Group initially measures the cost of equity settled transaction with employees using Black Scholes model to determine the fair value of the liability incurred. Estimating fair value for share-based payment transaction requires determination of the most appropriate valuation model which is dependent on the terms and conditions of the grant. The estimates also requires determination of the most appropriate inputs to the valuation model including expected life of the share option volatility and dividend yield and making assumptions about them. For equity settled share based payment transaction the liability needs to be re-measured at the end of each reporting period upto the date of settlement with any changes in fair value recognised in the Statement of Profit and Loss. This requires a re-assessment of the estimates used at end of each reporting period. The assumption and models used for estimating the fair value for share based-payment transaction are disclosed in note no 46. Provision for inventory The Group has calculated the provision for inventory basis the percentage as per historical experience for inventory lying from the last inventory count date to the reporting date. Defined benefit plans (gratuity benefits) The cost of the defined benefit gratuity plan and other post-employment medical benefits and the present value of the gratuity 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 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. The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates. Further details about gratuity obligations are given in note no 47.
124 Bajaj Auto Ltd. Automobile Ind AS 108 Operating Segments Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the Core Management Committee which includes the Managing Director who is the Chief Operating Decision Maker. The Core Management Committee examines performance both from a product as well as from a geographical perspective and has identified two operative reportable segments from which significant risks and rewards are derived viz. Automotive business and Investments.
125 Bajaj Auto Ltd. Automobile Ind AS 109 Financial Instruments Investments and financial assets A. Investment in subsidiaries Interest in subsidiaries are recognised at cost. Cost represents amount paid for acquisition of the said investments. The Company assesses at the end of each reporting period if there are any indications that the said investments may be impaired. If so the Company estimates the recoverable value/amount of the investment and provides for impairment if any i.e. the deficit in the recoverable value over cost. B. Other investments and financial assets i. Classification The Company classifies its financial assets at initial recognition in the following measurement categories: l those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss) and l those to be measured at amortised cost. The classification is done depending upon the Companys business model for managing the financial assets and the contractual terms of the cash flows. For assets classified as measured at fair value gains and losses will either be recorded in profit or loss or other comprehensive income as elected. For assets classified as measured at amortised cost this will depend on the business model and contractual terms of the cash flows. ii. Measurement Initial measurement Financial assets are classified at initial recognition as subsequently measured at amortised cost fair value through other comprehensive income (FVTOCI) or fair value through profit or loss (FVTPL). The classification of financial assets at initial recognition depends on the financial assets contractual cash flow characteristics and the Companys business model for managing them. At initial recognition the Company measures a financial asset at its fair value including in the case of a financial asset not at FVTPL transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVTPL are expensed in the Statement of Profit and Loss when incurred. Trade receivables that do not contain a significant financing component or for which the Company has applied the practical expedient are measured at the transaction price determined under Ind AS 115. Refer accounting policy no.2 Revenue from contracts with customers. For a financial asset to be classified and subsequently measured at amortised cost or FVTOCI (excluding equity instruments which are measured at FVTOCI) it needs to give rise to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding. This assessment is referred to as the SPPI anthology_new and is performed at an instrument level. Financial assets with cash flows that are not SPPI are classified and measured at FVTPL irrespective of the business model. The Companys business model for managing financial assets refers to how it manages its financial assets to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows selling the financial assets or both. Subsequent measurement Subsequent measurement of financial assets depends on the Companys business model for managing the financial asset and the cash flow characteristics of the financial asset. There are three measurement categories into which the Company classifies its financial instruments: Subsequently measured at amortised cost: A debt instrument 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. Financial assets that are held for collection of contractual cash flows where those cash flows represent SPPI are measured at amortised cost e.g. debentures bonds fixed maturity plans trade receivables etc. This category is the most relevant to the Company. 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. Interest income from trade receivables is included in other operating income in the Statement of Profit and Loss; whilst interest income from the remaining financial assets is included in other income in the Statement of Profit and Loss. The losses arising from impairment are recognised in the Statement of Profit and Loss. A gain or loss on a financial asset that is subsequently measured at amortised cost is recognised in the Statement of Profit and Loss when the asset is derecognised or impaired. In case of fixed maturity plans (FMP) they are measured at amortised cost if the Company intends to hold the FMPs to maturity. Further the Company applies amortised cost for those FMPs where the Company is able to demonstrate that the underlying instruments in the portfolio would fulfill the SPPI anthology_new and the churn in the underlying portfolio is negligible. These conditions are assessed at each Balance Sheet date. If these conditions are not fulfilled then FMPs are valued at FVTPL. Subsequently measured at FVTOCI: All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading if any are classified as at FVTPL. For all other equity instruments the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable. Equity instruments included within the FVTOCI 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). If the Company decides to classify an equity instrument as at FVTOCI then all fair value changes on the instrument excluding dividends are recognised in the OCI. There is no recycling of the amounts from OCI to Statement of Profit and Loss even on sale of investment. However the Company may transfer the cumulative gain or loss within equity. Subsequently measured at FVTPL: Financial assets that do not meet the criteria for amortised cost and FVTOCI are measured at fair value through profit or loss e.g. investments in mutual funds. A gain or loss on a financial asset that is subsequently measured at fair valuethrough profit or loss is recognised in profit or loss and presented net in the Statement of Profit and Loss within other gains/(losses) in the period in which it arises. In addition the Company may elect to designate a debt instrument which otherwise meets amortised cost or FVTOCI 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). The Company has designated investments in mutual funds (other than FMP) as at FVTPL. Debt instruments included within the FVTPL category are measured at fair value with all changes recognised in the Statement of Profit and Loss. iii. Impairment of financial assets The Company assesses on a forward-looking basis the expected credit losses associated with its financial assets carried at amortised cost for e.g. debt securities deposits trade receivables and bank balances; and lease receivables. The impairment methodology applied depends on whether there has been a significant increase in credit risk and if so assess the need to provide for the same in the Statement of Profit and Loss. The Company follows simplified approach for recognition of impairment loss allowance on trade receivables and all lease receivables. The application of simplified approach does not require the Company to track changes in credit risk. Rather it recognises impairment loss allowance based on lifetime expected credit losses (ECL) at each reporting date right from its initial recognition. For recognition of impairment loss on other financial assets and risk exposure the Company determines 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. Lifetime ECL are the expected credit losses resulting from all possible default events over the expected life of a financial instrument. The 12-month ECL is a portion of the lifetime ECL which results from default events that are possible within 12 months after the reporting date. ECL is the difference between all contractual cash flows that are due to the Company in ccordance with the contract and all the cash flows that the entity expects to receive (i.e. all cash shortfalls) discounted at the original EIR. When estimating the cash flows an entity is required to consider all contractual terms of the financial instrument over the expected life of the financial instrument. ECL impairment loss allowance (or reversal) recognised during the period is recognised as come/expense in the Statement of Profit and Loss. This amount is reflected under the head other expenses in the Statement of Profit and Loss. The Balance Sheet presentation for various financial instruments is described below: l Financial assets measured at amortised cost revenue receivables and lease receivables: ECL is presented as an allowance i.e. as an integral part of the measurement of those assets in the Balance Sheet. The allowance reduces the net carrying amount. Until the asset meets write-off criteria the Company does not reduce impairment allowance from the gross carrying amount. For assessing increase in credit risk and impairment loss the Company combines financial instruments based on shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increases in credit risk to be identified on a timely basis. For debt instruments at fair value through OCI the Company applies the low credit risk implification. At every reporting date the Company evaluates whether the debt instrument is considered to have low credit risk using all reasonable and supportable information that is available without undue cost or effort. In making that evaluation the Company reassesses the internal credit rating of the debt instrument.However in certain cases the Company may also consider a financial asset to be in default when internal or external information indicates that the Company is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Company. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows. iv. Derecognition of financial assets A financial asset is derecognised only when Company has transferred the rights to receive cash flows from the financial asset or the rights to receive cash flows from the financial asset have expired. 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 derecognised. v. Reclassification of financial assets The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Companys senior management determines change in the business model as a result of external or internal changes which are significant to the Companys operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains losses (including impairment gains or losses) or interest. The Company applies amortised cost where it has ability to demonstrate that the underlying instruments in the portfolio fulfill the solely payments of principal and interest (SPPI) anthology_new and the churn in the portfolio is negligible. Derivative and hedging activities The Company uses derivative financial instruments such as range forward and par forward currency contracts to hedge its foreign currency risks. Such derivative instruments are initially recognised at fair value on the date at which the derivative contract is entered and are subsequently re-measured at fair value as at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument and if so the nature of the item being hedged and the type of hedge relationship designated. The Company documents its risk management objectives and strategy for undertaking various hedge transactions. In terms thereof the Company designates their derivatives as hedges of foreign exchange risks associated with the cash flow of highly probable forecast transactions (viz. export sales). The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than or equal to 12 months. Cash flow hedges that qualify for hedge accounting The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in the other comprehensive income in cash flow hedging reserve within equity limited to the cumulative change in fair value of the hedged item on a present value basis from the inception of the hedge. The gain or loss relating to the ineffective portion is recognised immediately in the Statement of Profit and Loss within other gains/(losses). For hedge accounting hedges are classified as Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment. When forward contracts are used to hedge forecast transactions the Company designates them in entirety as the hedging instrument. Any gains or losses arising from changes in the fair value for the effective portion of cash flow hedges is recognised in OCI and later reclassified to profit or loss when the hedge item affects profit or loss. Where option contracts are used to hedge forecast transactions the Company designates intrinsic value of the option contract as hedging instrument.Gains or losses relating to the effective portion of the change in intrinsic value of the option contract are recognised in the cash flow hedging reserve within equity. The changes in time value of the option contracts that relate to the hedged items are recognised through other comprehensive income in Costs of hedging reserve within equity.When a hedging instrument expires or is sold or when a hedge no longer meets the criteria for hedge accounting any cumulative gain or loss existing in equity at that time is recognised in the Statement of Profit and Loss. When a forecast transaction is no longer expected to occur the cumulative gain or loss that was reported in equity is immediately transferred to the Statement of Profit and Loss. When a hedging instrument is unexercised and expires the cumulative gain or loss is reversed within equity with the corresponding effect to the hedge receivable/payable. If the hedge ratio for risk management is no longer optimal but risk management objectives remain unchanged and hedge continues to qualify for hedge accounting the hedge relationships are re-balanced so that the hedge ratio aligns. Consequently hedge ineffectiveness is computed and accounted for in the Statement of Profit and Loss immediately Treasury shares The Company has created an ESOP Trust (the Trust) for providing share-based payment to its employees. The Company uses the Trust as a vehicle for distributing shares to employees under the Employee Stock Option Scheme. The Trust purchase shares of the Company from the market for giving shares to employees. The Company treats Trust as its extension and shares held by the Trust are treated as treasury shares. Own equity instruments that are re-acquired (treasury shares) are recognised at cost and deducted from other equity. No gain or loss is recognised in the Statement of Profit and Loss on the purchase sale issue or cancellation of the Companys own equity instruments. Share options exercised during the reporting period are settled with treasury shares.
126 Bajaj Auto Ltd. Automobile Ind AS 115 Revenue from Contracts with Customers/ Revenue from contracts with customers Revenue is recognised when control of goods (vehicles or parts) and services have been transferred to the customer; at an amount that reflects the consideration which the Company expects to be entitled in exchange for those goods or services. The timing of when the Company transfers the goods or provide services may differ from the timing of the customers payment. Amounts disclosed as revenue are net of goods and service tax (GST). The Company has generally concluded that it is the principal in its revenue arrangements except for the agency services below (in respect of freight) because it typically controls the goods or services before transferring them to the customer. The disclosures of significant accounting judgments estimates and assumptions relating to revenue from contracts with customers are provided below. Sale of goods (vehicles or parts) The Company has determined that our customers from the sale of goods are generally dealers and distributors. Transfer of control and therefore revenue recognition generally corresponds to the date when the goods are made available to the customer or when the goods are released to the carrier responsible for transporting them to the customer in the following manner: l Domestic sales are recognised at the time of dispatch from the point of sale; l Export sales are recognised on the date when shipped on board as per terms of sale and are initially recorded at the relevant exchange rates prevailing on the date of the transaction Generally Company does not offer any specific credit period to its customer. All invoices are due immediately after billing. The nature of contracts of the Company are such that no material part performance obligations would remain unfulfilled at the end of any accounting period. Variable consideration If the consideration in a contract includes a variable amount (like volume rebates/incentives cash discounts etc.) the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable Consideration is subsequently resolved. The estimate of variable consideration for expected future volume rebates/incentives cash discounts etc. are made on the most likely amount method. Consideration payable to the customer Consideration payable to a customer includes cash amounts that the Company pays or expects to pay to the customer.The consideration payable to a customer is accounted for as a reduction of the revenue. Warranty obligations The Company provides warranties for general repairs of defects as per terms of the contract with ultimate customers. These warranties are considered as assurance type warranties and are accounted for under Ind AS 37- Provisions Contingent Liabilities and Contingent Assets. Financing component Generally the Company receives short-term advances from its customers. The Company applies the practical expedient for short-term advances received from customers. That is the promised amount of consideration is not adjusted for the effects of a significant financing component if the period between the transfer of the promised good or service and the payment is one year or less. Principal versus agent consideration in respect of freight The Company on behalf of its customers (dealers and distributors) dispatches goods to agreed locations for an agreed fee. The Company has determined that the performance obligation of the Company is to arrange for those goods and services (Company is an agent) to the dealers and hence the amount charged to the customer offset by freight charges paid to the freight service providers is shown as revenue and disclosed as other operating income or other operating expenses depending upon the results of the offsetting. Contract balances Trade receivables A receivable represents the Companys right to an amount of consideration that is unconditional (i.e. only the passage of time is required before payment of the consideration is due). Refer to accounting policy no. 6 Financial instruments initial measurement and subsequent measurement. Contract liabilities A contract liability is the obligation to transfer goods to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Company performs under the contract. Refund liabilities A refund liability is the obligation to refund some or all the consideration received (or receivable) from the customer and is measured at the amount the Company ultimately expects it will have to return to the customer. The Company updates its estimates of refund liabilities (and the corresponding change in the transaction price) at the end of each reporting period. Dividends Income: Dividends are recognised in the Statement of Profit and Loss only when the right to receive payment is established and it is probable that the economic benefits associated with the dividend will flow to the Company and that the amount of the dividend can be measured reliably Other income: The Company recognises income on accrual basis. However where the ultimate collection of the same lacks reasonable certainty revenue recognition is postponed to the extent revenue is reasonably certain and can be reliably measured.
127 Bajaj Auto Ltd. Automobile Ind AS 116 Leases Operating leases including investment properties As a lessee a) Right-of-use assets The Company recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is available for use). Right-of-use assets are measured at cost less any accumulated depreciation and impairment losses and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised initial direct costs incurred and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets. If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are also subject to impairment. Refer to note 1 clause 8 for accounting policies on impairment of nonfinancial assets. b) Lease liabilities At the commencement date of the lease the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments primarily comprise of fixed payments. In calculating the present value of lease payments the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. c) Short-term leases and leases of low value assets The Company applies the short-term lease recognition exemption to its short-term leases of office spaces and certain equipment (i.e. those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term. As a lessor Leases in which the Company does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income
128 Bajaj Auto Ltd. Automobile " Ind AS 16 Property A. Property plant and equipment i) Capital work in progress property plant and equipment except land are carried at historical cost of acquisition construction or manufacturing as the case may be less accumulated depreciation and amortisation. Freehold land is carried at cost of acquisition. ii) Cost represents all expenses directly attributable to bringing the asset to its working condition capable of operating in the manner intended. Such cost includes the cost of replacing part of the plant and equipment if the recognition criteria are met. When significant parts of plant and equipment are required to be replaced at intervals the Company depreciates them separately based on their specific useful lives. Likewise when a major inspection is performed its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the Statement of Profit and Loss as incurred. iii) Costs incurred to manufacture/construct property plant and equipment are reduced from the total expense under the head Expenses included in above items capitalised in the Statement of Profit and Loss. iv) An item of property plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the Statement of Profit and Loss when the asset is derecognised. vi) The residual values useful lives and methods of depreciation of property plant and equipment are reviewed at regular intervals and adjusted prospectively if appropriate. B. Depreciation and amortisation methods estimated useful lives and residual value (a) Leasehold land Premium on leasehold land is amortised over the period of lease. (b) Other tangible assets i. a. Depreciation is provided on a pro rata basis on straight line method to allocate the cost net of residual value over the estimated useful lives of the assets. Where a significant component (in terms of cost) of an asset has an estimated economic useful life shorter thanthat of its corresponding asset the component is depreciated over its shorter life. c. The Company based on technical assessment made by technical expert and Management estimate depreciates certain items of property plant and equipment over estimated useful lives which are different from the useful life prescribed in Schedule II to the Companies Act 2013. The Management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used. ii. Assets which are depreciated over useful life/residual value different than those indicated by Schedule II are as under: Asset class As per Schedule II Useful life Aircraft 20 years 10 years PDC Dies 8 years 3 years iii. Depreciation on additions is being provided on pro rata basis from the month of such additions. iv. Depreciation on assets sold discarded or demolished during the year is being provided up to the month in which such assets are sold discarded or demolished.
129 Bajaj Auto Ltd. Automobile Ind AS 19 Employee Benefits Employee benefits a) Privilege leave entitlements Privilege leave entitlements are recognised as a liability in the calendar year of rendering of service as per the rules of the Company. As accumulated leave can be availed and/or encashed at any time during the tenure of employment subject to terms and conditions of the scheme the liability is recognised based on an independent actuarial valuation.They are therefore measured at the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in Statement of Profit and Loss. b) Gratuity Payment for present liability of future payment of gratuity is being made to approved gratuity fund which fully covers the same under Cash Accumulation Policy and Debt fund of the Life Insurance Corporation of India (LIC) and Bajaj Allianz Life Insurance Company Ltd. (BALIC). However any deficit in plan assets managed by LIC and BALIC as compared to the liability based on an independent actuarial valuation is recognised as a liability. The liability or asset recognised in the Balance Sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method in conformity with the principles and manner of computation specified in Ind AS 19. Remeasurements comprising of actuarial gains and losses the effect of the asset ceiling excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability) are recognised immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the Statement of Profit and Loss. c) Superannuation Defined contribution to superannuation fund is being made as per the scheme of the Company and recognised as expense as and when due. d) Provident fund contributions are made to Company's Provident Fund Trust. The contributions are accounted for as defined benefit plans and the contributions are recognised as employee benefit expense when they are due. Deficits if any of the fundas compared to liability based on an independent actuarial valuation is to be additionally contributed by the Company and hence recognised as a liability. e) Defined contribution to Employees Pension Scheme 1995 is made to Government Provident Fund Authority and recognised as expense as and when due.
130 Bajaj Auto Ltd. Automobile Ind AS 20 Accounting for Government Grants and Di Government grant Grants from the Government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Company will comply with all attached conditions. Government grants relating to income are deferred and recognised in the profit or loss over the period necessary to match them with the costs that they are intended to compensate and presented within other operating revenue. Government grants in the nature of export incentives are accounted for in the period of export of goods if the entitlements can be estimated with reasonable accuracy and conditions precedent to claim are reasonably expected to be fulfilled. When loans or similar assistance are provided by Governments or related institutions with an interest rate below the current applicable market rate the effect of this favorable interest is regarded as a Government grant. The loan or assistance is initially recognised and measured at fair value and the Government grant is measured as the difference between the initial carrying value of the loan and the proceeds received. The loan is subsequently measured as per the accounting policy applicable to financial liabilities.
131 Bajaj Auto Ltd. Automobile Ind AS 21 The Effects of Changes in Foreign Excha Foreign currencies The Groups consolidated financial statements are presented in INR which is also the parent companys functional currency. For each entity the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency. The Group uses the direct method of consolidation and on disposal of a foreign operation the gain or loss that is reclassified to profit or loss reflects the amount that arises from using this method. Transactions and balances Transactions in foreign currencies are initially recorded by the Groups entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition. However for practical reasons the Group uses an average rate if the average approximates the actual rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.Exchange differences arising on settlement or translation of monetary items are recognised in profit or loss with the exception of the following: Exchange differences arising on monetary items that forms part of a reporting entitys net investment in a foreign operation are recognised in profit or loss in the separate financial statements of the reporting entity or the individual financial statements of the foreign operation as appropriate. In the financial statements that include the foreign operation and the reporting entity (e.g. consolidated financial statements when the foreign operation is a subsidiary) such exchange differences are recognised initially in OCI. These exchange differences are reclassified from equity to profit or loss on disposal of the net investment. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in OCI. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e. translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss are also recognised in OCI. or profit or loss respectively). Group companies On consolidation the assets and liabilities of foreign operations are translated into INR at the rate of exchange prevailing at the reporting date and their statements of profit or loss are translated at exchange rates prevailing at the dates of the transactions. For practical reasons the Group uses an average rate to translate income and expense items if the average rate approximates the exchange rates at the dates of the transactions. The exchange differences arising on translation for consolidation are recognised in OCI. On disposal of a foreign operation the component of OCI relating to that particular foreign operation is recognised in profit or loss. Any goodwill arising in the acquisition/business combination of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the spot rate of exchange at the reporting date. Gain or loss on a subsequent disposal of any foreign operation excludes translation differences that arose before the date of transition but includes only translation differences arising after the transition date.
132 Bajaj Auto Ltd. Automobile Ind AS 28 Investments in Associates and Joint Ven Investment in associates Investments in associates are accounted for using the equity method. An associate is an entity over which the Group is in a position to exercise significant influence over operating and financial policies. The considerations made in determining whether significant influence is being exercised are similar to those necessary to determine control over the subsidiaries. Goodwill arising on the acquisition of associates is included in the carrying value of investments in associate. The Groups investments in its associate are accounted for using the equity method. Under the equity method the investment in an associate is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Groups share of net assets of the associate since the acquisition date. Goodwill relating to the associate is included in the carrying amount of the investment and is not anthology_newed for impairment individually. The Statement of Profit and Loss reflects the Groups share of the results of operations of the associate. Any change in OCI of those investees is presented as part of the Groups OCI. In addition when there has been a change recognised directly in the equity of the associate the Group recognises its share of any changes when applicable in the Statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate. If an entitys share of losses of an associate equals or exceeds its interest in the associate (which includes any long term interest that in substance form part of the Groups net investment in the associate) the entity discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. If the associate subsequently reports profits the entity resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised. The aggregate of the Groups share of profit or loss of an associate is shown on the face of the Statement of Profit and Loss. The financial statements of the associate are prepared with a three months time lag for consolidation into the Group financial statements. When necessary adjustments are made to bring the accounting policies in line with those of the Group. The Group has not identified any material adjustments during the year; in regard to the alignment of accounting policies. After application of the equity method the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate. At each reporting date the Group determines whether there is objective evidence that the investment in the associate is impaired. If there is such evidence the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and then recognises the loss in the statement of profit or loss. Upon loss of significant influence over the associate the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.
133 Bajaj Auto Ltd. Automobile Ind AS 33 Earnings per Share Earnings per share Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Earnings considered in ascertaining the Companys earnings per share is the net profit for the period. The weighted average number of equity shares outstanding during the period and all periods presented is adjusted for events such as bonus shares other than the conversion of potential equity shares that have changed the number of equity shares outstanding without a corresponding change in resources. For calculating diluted earnings per share the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
134 Bajaj Auto Ltd. Automobile Ind AS 36 Impairment of Assets Impairment of non-financial assets Assets are anthology_newed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the assets carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an assets fair value less cost of disposal and value in use. For the purposes of assessing impairment assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash-generating units).
135 Bajaj Auto Ltd. Automobile " Ind AS 37 Provisions Provisions and contingent liabilities The Company creates a provision when there is present 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 a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may but probably will not require an outflow of resources. When the likelihood of outflow of resources is remote no provision or disclosure is made. 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.
136 Bajaj Auto Ltd. Automobile Ind AS 38 Intangible Assets Intangible assets A. Technical know-how acquired Technical know-how acquired is stated at acquisition cost less accumulated amortisation and impairment losses if any. Acquired technical know-how is amortised equally over a period of estimated useful life i.e. six years. B. Technical know-how developed by the Company i) Expenditure incurred by the Company on development of know-how researched is recognised as an intangible asset if and only if the future economic benefits attributable to the use of such know-how are probable to flow to the Company and the costs/expenditure can be measured reliably. ii) Costs incurred to develop an intangible asset are reduced from total expenses and disclosed under the head Expenses included in above items capitalised in the Statement of Profit and Loss. iii) The cost of technical know-how developed is amortised equally over its estimated useful life i.e. generally three years from the date of commencement of commercial production. C. Research and development costs Research costs are expensed as incurred. Development expenditure on an individual project are recognised as an intangible asset when the Company can demonstrate: l The technical feasibility of completing the intangible asset so that the asset will be available for use or sale l Its intention to complete and its ability and intention to use or sell the asset l How the asset will generate future economic benefits l The availability of resources to complete the asset l The ability to measure reliably the expenditure during development Following initial recognition of the development expenditure as an asset the asset is carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and theasset is available for use. It is amortised over the period of expected future benefit. Amortisation expense is recognised in the Statement of Profit and Loss unless such expenditure forms part of carrying value of another asset. During the period of development the asset is anthology_newed for impairment annually.
137 Bajaj Auto Ltd. Automobile Ind AS 40 Investment Property Investment property Land and buildings acquired/constructed not intended to be used in the operations of the Company and held for earning long-term rental yields or for capital appreciation or both and that is not occupied by the Company are categorised as investment property.
138 Bajaj Auto Ltd. Automobile Ind AS 7 Statement of Cash Flows Cash and cash equivalents For presentation in the Statement of Cash Flows cash and cash equivalents includes cash on hand other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
139 Bajaj Auto Ltd. Automobile Ind AS 1 Presentation of Financial Statements Basis of preparation The financial statements have been prepared on a historical cost basis except for certain financial assets and financial liabilities (including derivative instruments) that are measured at fair value or amortised book value. The financial statements are presented in INR which is also the Companys functional currency and all values are rounded to the nearest crore (INR 0 000 000) except when otherwise indicated. All assets and liabilities other than deferred tax assets and liabilities have been classified as current or non-current as per the Companys normal operating cycle and other criteria set out in the Schedule III (Division II) to the Act. Deferred tax assets and liabilities are classified as non-current assets and liabilities. Based on the nature of products and the time between the acquisition of assets for processing and their realisation in cash and cash equivalents the Company has ascertained its operating cycle as 12 months for current and non-current classification of assets and liabilities. Dividends Provision is made for any dividend declared being appropriately authorised and no longer at the discretion of the entity on or before the end of the reporting period but not distributed at the end of the reporting period.
140 Bajaj Auto Ltd. Automobile Ind AS 102 Share based Payment Employee stock options Certain employees (including senior executives) of the Company receive part of their remuneration in the form of employee stock options (ESOP). The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model. Further details are given in note 41. That cost is recognised together with a corresponding increase in share-based payment reserve in equity over the period in which the performance and/or service conditions are fulfilled in employee benefits expense. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Companys best estimate of the number of equity instruments that will ultimately vest. The expense or credit in the Statement of Profit and Loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense. Service and non-market performance conditions are not taken into account when determining the grant date fair value of ESOPs but the likelihood of the conditions being met is assessed as part of the Companys best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an ESOP but without an associated service requirement are considered to be non-vesting conditions. Nonvesting conditions are reflected in the fair value of an ESOP and lead to an immediate expensing of an ESOP unless there are also service and/or performance conditions. No expense is recognised for ESOPs that do not ultimately vest because non-market performance and/or service conditions have not been met. Where ESOPs include a market or non-vesting condition the transactions are treated as vested irrespective of whether the market or non-vesting condition is satisfied provided that all other performance and/or service conditions are satisfied. The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
141 Bajaj Auto Ltd. Automobile Ind AS 110 Consolidated Financial Statements Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and all its subsidiaries being the entities that it controls. Control is evidenced where the Group has power over the investee or is exposed or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Power is demonstrated through existing rights that give the ability to direct relevant activities which significantly affect the entity returns. The financial statements of subsidiaries are prepared for the same reporting year as the parent company. Where necessary adjustments are made to the financial statements of subsidiaries to align the accounting policies in line with accounting policies of the Group. For non-wholly owned subsidiaries a share of the profit/loss for the financial year and net assets is attributed to the noncontrolling interests as shown in the consolidated Statement of Profit and Loss and consolidated Balance Sheet. For acquisitions of additional interests in subsidiaries where there is no change in control the Group recognises a reduction to the non-controlling interest of the respective subsidiary with the difference between this figure and the cash paid inclusive of transaction fees being recognised in equity. In addition upon dilution of controlling interests the difference between the cash received from sale or listing of the subsidiary shares and the increase to non-controlling interest is also recognised in equity. The financial statements of subsidiaries acquired or disposed off during the year are included in the consolidated Statement of Profit and Loss from the effective date of acquisition or up to the effective date of disposal as appropriate. Intragroup balances and transactions and any unrealised income and expenses arising from intragroup transactions are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated unless costs cannot be recovered. The financial statements of Bajaj Auto (Thailand) Ltd. are prepared with a three months time lag for consolidation into the Group financial statements.
142 Bajaj Auto Ltd. Automobile Ind AS 113 Fair Value Measurement Fair value measurement The Company measures financial instruments such as derivatives 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: l In the principal market for the asset or liability or l 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 best economic interest. A fair value measurement of a non-financial asset takes into account a market participants 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: l Level 1 Quoted (unadjusted) market prices in active markets for identical assets or liabilities l Level 2 Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable l Level 3 Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. The Company has set policies and procedures for both recurring and non-recurring fair value measurement of financial assets which includes valuation techniques and inputs to use for each case. For fair value disclosures the Company has determined classes of assets and liabilities based on the nature characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes. l Disclosures for valuation methods significant estimates and assumptions (note 1 clause 1) l Quantitative disclosures of fair value measurement hierarchy (note 31) l Investment properties (note 3) l Financial instruments (including those carried at amortised cost) (note 31)
143 Bajaj Auto Ltd. Automobile Ind AS 12 Income Taxes Taxation a) Current income 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 Group operates and generates taxable income. b) Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. c) Deferred tax is provided using the liability method on temporary differences arising between the tax base of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is determined using tax rates that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences. d) Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
144 Bajaj Auto Ltd. Automobile Ind AS 2 Inventories Inventories Cost of inventories have been computed to include all costs of purchases (including materials) cost of conversion and other costs incurred in bringing the inventories to their present location and condition. i) Finished stocks of vehicles and auto spare parts and stocks of work-in-progress are valued at cost of manufacturing or net realisable value whichever is lower. Cost is calculated on a weighted average basis. ii) Stores packing materials and tools are valued at cost arrived at on a weighted average basis or net realisable value whichever is lower. iii) Raw materials and components are valued at cost arrived at on a weighted average basis or net realisable value whichever is lower. iv) Inventory of machinery spares and maintenance materials not being material are expensed in the year of purchase.
145 Bajaj Auto Ltd. Automobile "Ind AS 8 Accounting Policies Use of estimates judgments and assumptions Estimates and assumptions used in the preparation of these financial statements and disclosures made therein are based upon Managements evaluation of the relevant facts and circumstances as of the date of the financial statements which may differ from the actual results at a subsequent date. The following are items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates is included in the relevant notes together with information about basis of calculation for each affected line item in the financial statements: a) Estimation of fair value of derivative instruments b) Estimation of variable considerations in revenue c) Provision for warranties d) Provision for employee benefits e) Provision for tax expenses f) Residual value and useful life of property plant and equipment g) Valuation of investments h) Inventory provisioning
146 Bajaj Auto Ltd. Automobile "Ind AS 8 Accounting Policies Changes in accounting policies and disclosures New and amended standards The Company applied Ind AS 116 Leases (Ind AS 116) for the first time. The nature and effect of the changes as a result of adoption of this new accounting standard is described below. Several other amendments and interpretations apply for the first time in March 2020 but do not have an impact on the standalone financial statements of the Company. The Company has not early adopted any standards or amendments that have been issued but are not yet effective. Ind AS 116 supersedes Ind AS 17 Leases including its appendices (Appendix C of Ind AS 17 Determining whether an Arrangement contains a Lease Appendix A of Ind AS 17 Operating Leases-Incentives and Appendix B of Ind AS 17 Evaluating the Substance of Transactions Involving the Legal Form of a Lease). The standard sets out the principles for the recognition measurement presentation and disclosure of leases and requires lessees to recognise most leases on the Balance Sheet. Lessor accounting under Ind AS 116 is substantially unchanged from Ind AS 17. Lessors will continue to classify leases as either operating or finance leases using similar principles as in Ind AS 17. Therefore Ind AS 116 does not have an impact for leases where the Company is the lessor. The Company adopted Ind AS 116 using the modified retrospective method of adoption with the date of initial application on 1 April 2019. The Company elected to use the transition practical expedient to not reassess whether a contract is or contains a lease at 1 April 2019. Instead the Company applied the standard only to contracts that were previously identified as leases applying Ind AS 17 and Appendix C of Ind AS 17 at the date of initial application. The Company also elected to use the recognition exemptions for lease contracts that at the commencement date have a lease term of 12 months or less and do not contain a purchase option (short-term leases) and lease contracts for which the underlying asset is of low value (low-value assets). Based on the Companys evaluation the standard did not have significant impact on the financial statements of the Company Appendix C to Ind AS 12 Uncertainty over Income Tax Treatment The appendix addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of Ind AS 12 Income Taxes. It does not apply to taxes or levies outside the scope of Ind AS 12 nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The Appendix specifically addresses the following: l Whether an entity considers uncertain tax treatments separately l The assumptions an entity makes about the examination of tax treatments by taxation authorities l How an entity determines taxable profit (tax loss) tax bases unused tax losses unused tax credits and tax rates l How an entity considers changes in facts and circumstances The Company determines whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments and uses the approach that better predicts the resolution of the uncertainty. The Company applies significant judgment in identifying uncertainties over income tax treatments. Since the Company operates in a complex multinational environment it assessed whether the Appendix had an impact on its consolidated financial statements. Upon adoption of the Appendix C to Ind AS 12 the Company considered whether it has any uncertain tax positions. Based on the Companys evaluation the Appendix did not have an impact on the financial statements of the Company. Amendments to Ind AS 109: Prepayment Features with Negative Compensation Under Ind AS 109 a debt instrument can be measured at amortised cost or at fair value through other comprehensive income provided that the contractual cash flows are solely payments of principal and interest on the principal amount outstanding (the SPPI criterion) and the instrument is held within the appropriate business model for that classification. The amendments to Ind AS 109 clarify that a financial asset passes the SPPI criterion regardless of an event or circumstance that causes the early termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termination of the contract. These amendments had no impact on the financial statements of the Company. Amendments to Ind AS 19: Plan Amendment Curtailment or Settlement The amendments to Ind AS 19 address the accounting when a plan amendment curtailment or settlement occurs during a reporting period. The amendments specify that when a plan amendment curtailment or settlement occurs during the annual reporting period an entity is required to determine the current service cost for the remainder of the period after the plan amendment curtailment or settlement using the actuarial assumptions used to remeasure the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event. An entity is also required to determine the net interest for the remainder of the period after the plan amendment curtailment or settlement using the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event and the discount rate used to remeasure that net defined benefit liability (asset). The amendments had no impact on the financial statements of the Company as it did not have any plan amendments curtailments or settlements during the period. Ind AS 12 Income Taxes The amendments clarify that the income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore an entity recognises the income tax consequences of dividends in profit or loss other comprehensive income or equity according to where it originally recognised those past transactions or events. An entity applies the amendments for annual reporting periods beginning on or after 1 April 2019. Since the Companys current practice is in line with these amendments they had no impact on the financial statements of the Company. Ind AS 23 Borrowing Costs The amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete. The entity applies the amendments to borrowing costs incurred on or after the beginning of the annual reporting period in which the entity first applies those amendments. An entity applies those amendments for annual reporting periods beginning on or after 1 April 2019. Since the Company does not have any borrowings the amendment had no impact on the financial statements of the Company
147 Bajaj Electricals Ltd Consumer Durables Ind AS 1 Presentation of Financial Statements The consolidated financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act 2013 (the Act) and other relevant provisions of the Act. The consolidated financial statements are prepared under the historical cost convention except for the following: certain financial assets and liabilities (including derivative instruments) that are measured at fair value; assets held for sale which are measured at lower of carrying value and fair value less cost to sell; defined benefit plans where plan assets are measured at fair value; and share-based payments at fair value as on the grant date of options given to employees. Estimates judgements and assumptions used in the preparation of the consolidated financial statements and disclosures are based upon managements evaluation of the relevant facts and circumstances as of the date of the consolidated financial tatements which may differ from the actual results at a subsequent date. The critical estimates judgements and assumptions are presented in Note no. 1D. The Group presents assets and liabilities in the balance sheet based on current / non-current classification. An asset is treated as current when it is: Expected to be realised or intended to be sold or consumed in normal operating cycle Expected to be realised within twelve months after the reporting period or Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period All other assets are classified as non-current A liability is current when: It is expected to be settled in normal operating cycle It is due to be settled within twelve months after the reporting period or There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period All other liabilities as classified as non-current. The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Group has identified twelve months as its operating cycle. All amounts disclosed in the consolidated financial statements and notes have been rounded off to the nearest lakh (up to two decimals) as per the requirement of Schedule III unless otherwise stated.
148 Bajaj Electricals Ltd Consumer Durables Ind AS 103 Business Combinations Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquirees identifiable net assets. Acquisition-related costs are expensed as incurred. At the acquisition date the identifiable assets acquired and the liabilities assumed are recognised at their acquisition date fair values (including related deferred tax). For this purpose the liabilities assumed include contingent liabilities representing present obligation and they are measured at their acquisition fair values irrespective of the fact that outflow of resources embodying economic benefits is not probable. Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognised for noncontrolling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed. After initial recognition goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment anthology_newing goodwill acquired in a business combination is from the acquisition date allocated to each of the Groups cash-generating units that are expected to benefit from the combination irrespective of whether other assets or liabilities of the acquiree are assigned to those units. A cash generating unit to which goodwill has been allocated is anthology_newed for impairment annually or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than its carrying amount the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted through goodwill during the measurement period or additional assets or liabilities are recognised to reflect new information obtained about facts and circumstances that existed at the acquisition date that if known would have affected the amounts recognised at that date. These adjustments are called as measurement period adjustments. The measurement period does not exceed one year from the acquisition date. A change in the ownership interest of a subsidiary without a loss of control is accounted for as an equity transaction. If the Group loses control over a subsidiary it: Derecognises the assets (including goodwill) and liabilities of the subsidiary at their carrying amounts at the date when control is lost Derecognises the carrying amount of any non-controlling interests Derecognises the cumulative translation differences recorded in equity Recognises the fair value of the consideration received Recognises the fair value of any investment retained Recognises any surplus or deficit in profit or loss Recognise that distribution of shares of subsidiary to Group in Groups capacity as owners Reclassifies the parents share of components previously recognised in OCI to profit or loss or transferred directly to retained earnings if required by other Ind ASs as would be required if the Group had directly disposed of the related assets or liabilities
149 Bajaj Electricals Ltd Consumer Durables Ind AS 108 Operating Segments An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses whose operating results are regularly reviewed by the entitys chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. Operating segments often exhibit similar long-term financial performance if they have similar economic characteristics. Two or more operating segments are aggregated by the Group into a single operating segment if aggregation is consistent with the core principle of Ind AS 108 the segments have similar economic characteristics and the segments are similar in aspects as defined by Ind AS. The Group reports separately information about an operating segment that meets any of quantitative thresholds as defined by Ind AS. Operating segments that do not meet any of the quantitative thresholds are considered reportable and separately disclosed only if management of the Group believes that information about the segment would be useful to users of the consolidated financial statements Information about other business activities and operating segments that are not reportable separately are combined and disclosed in an all other segments category.
150 Bajaj Electricals Ltd Consumer Durables Ind AS 109 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. I. Financial Assets A) Initial recognition and measurement All financial assets are recognised 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. B) Subsequent measurement For purposes of subsequent measurement financial assets are classified in four categories: Debt instruments at amortised cost A debt instrument is measured at the amortised cost if both the following conditions are met: The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows and Contractual terms of the asset ive rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding. This category is the most relevant to the Group. 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 other income in the consolidated statement of profit and loss. The losses arising from impairment are recognised in the profit or loss. This category generally applies to trade and other receivables. Debt instruments at fair value through other comprehensive income (FVTOCI) A debt instrument is classified as at the FVTOCI if both of the following criteria are met: The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets and The assets contractual cash flows represent SPPI. Debt instruments included within the FVTOCI 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). On derecognition of the asset cumulative gain or loss previously recognised in OCI is reclassified from the equity to consolidated statement of profit and loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method. Debt instruments at fair value through profit or loss (FVTPL) FVTPL is a residual category for debt instruments. Any debt instrument which does not meet the criteria for categorisation as at amortised cost or as FVTOCI is classified as at FVTPL. In addition the Group may elect to designate a debt instrument which otherwise meets amortised cost or FVTOCI 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). Debt instruments included within the FVTPL category are measured at fair value with all changes recognised in the consolidated statement of profit and loss. Equity instruments measured at fair value through other comprehensive income (FVTOCI) All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination to which Ind AS103 applies are classified as at FVTPL. For all other equity instruments the Group may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Group makes such election on an instrument-by instrument basis. The classification is made on initial recognition and is irrevocable. If the Group decides to classify an equity instrument as at FVTOCI then all fair value changes on the instrument excluding dividends are recognised in the OCI. There is no recycling of the amounts from OCI to P&L even on sale of investment. However the Group may transfer the cumulative gain or loss within equity. Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in the P&L. C) Derecognition A financial asset (or where applicable a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the consolidated balance sheet) when: The rights to receive cash flows from the asset have expired or loss. The Group 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 Group has transferred substantially all the risks and rewards of the asset or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset. When the Group 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 Group continues to recognise the transferred asset to the extent of the Groups continuing involvement. In that case the Group 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 Group has retained. 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 Group could be required to repay. D) Impairment of financial assets The Group assesses on a forward looking basis the expected credit losses associated with its assets carried at amortised cost and FVOCI debt instruments. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables only the Group applies the simplified approach permitted by Ind AS 109 Financial Instruments which requires expected lifetime losses to be recognised from initial recognition of the receivables. II. Financial Liabilities A) 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. B) Subsequent measurement The measurement of financial liabilities depends on their classification as described below: Financial liabilities 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 consolidated statement of profit and loss. Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such 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 recognised in OCI. These gains/ loss are not subsequently transferred to P&L. However the Group may transfer the cumulative gain or loss within equity. All other changes in fair value such liability are recognised in the consolidated statement of profit and loss. Loans and Borrowings This is the category most relevant to the Group. 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 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 consolidated statement of profit and loss. Financial guarantee contracts Financial guarantee contracts issued by the Company are those contracts that require a payment to be made o reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently the liability is measured at the higher of the amount of loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amortisation. The fair value of financial guarantees is determined as the present value of the difference in net cash flows between the contractual payments under the debt instrument and the contractual payments that would be required without the guarantee or the estimated amount that would be payable to a third party for assuming the obligations. C) De-recognition A financial liability is derecognised 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 consolidated statement of profit or loss. III. Reclassification of financial assets / liabilities After initial recognition no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Groups senior management determines change in the business model as a result of external or internal changes which are significant to the Groups operations. IV. Offsetting of financial instruments Financial assets and liabilities are offset and the net amount is reported in the consolidated balance sheet where there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise 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 Group or the counterparty. V. Derivatives and hedging activities The Group enters derivatives like forwards contracts to hedge its foreign currency risks. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently marked to market at the end of each reporting period with profit/loss being recognised in consolidated statement of profit and loss. Derivative assets/liabilities are classified under other financial assets/other financial liabilities. Profits and losses arising from cancellation of contracts are recognised in the consolidated statement of profit and loss.
151 Bajaj Electricals Ltd Consumer Durables Ind AS 110 Consolidated Financial Statements The consolidated financial statements includes financial statements of Bajaj Electricals Limited and its subsidiary (together referred as a Group) and results of an associate and a joint venture consolidated in accordance with Ind AS 28 - Investments in associate and joint venture Ind AS 111 Joint Arrangements and Ind AS 110 Consolidated financial statements as given below: Name of the Company: Country of Incorporation: % share holding of the Company: Consolidated / Equity accounted as Starlite Lighting Limited : India: 47% : Joint Venture Hind Lamps Limited : India: 19% :Associate Nirlep Appliances Pvt Ltd : India: 79.85% : Subsidiary Control is achieved when the Group is exposed or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically the Group controls an investee if and only if the Group has: Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee) Exposure or rights to variable returns from its involvement with the investee and The ability to use its power over the investee to affect its returns Generally there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee the Group considers all relevant facts and circumstances in assessing whether it has power over an investee including: The contractual arrangement with the other vote holders of the investee Rights arising from other contractual arrangements The Groups voting rights and potential voting rights The size of the groups holding of voting rights relative to the size and dispersion of the holdings of the other voting rights holders The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets liabilities income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances. If a member of the Group uses accounting polices other than those adopted in the consolidated financial statements for like transactions and other events in similar circumstances appropriate adjustments are made to that Group members financial statements in preparing the consolidated financial statements to ensure conformity with the Groups accounting policies. The financial statement of all entities used for the purpose of consolidation are drawn upto same reporting date as that of the parent company i.e year ended 31st March. Consolidation procedure: (a) Combine like items of assets liabilities equity income expenses and cash flows of the parent with those of its subsidiaries. For this purpose income and expenses of for the year ended 31st March 2020 the subsidiary are based on the amounts of the assets and liabilities recognised in the consolidated financial statements at the acquisition date. (b) Offset (eliminate) the carrying amount of the parents investment in each subsidiary and the parents portion of equity of each subsidiary. Business combinations policy explains how to account for any related goodwill. (c) Eliminate in full intragroup assets and liabilities equity income expenses and cash flows relating to transactions between entities of the group (profits or losses resulting from intragroup transactions that are recognised in assets such as inventory and fixed assets are eliminated in full). Ind AS 12 Income Taxes applies to temporary differences that arise from the elimination of profits and losses resulting from intragroup transactions. Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. When necessary adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Groups accounting policies. All intra-group assets and liabilities equity income expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Put options held by non-controlling interests in the Groups subsidiaries entitle the noncontrolling interest to sell its interest in the subsidiary to the Group at pre-determined values and on contracted dates. In such cases the Group consolidates the non- controlling interests share of the equity in the subsidiary and recognises the fair value of the non-controlling interests put option being the present value of the estimated future purchase price as a financial liability in the statement of financial position. In raising this liability the non-controlling interest is derecognised and any excess or shortfall is charged or realised directly in retained earnings in the statement of changes in equity. An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining whether significant influence or joint control are similar to those necessary to determine control over the subsidiaries. Interest in associate and joint ventures are accounted for using the equity method. They are initially recognised at cost which includes transaction costs. Subsequent to initial recognition the consolidated financial statements include the groups share of profit and loss and OCI of equity accounted investee until the date on which significant influence or joint control ceases. When the groups share of losses in an equity accounted investment equals or exceeds its interest in the entity including any other unsecured long-term receivables the group does not recognise further losses unless it has incurred legal or constructive obligations or made payments on behalf of the other entity. Unrealised gains on transactions between the group and its associates and joint ventures are eliminated to the extent of the groups interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
152 Bajaj Electricals Ltd Consumer Durables Ind AS 113 Fair Value Measurement The Group measures financial instruments 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 Group. 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 participants 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 Group 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 consolidated 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 consolidated 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 air value measurement as a whole) at the end of each reporting period. External valuers are involved for valuation of significant assets such as properties and unquoted financial assets. For the purpose of fair value disclosures the Group 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. This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes.
153 Bajaj Electricals Ltd Consumer Durables Ind AS 115 Revenue from Contracts with Customers/ Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. The Group has generally concluded that it is the principal in its revenue arrangements because it typically controls the goods or services before transferring them to the customer. The recognition criteria for sale of products and construction contracts is described below (1) Sale of products Revenue from sale of products is recognised at the point in time when control of the asset is transferred to the customer generally on delivery of the product to the customers destination. The Group considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated (e.g. customer loyalty points and warranties). In determining the transaction price for the sale of product the Group considers the effects of variable consideration the existence of significant financing components and consideration payable to the customer (if any). The Group provides volume rebates to certain customers once the quantity of products purchased during the period exceeds a threshold specified in the contract. Rebates are offset against amounts payable by the customer. To estimate the variable consideration for the expected future rebates the Group applies the most likely amount method. The selected method that best predicts the amount of variable consideration is primarily driven by the number of volume thresholds contained in the contract. Generally the Group receives short-term advances from its customers. Using the practical expedient in Ind AS 115 the Group does not adjust the promised amount of consideration for the effects of a significant financing component if it expects at contract inception that the period between the transfer of the promised good or service to the customer and when the customer pays for that good or service will be one year or less. The Group has a loyalty points program Retailer Bonding Program which allows customers to accumulate points that can be redeemed for free products. The loyalty points give rise to a separate performance obligation as they provide a material right to the customer. A portion of the transaction price is allocated to the loyalty points awarded to customers based on relative stand-alone selling price and recognised as deferred revenue until the points are redeemed. Revenue is recognised upon redemption of products by the customer. When estimating the stand-alone selling price of the loyalty points the Group considers the likelihood that the customer will redeem the points. The Group updates its estimates of the points that will be redeemed on a quarterly basis and any adjustments to the deferred revenue are charged against revenue. The Group provides a warranty beyond fixing defects that existed at the time of sale. These service-type warranties are bundled together with the sale of products. Contracts for bundled sales of products and a service-type warranty comprise two performance obligations because the product and service-type warranty are both sold on a stand-alone basis and are distinct within the context of contract. Using the relative stand-alone selling price method a portion of the transaction price is allocated to the service-type warranty and recognised as deferred revenue. Revenue for service-type warranties is recognised over the period in which the service is provided based on the time elapsed. (2) Construction contracts Performance obligation in case of construction contracts is satisfied over a period of time as the Group creates an asset that the customer control and the Group has an enforceable right to payment for performance completed to date if it meets the agreed specifications. Revenue from construction contracts is recognised based on the stage of completion determined with reference to the actual costs incurred up to reporting date on the construction contract and the estimated cost to complete the project. Cost estimates involves judgments including those relating to cost escalations; assessment of technical political regulatory and other related contract risks and their financial estimation; scope of deliveries and services required for fulfilling the contractually defined obligations and expected delays if any. Provision for foreseeable losses/ construction contingencies on said contracts is made based on technical assessments f costs to be incurred and revenue to be accounted for. The Group pays insurance and bank guarantee charges for each contract hat they obtain for supply of materials and erection services. The Group amortises the same over the period of the contract. The Group has long-term receivables from customers. The transaction price for such contracts is discounted using the rate that would be reflected in a separate financing transaction between the Group and its customers at contract inception to take into consideration the significant financing component (3) Contract balances Contract asset A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group performs by transferring goods or services to a customer before the customer pays consideration or efore payment is due a contract asset is recognised for the earned consideration that is conditional. Trade receivables A receivable represents the Group right to an amount of consideration that is unconditional (i.e. only the passage of time is required before payment of the consideration is due). Contract liabilities A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to the customer a contract iability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Group performs under the contract.
154 Bajaj Electricals Ltd Consumer Durables Ind AS 116 Leases Ind AS 116 supersedes Ind AS 17 Leases including evaluating the substance of transactions involving the legal form of a Lease. The standard sets out the principles for the recognition measurement presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model. Lessor accounting under Ind AS 116 is substantially unchanged under Ind AS 17. Lessors will continue to classify leases as either operating or finance leases using similar principles as in Ind AS 17. Therefore Ind AS 116 did not have an impact for leases where the Group is the lessor. As a lessee: Right-of-use assets The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is available for use). Right-of-use assets are measuredat cost less any accumulated depreciation and impairment losses and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised initial direct costs incurred and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment anthology_new. The Group determines the lease term as the non-cancellable term of the lease together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised or any periods covered by an option to terminate the lease if it is reasonably certain not to be exercised The Group has determined leasehold lands also as right of use assets and hence the same has been classified from property plant and equipment to right of use assets. Lease liabilities At the commencement date of the lease the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable variable lease payments that depend on an index or a rate and amounts expected to be paid under residual value guarantees. The variable ease payments that do not depend on and index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs. In calculating the present value of lease payments the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to its short-term leases (i.e. those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low value assets recognition exemption to leases that are considered of low value (i.e. below H 5 00 000). Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low value assets recognition exemption transition to Ind AS 116 The Group has adopted modified retrospective approach as per para C8 (c) (ii) of IND AS 116 - Leases effective from annual reporting period beginning 1st April 2019. This has resulted in recognising a right of use asset of H 10 220.16 lakhs (adjusted by the prepaid lease rent of H 209.24 lakhs) and lease liability of H 7 354.86 lakhs as at 1st April 2019. As a lessor: The Group has leased certain tangible assets and such leases where the Group has not substantially transferred all the risks and rewards of ownership are classified as operating leases. Lease income on such operating leases are recognised in the Statement of Profit & Loss on a straight line basis over the lease term which is representative of the time pattern in which benefit derived from the use of the leased asset is diminished. Initial direct costs are recognised as an expense in the Statement of Profit and Loss in the period in which are they are incurred. For the year ended March 31 2019 the lease accounting has been done as per Ind AS 17 as stated below: 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 to use the asset or assets even if that right is not explicitly specified in an arrangement. As a lessee: A lease is classified at the inception date as a finance lease or an operating lease. A lease that transfers substantially all the risks and rewards incidental to the ownership to the Group are classified as a finance lease. Payments made under operating leases are charged to the Statement of Profit & Loss on a straight line basis over the period of the lease. As a lessor: The Group has leased certain tangible assets and such leases where the Group has not substantially transferred all the risks and rewards of ownership are classified as operating leases. Lease income on such operating leases are recognised in the Statement of Profit & Loss on a straight line basis over the lease term which is representative of the time pattern in which benefit derived from the use of the leased asset is diminished. Initial direct costs are recognised as an expense in the Statement of Profit and Loss in the period in which they are incurred.
155 Bajaj Electricals Ltd Consumer Durables Ind AS 12 Income Taxes The income tax expense or credit for the period is the tax payable on the current periods taxable income based on the applicable income tax rate for the jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences unused tax losses and unabsorbed depreciation. Current and deferred tax is recognised in the consolidated Statement of Profit and Loss except to the extent it relates to items recognised directly in equity or other comprehensive income n which case it is recognised in equity or other comprehensive income. A. Current income tax The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period. The Group establishes provisions wherever appropriate on the basis of amounts expected to be paid to the tax authorities. Current tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities. B. Deferred tax Deferred tax is provided using the liability method on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. The carrying amount of deferred tax assets is reviewed at each reporting date and adjusted to reflect changes in probability that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets are recognised for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.
156 Bajaj Electricals Ltd Consumer Durables " Ind AS 16 Property A) Asset class: i) Freehold land is carried at historical cost including expenditure that is directly attributable to the acquisition of the land. ii) All other items of property plant and equipment (including capital work in progress) are stated at historical cost less accumulated depreciation and impairment losses if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items. iii) Capital goods manufactured by the Group for its own use are carried at their cost of production (including duties and other levies if any) less accumulated depreciation and impairment losses if any. iv) Subsequent costs are included in the assets carrying amount or recognised as a separate asset as appropriate only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to the consolidated statement of profit and loss during the year in which they are incurred. v) Losses arising from the retirement of and gains or losses arising from disposal of property plant and equipments which are carried at cost are recognised in the consolidated statement of profit and loss. B) Depreciation: i) Depreciation is calculated using the straight-line method to allocate their cost net of their residual values over their estimated useful lives. Premium of Leasehold land and leasehold improvements cost are amortised over the primary period of lease. ii) 100% depreciation is provided in the month of addition for temporary structure cost at project site iii) Where a significant component (in terms of cost) of an asset has an economic useful life different than that of its corresponding asset the component is depreciated over its estimated useful life. iv) The Group based on internal technical assessments and management estimates depreciates certain items of property plant & equipment over the estimated useful lives and considering residual value which are different from the one prescribed in Schedule II of the Companies Act 2013. The management believes that these estimated useful lives and residual values are realistic and reflect fair approximation of the period over which the assets are likely to be used. v) Useful life of asset is as given below: Asset block Useful Lives Asset block : Useful Lives (in years) Leasehold Land: Over the period of the lease Building Office: 5 to 70 Building Factory: 3 to 30 Ownership Premises: 60 Plant & Machinery: 1 to 22 Furniture & Fixtures: 1 to 15 Electric Installations: 1 to 10 Office Equipment: 2 to 10 Vehicles: 8 to 10 Dies & Jigs: 1 to 10 Leasehold Improvements: 5 to 10 Roads & Borewell : 3 to 21 IT hardware : 2 to 10 Laboratory Equipment : 1 to 10 vi ) The residual values useful lives and methods of depreciation of property plant and equipment are reviewed at each financial year and adjusted prospectively if appropriate.
157 Bajaj Electricals Ltd Consumer Durables Ind AS 19 Employee Benefits A. Short-term obligations Liabilities for wages and salaries including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in the same period in which the employees renders the related service and are measured at the amounts expected to be paid when the liabilities are settled. B. Other long-term employee benefit obligations The liabilities for earned leave and sick leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligation. Remeasurements as a result of experience adjustments and changes in for the year ended 31st March 2020 actuarial assumptions are recognised in the consolidated statement of profit or loss. C. Post-employment obligations The Group operates the following postemployment schemes (a) defined benefit plans - gratuity and obligation towards shortfall of Provident Fund Trusts (b) defined contribution plans - Provident fund (RPFC Contributions) superannuation and pension Defined benefit plans : The liability or asset recognised in the consolidated balance sheet in respect of defined benefit plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets excluding non-qualifying asset (reimbursement right). The defined benefit obligation is calculated annually by actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the consolidated statement of profit and loss. Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur directly in other comprehensive income. They are included in retained earnings in the consolidated statement of changes in equity and in the balance sheet. Insurance policy held by the Group from insurers who are related parties are not qualifying insurance policies and hence the right to reimbursement is recognised as a separate assets under other non-current and/or current assets as the case may be. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in consolidated profit or loss as past service cost. Defined contribution plans : In respect of certain employees the Group pays provident fund contributions to publicly administered provident funds as per local regulations. The Group y has no further payment obligations once the contributions have been paid. Such contributions are accounted for as employee benefit expense when they are due. Defined contribution to superannuation fund is being made to Life Insurance Corporation of India (LIC) as per the scheme of the Group. Defined contribution to Employees Pension Scheme 1995 is made to Government Provident Fund Authority whereas the contributions for National Pension Scheme is made to Stock Holding Corporation of India Limited D. Employee stock option scheme The Company operates a number of equity settled employee share based compensation plans under which the Company receives services from employees as consideration for equity shares of the Company. The fair value of the employee services received in exchange for the grant of the options is determined by reference to the fair value of the options as at the Grant Date and is recognised as an employee benefits expense with a corresponding increase in equity. The total expense is recognised over the vesting period which is the period over which the applicable vesting condition is to be satisfied. The total amount to be expensed is determined by reference to the fair value of the options granted excluding the impact of any service vesting conditions. At the end of each year the entity revises its estimates of the number of options that are expected to vest based on the service vesting conditions. It recognises the impact of the revision to original estimates if any in the consolidated profit or loss with a corresponding adjustment to equity. If at any point of time after the vesting of the share options the right to the same expires (either by virtue of lapse of the exercise period or the employee leaving the Company) the fair value of the options accruing in favour of the said employee are written back to the General Reserve in the reporting period in which the right expires.
158 Bajaj Electricals Ltd Consumer Durables Ind AS 2 Inventories Raw materials and stores work in progress traded and finished goods are stated at the lower of cost and net realisable value. Cost of raw materials and traded goods comprises cost of purchases. Cost of work-in-progress and finished goods comprises direct materials direct labour and an appropriate proportion of variable and fixed overhead expenditure the latter being allocated on the basis of normal operating capacity. Cost of inventories also include all other costs incurred in bringing the inventories to their present location and condition. Costs are assigned to individual items of inventory on the weighted average basis. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
159 Bajaj Electricals Ltd Consumer Durables Ind AS 21 The Effects of Changes in Foreign Excha Items included in the consolidated financial statements are measured using the currency of the primary economic environment in which the Group operates (the functional currency). The consolidated financial statements are presented in Indian Rupee (INR) which is the Group functional and presentation currency. a) On initial recognition all foreign currency transactions are recorded at the functional currency spot rate at the date the transaction first qualifies for recognition. b) Monetary assets and liabilities in foreign currency outstanding at the close of reporting date are translated at the functional currency spot rates of exchange at the reporting date. c) Exchange differences arising on settlement of translation of monetary items are recognised in the consolidated Statement of Profit and Loss.
160 Bajaj Electricals Ltd Consumer Durables Ind AS 23 Borrowing Costs General and specific borrowing costs that are directly attributable to the acquisition construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Borrowing costs also include exchange difference arising from foreign currency borrowings to the extent they are regarded as an adjustment to interest costs. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. Other borrowing costs are expensed in the period in which they are incurred.
161 Bajaj Electricals Ltd Consumer Durables Ind AS 33 Earnings per Share Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Earnings considered in ascertaining the Groups earnings per share is the net profit for the period. The weighted average number equity shares outstanding during the period and all periods presented is adjusted for events such as bonus shares other than the conversion of potential equity shares that have changed the number of equity shares outstanding without a corresponding change in resources. For the purpose of calculating diluted earnings per share the net profit of loss for the period attributable to equity shareholders and the weighted average number of share outstanding during the period is adjusted for the effects of all dilutive potential equity shares.
162 Bajaj Electricals Ltd Consumer Durables Ind AS 36 Impairment of Assets The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An asset is impaired when the carrying amount of the asset exceeds the recoverable amount. The recoverable amount is the higher of an assets fair value less costs of disposal and value in use. For the purposes of assessing impairment assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Impairment loss is charged to the Statement of Profit & Loss Account in the year in which an asset is identified as impaired. An impairment loss recognised in the prior accounting periods is reversed if there has been change in the estimates used to determine the assets recoverable amount since the last impairment loss was recognised.
163 Bajaj Electricals Ltd Consumer Durables " Ind AS 37 Provisions A. Provisions A provision is recognised if the Group has present legal or constructive obligation as a result of an event in the past; it is probable that an outflow of resources will be required to settle the obligation; and the amount of the obligation has been reliably estimated. Provisions are measured at the managements best estimate of the expenditure required to settle the obligation at the end of the reporting period. If the effect of the time value of money is material provisions are discounted to reflect its present value using a current pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used the increase in the provision due to the passage of time is recognised as a finance cost. Provision for warranty related costs are recognised when the product is sold to the customer. Initial recognition is based on historical experience. The estimate of warranty related costs is revised annually. B. Contingent liabilities Contingent liabilities are 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 Group or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount cannot be made. C. Contingent assets 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 Group. A contingent asset is not recognised but disclosed where an inflow of economic benefit is probable.
164 Bajaj Electricals Ltd Consumer Durables Ind AS 38 Intangible Assets An intangible asset shall be recognised if and only if: (a) it is probable that the expected future economic benefits that are attributable to the asset will flow to the Group; and (b) the cost of the asset can be measured reliably. Intangible assets are stated at cost less accumulated amortisation and impairment. Intangible assets are amortised over their respective individual estimated useful lives on a straight-line basis from the date that they are available for use. Asset class & depreciation: Computer softwares / licenses are carried at historical cost. They have an expected finite useful life of 3 years and are carried at cost less accumulated amortisation and impairment losses. Computer licenses which are purchased on annual subscription basis are expensed off in the year of purchase. trademarks are carried at historical cost. They have an registered finite useful life of 10 years and are carried at cost less accumulated amortisation and impairment losses. Brand (Nirlep) is recognised on business combination and is amortised over a period of 5 years.
165 Bajaj Electricals Ltd Consumer Durables "Ind AS 8 Accounting Policies SUMMARY OF CRITICAL ESTIMATES JUDGEMENTS AND ASSUMPTIONS The preparation of consolidated financial statements requires the use of accounting estimates which by definition will seldom qual the actual results. The management also needs to exercise judgment in applying the Groups accounting policies. This note provides an overview of the areas that involved a higher degree of judgment or complexity and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgments is included below. 1 Warranty provision The Group generally offers 1 to 2 year warranties for its consumer products. Based on the evaluation of the past warranty trends management has estimated that warranty costs for 25% of sales arises in the year of sale itself warranty costs for 50% of the sales in Year 1 and the balance 25% in Year 2. Based on the same the related provision for future warranty claims has been determined. The Group also sells lighting fitting to its customers. In few lighting fittings products the drivers are an essential part and are expected to last for a longer period. In such cases the Group provides warranties beyond fixing defects that existed at the time of sale. Basis this the Group recognises this as a separate performance obligation and recognises revenue only in the period in which such service is provided based on time elapsed. The assumptions made in relation to serviceable sales and related standard or serviceable warranty provision for the current period are consistent with those in the prior years. 2 Impairment allowance for trade receivables The Group makes allowances for doubtful accounts receivable using a simplified approach which is a dual policy of an ageing based provision and historical / anticipated customer experience. Management believes that this simplified model closely represents the expected credit loss model to be applied on financial assets as per Ind AS 109. Further in case of operationally closed projects Group makes specific assessment of the overdue balance s by considering the customers historical payment patterns laanthology_new correspondences with the customers for recovery of the amounts outstanding and credit status of the significant counterparties where available. Accordingly a best judgment estimate is made to record the impairment allowance in respect of operationally closed projects 3 Project revenue and costs Revenue from construction contracts is recognised based on the stage of completion determined with reference to the actual costs incurred up to reporting date on the construction contract and the estimated cost to complete the project. The percentage-of-completion method places considerable importance on accurate estimates to the extent of progress towards completion and may involve estimates on the scope of deliveries and services required for fulfilling the contractually defined obligations. These significant estimates include total contract costs total contract revenues contract risks including technical political and regulatory risks and other judgments. The Group re-assesses these estimates on periodic basis and makes appropriate revisions accordingly. 4 Fair value measurement When the fair values of financial assets and financial liabilities recorded in the consolidated balance sheet cannot be measured based on quoted prices in active markets their fair value is measured using appropriate valuation techniques. The inputs for these valuations are taken from observable sources where possible but where this is not feasible a degree of judgement is required in establishing fair values. Judgements include considerations of various inputs including liquidity risk credit risk volatility etc. Changes in assumptions/judgements about these factors could affect the reported fair value of financial instruments. Refer Note 34 of consolidated financial statements for the fair value disclosures and related sensitivity. 5 Employee benefits The cost of the defined benefit gratuity plan and other post-employment leave benefits and the present value of the gratuity 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 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. The mortality rate is based on publicly available mortality tables. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases are based on expected future inflation rates. Refer note 21 6 Leases The application of Ind AS 116 requires Group to make judgements and estimates that affect the measurement of right-of-use assets and liabilities. In determining the lease term ll facts and circumstances that create an economic incentive to exercise renewal options (or not exercise termination options) have to be considered. Assessing whether a contract includes a lease also requires judgement. As per Ind AS 116 the Group has used the practical expedient available and has not applied this standard to contracts that were not previously identified as containing a lease as per Ind AS 17 Estimates are required to determine the appropriate discount rate used to measure lease liabilities. The Group cannot readily determine the interest rate implicit in the lease therefore it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term and with a similar security the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group would have to pay which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease. The Group estimates the IBR using observable inputs (such as market interest rates bank rates to the Group for a loan of a similar tenure etc). The Group has applied a single discount rate to a portfolio of leases of similar assets in similar economic environment with a similar end date. 7 Impairment of non-financial assets and goodwill In case of non-financial assets the Group estimates assets recoverable amount which is higher of an assets or Cash Generating and its (CGUs) fair value less costs of disposal and its value in use. In assessing value in use the estimated future cash flows are discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal recent market transactions are taken into account if no such transactions can be identified an appropriate valuation model is sed. Refer Note 44.
166 Bajaj Finance Ltd. Financial Services Ind AS 1 Presentation of Financial Statements Presentation of financial Statements The Group presents its Balance Sheet in order of liquidity. The Group prepares and present its Balance Sheet the Statement of Profit and Loss and the Statement of Changes in Equity in the format prescribed by Division III of Schedule III to the Act. The Statement of Cash Flows has been prepared and presented as per the requirements of Ind AS 7 Statement of Cash Flows. The Group generally reports financial assets and financial liabilities on a gross basis in the Balance Sheet. They are offset and reported net only when Ind AS specifically permits the same or it has an unconditional legally enforceable right to offset the recognised amounts without being contingent on a future event. Similarly the Group offsets incomes and expenses and reports the same on a net basis when permitted by IndAS specifically unless they are material in nature.
167 Bajaj Finance Ltd. Financial Services Ind AS 102 Share based Payment Employee Stock Option Scheme The Parent Company operates a group Employee Stock Option Scheme for its employees and employees of its subsidiary through a trust formed for the purpose. Equity shares are issued to the trust on the basis of the Groups expectation of the number of options that may be exercised by employees. The cost of equity settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model. The cost is recognised in employee benefits expenses together with a corresponding increase in employee stock option outstanding account in other equity over the period in which the service conditions are fulfilled. The cumulative expense recognised for equity settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has not expired and the Groups best estimate of the number of equity instruments that will ultimately vest. Service conditions are not taken into account when determining the grant date fair value of awards but the likelihood of the conditions being met is assessed as part of the Groups best estimate of the number of equity instruments that will ultimately vest. Non-market performance conditions are reflected within the grant date fair value. No expense is recognised for awards that do not ultimately vest because non-market performance and/or service conditions are not met. The balance equity shares not exercised and held by the trust are disclosed as a reduction from the share capital and securities premium account with an equivalent adjustment to the subscription loan advanced to the Trust.
168 Bajaj Finance Ltd. Financial Services Ind AS 103 Business Combinations Business combinations under common control Common control business combination means a business combination involving entities or businesses in which all the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination and that control is not transitory. The Group accounts for business combinations under common control as per the pooling of interest method. The pooling of interest method involves the following: (i) The assets and liabilities of the combining entities are reflected at their carrying amounts. (ii) No adjustments are made to reflect fair values or recognise any new assets or liabilities. The only adjustments that are made are to harmonise accounting policies. (iii) The financial information in the financial statements in respect of prior periods should be restated as if the business combination had occurred from the beginning of the preceding period in the financial statements irrespective of the actual date of the combination. However if business combination had occurred after that date the prior period information shall be restated only from that date.
169 Bajaj Finance Ltd. Financial Services Ind AS 109 Financial Instruments Financial instruments A financial instrument is defined as any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Trade receivables and payables loan receivables investments in securities and subsidiaries debt securities and other borrowings preferential and equity capital etc. are some examples of financial instruments. All the financial instruments are recognised on the date when the Group becomes party to the contractual provisions of the financial instruments. For tradable securities the Group recognises the financial instruments on settlement date. (i) Financial assets Financial assets include cash or an equity instrument of another entity or a contractual right to receive cash or another financial asset from another entity. Few examples of financial assets are loan receivables investment in equity and debt instruments trade receivables and cash and cash equivalents Initial measurement All financial assets are recognised initially at fair value including transaction costs that are attributable to the acquisition of financial assets except in the case of financial assets recorded at FVTPL where the transaction costs are charged to profit or loss. Generally the transaction price is treated as fair value unless proved to the contrary. Subsequent measurement For the purpose of subsequent measurement financial assets are classified into four categories as per Board approved policy and internal policies for business model: (a) Debt instruments at amortised cost (b) Debt instruments at FVOCI (c) Debt instruments at FVTPL (d) Equity instruments designated under FVOCI (a) Debt instruments at amortised cost The Group measures its financial assets at amortised cost if both the following conditions are met: * The asset is held within a business model of collecting contractual cash flows; and * Contractual terms of the asset give rise on specified dates to cash flows that are Sole Payments of Principal and Interest (SPPI) on the principal amount outstanding. To make the SPPI assessment the Group applies judgment and considers relevant factors such as the nature of portfolio and the period for which the interest rate is set. The Group determines its business model at the level that best reflects how it manages groups of financial assets to achieve its business objective. The Groups business model is not assessed on an instrument by instrument basis but at a higher level of aggregated portfolios. If cash flows after initial recognition are realised in a way that is different from the Groups original expectations the Group does not change the classification of the remaining financial assets held in that business model but incorporates such information when assessing newly originated financial assets going forward. The business model of the Group for assets subsequently measured at amortised cost category is to hold and collect contractual cash flows. However considering the economic viability of carrying the delinquent portfolios on the books of the Group it may enter into immaterial and/or infrequent transactions to sell these portfolios to banks and/or asset reconstruction companies without affecting the business model of the Group. After initial measurement such financial assets are subsequently measured at amortised cost. For further details refer note no. 3.1(i). The expected credit loss (ECL) calculation for debt instruments at amortised cost is explained in subsequent notes in this section. (b) Debt instruments at FVOCI The Group subsequently classifies its financial assets as FVOCI only if both of the following criteria are met: * The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets; and * 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 Debt instruments included within the FVOCI category are measured at each reporting date at fair value with such changes being recognised in other comprehensive income (OCI). The interest income on these assets is recognised in profit or loss. The ECL calculation for debt instruments at FVOCI is explained in subsequent notes in this section. Debt instruments such as long term investments in Government securities to meet regulatory liquid asset requirement of the Groups deposit program are classified as FVOCI (also refer note no. 9 for change in business model during the year ended 31 March 2020). On derecognition of the asset cumulative gain or loss previously recognised in OCI is reclassified from OCI to profit or loss. (c) Debt instruments at FVTPL The Group classifies financial assets which are held for trading under FVTPL category. Held for trading assets are recorded and measured in the Balance Sheet at fair value. Interest and dividend income are recorded in Statement of Profit and Loss according to the terms of the contract or when the right to receive has been established. Gain and losses on changes in fair value of debt instruments are recognised on net basis through profit or loss. The Groups investments into mutual funds Government securities and certificate of deposits for trading and short term cash flow management have been classified under this category. (d) Equity investments designated under FVOCI All equity investments in scope of Ind AS 109 Financial instruments are measured at fair value. The Group has strategic investments in equity for which it has elected to present subsequent changes in the fair value in other comprehensive income. The classification is made on initial recognition and is irrevocable. All fair value changes of the equity instruments excluding dividends are recognised in OCI and not available for reclassification to profit or loss even on sale of investments. Equity instruments at FVOCI are not subject to an impairment assessment. Derecognition of Financial Assets The Group derecognises a financial asset (or where applicable a part of a financial asset) when: * The right to receive cash flows from the asset has expired; or * The Group has transferred its right 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 an assignment arrangement and the Group has transferred substantially all the risks and rewards of the asset. Once the asset is derecognised the Group does not have any continuing involvement in the same. The Group transfers its financial assets through the partial assignment route and accordingly derecognises the transferred portion as it neither has any continuing involvement in the same nor does it retain any control. If the Group retains the right to service the financial asset for a fee it recognises either a servicing asset or a servicing liability for that servicing contract. A service liability in respect of a service is recognised at fair value if the fee to be received is not expected to compensate the Group adequately for performing the service. If the fees to be received is expected to be more than adequate compensation for the servicing a service asset is recognised for the servicing right at an amount determined on the basis of an allocation of the carrying amount of the larger financial asset (also refer note no. 9 for change in business model during the financial year 2019-20). On derecognition of a financial asset in its entirety the difference between: * the carrying amount (measured at the date of derecognition) and * the consideration received (including any new asset obtained less any new liability assumed) is recognised in profit or loss. Financial assets subsequently measured at amortised cost are generally held for collection of contractual cashflow. The Group on looking at economic viability of certain portfolios measured at amortised cost may enter into immaterial and/or infrequent transaction of sale of portfolio which doesnt affect the business model of the Group. Reclassification of financial assets When and only when the Group changes its business model for managing financial assets it reclassifies all the affected financial assets prospectively as per the principles laid down in Ind AS 109 Financial Instruments (also refer note no. 9 for change in business model during the year ended 31 March 2020). Impairment of financial assets ECL are recognised for financial assets held under amortised cost debt instruments measured at FVOCI and certain loan commitments as per the Board approved policy and internal policies for business model. Financial assets where no significant increase in credit risk has been observed are considered to be in stage 1 for which a 12 month ECL is recognised. Financial assets that are considered to have significant increase in credit risk are considered to be in stage 2 and those which are in default or for which there is an objective evidence of impairment are considered to be in stage 3. Life time ECL is recognised for stage 2 and stage 3 financial assets. At initial recognition allowance (or provision in the case of loan commitments) is required for ECL towards default events that are possible in the next 12 months or less where the remaining life is less than 12 months. In the event of a significant increase in credit risk allowance (or provision) is required for ECL towards all possible default events over the expected life of the financial instrument (lifetime ECL). Financial assets (and the related impairment allowances) are written off in full when there is no realistic prospect of recovery. Treatment of the different stages of financial assets and the methodology of determination of ECL (a) Credit impaired (stage 3) The Group recognises a financial asset to be credit impaired and in stage 3 by considering relevant objective evidence primarily whether: * Contractual payments of either principal or interest are past due for more than 90 days; * The loan is otherwise considered to be in default Restructured loans where repayment terms are renegotiated as compared to the original contracted terms due to significant credit distress of the borrower are classified as credit impaired. Such loans continue to be in stage 3 until they exhibit regular payment of renegotiated principal and interest over a minimum observation period typically 12 months- post renegotiation and there are no other indicators of impairment. Having satisfied the conditions of timely payment over the observation period these loans could be transferred to stage 1 or 2 and a fresh assessment of the risk of default be done for such loans. Interest income is recognised by applying the effective interest rate to the net amortised cost amount i.e. gross carrying amount less ECL allowance. (b) Significant increase in credit risk (stage 2) An assessment of whether credit risk has increased significantly since initial recognition is performed at each reporting period by considering the change in the risk of default of the loan exposure. However unless identified at an earlier stage 30 days past due is considered as an indication of financial assets to have suffered a significant increase in credit risk. Based on other indications such as borrowers frequently delaying payments beyond due dates though not 30 days past due are included in stage 2 for mortgage loans. The measurement of risk of defaults under stage 2 is computed on homogenous portfolios generally by nature of loans tenors underlying collateral geographies and borrower profiles. The default risk is assessed using PD (probability of default) derived from past behavioural trends of default across the identified homogenous portfolios. These past trends factor in the past customer behavioural trends credit transition probabilities and macroeconomic conditions. The assessed PDs are then aligned considering future economic conditions that are determined to have a bearing on ECL. (c) Without significant increase in credit risk since initial recognition (stage 1) ECL resulting from default events that are possible in the next 12 months are recognised for financial instruments in stage 1. The Group has ascertained default possibilities on past behavioural trends witnessed for each homogenous portfolio using application/behavioural score cards and other performance indicators determined statistically. (d) Measurement of ECL The assessment of credit risk and estimation of ECL are unbiased and probability weighted. It incorporates all information that is relevant including information about past events current conditions and reasonable forecasts of future events and economic conditions at the reporting date. In addition the estimation of ECL takes into account the time value of money. Forward looking economic scenarios determined with reference to external forecasts of economic parameters that have demonstrated a linkage to the performance of our portfolios over a period of time have been applied to determine impact of macro economic factors. The Group has calculated ECL using three main components: a probability of default (PD) a loss given default (LGD) and the exposure at default (EAD). ECL is calculated by multiplying the PD LGD and EAD and adjusted for time value of money using a rate which is a reasonable approximation of EIR. * Determination of PD is covered above for each stages of ECL. * EAD represents the expected balance at default taking into account the repayment of principal and interest from the Balance Sheet date to the date of default together with any expected drawdowns of committed facilities. * LGD represents expected losses on the EAD given the event of default taking into account among other attributes the mitigating effect of collateral value at the time it is expected to be realised and the time value of money The Group recaliberates above components of its ECL model on a periodical basis by using the available incremental and recent information as well as assessing changes to its statistical techniques for a granular estimation of ECL. A more detailed description of the methodology used for ECL is covered in the credit risk section of note no. 50. (ii) Financial liabilities Financial liabilities include liabilities that represent a contractual obligation to deliver cash or another financial assets to another entity or a contract that may or will be settled in the entitys own equity instruments. Few examples of financial liabilities are trade payables debt securities and other borrowings and subordinated debts. Initial measurement All financial liabilities are recognised initially at fair value and in the case of borrowings and payables net of directly attributable transaction costs. The Groups financial liabilities include trade payables other payables debt securities and other borrowings. Subsequent measurement After initial recognition all financial liabilities are subsequently measured at amortised cost using the EIR method [Refer note no 3.1(i)]. Any gains or losses arising on derecognition of liabilities are recognised in the Statement of Profit and Loss. Derecognition The Group derecognises a financial liability when the obligation under the liability is discharged cancelled or expired. (iii) Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the Balance Sheet only if there is an enforceable legal right to offset the recognised amounts with an intention to settle on a net basis or to realise the assets and settle the liabilities simultaneously. Derivative financial instruments During the year ended 31 March 2020 the Parent Company has entered into derivative financial instruments to manage its exposure to interest rate risk and foreign exchange rate risk. Derivatives held by the Parent Company are Cross Currency Interest Rate Swaps (CCIRS). Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each Balance Sheet date. The resulting gain/loss is recognised in the Statement of Profit and Loss immediately unless the derivative is designated and is effective as a hedging instrument in which event the timing of the recognition in the Statement of Profit and Loss depends on the nature of the hedge relationship. The Parent Company has designated derivatives as cash flow hedges of a recognised liability and has no fair value hedges. A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability. Hedge Accounting The Parent Company makes use of derivative instruments to manage exposures to interest rate risk and foreign currency risk. In order to manage particular risks the Parent Company applies hedge accounting for transactions that meet specified criteria. At the inception of a hedge relationship the Parent Company formally designates and documents the hedge relationship to which the Parent Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the Parent Companys risk management objective and strategy for undertaking hedge the hedging/economic relationship the hedged item or transaction the nature of the risk being hedged hedge ratio and how the Parent Company would assess the effectiveness of changes in the hedging instruments fair value in offsetting the exposure to changes in the hedged items cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in cash flows and are assessed on an on-going basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated. During the year ended 31 March 2020 hedges that meet the criteria for hedge accounting and qualify as cash flow hedges are accounted as follows: Cash Flow Hedges A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability and could affect profit or loss. For designated and qualifying cash flow hedges the effective portion of the cumulative gain or loss on the hedging instrument is initially recognised directly in OCI within equity (cash flow hedge reserve). The ineffective portion of the gain or loss on the hedging instrument is recognised immediately as finance cost in the Statement of Profit and Loss. When the hedged cash flow affects the Statement of Profit and Loss the effective portion of the gain or loss on the hedging instrument is recorded in the corresponding income or expense line of the Statement of Profit and Loss. Income Recognition (i) Interest income The Group recognises interest income using effective interest rate (EIR) on all financial assets subsequently measured under amortised cost or fair value through other comprehensive income (FVOCI). EIR is calculated by considering all costs and incomes attributable to acquisition of a financial asset or a assumption of a financial liability and it represents a rate that exactly discounts estimated future cash payments/receipts through the expected life of the financial asset/financial liability to the gross carrying amount of a financial asset or to the amortised cost of a financial liability. The Group calculates interest income by applying the EIR to the gross carrying amount of financial assets other than credit-impaired assets. In case of credit impaired financial assets [as set out in note no. 3.4(i) regarded as Stage 3] the Group recognises interest income on the amortised cost net of impairment loss of financial assets at EIR. If financial asset is no longer credit impaired [as outlined in note no. 3.4(i)] the Group reverts to calculating interest income on a gross basis. Delayed payment interest (penal interest) levied on customers for delay in repayments/non payment of contractual cashflows is recognised on realisation. Interest on financial assets subsequently measured at fair value through profit or loss (FVTPL) is recognised at the contractual rate of interest. (ii) Dividend income Dividend income on equity shares is recognised when the Groups right to receive the payment is established which is generally when shareholders approve the dividend. (III) Net gain on fair value changes The Group designates certain financial assets for subsequent measurement at fair value through profit or loss (FVTPL) or fair value through other comprehensive income (FVOCI). The Group recognises gains on fair value change of financial assets measured as FVTPL and realised gains on derecognition of financial asset measured at FVTPL and FVOCI on net basis.
170 Bajaj Finance Ltd. Financial Services Ind AS 110 Consolidated Financial Statements Basis of preparation The consolidated financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules 2015 as amended from time to time and notified under section 133 of the Companies Act 2013 (the Act) along with other relevant provisions of the Act the Master Direction Non-Banking Financial Company Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions 2016 (the NBFC Master Directions) issued by RBI and National Housing Bank Guidelines/Regulations (NHB directions) and notification for Implementation of Indian Accounting Standard vide circular RBI/2019-20/170 DOR(NBFC).CC.PD. No.109/22.10.106/2019-20 dated 13 March 2020 (RBI Notification for Implementation of Ind AS) issued by RBI to the extent applicable. The Group uses accrual basis of accounting except in case of significant uncertainties. The consolidated financial statements are presented in Indian Rupee(INR) which is also the functional currency of the Group. The financial statements are prepared on a going concern basis as the Management is satisfied that the Group shall be able to continue its business for the foreseeable future and no material uncertainty exists that may cast significant doubt on the going concern assumption. In making this assessment the Management has considered a wide range of information relating to present and future conditions including future projections of profitability cash flows and capital resources. The outbreak of COVID-19 has not affected the going concern assumption of the Group. Principles of consolidation The consolidated financial statements incorporate the financial statements of the Parent Company and all its subsidiaries (from the date control is gained) being the entities that it controls. Control is evidenced where the investor is exposed or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Power is demonstrated through existing rights that give the ability to direct relevant activities which significantly affect the entitys returns. The financial statements of subsidiaries are prepared for the same reporting year as the Parent Company. Where necessary adjustments are made to the financial statements of subsidiaries to align the accounting policies in line with accounting policies of the Parent Company. The Parent Company holds the entire shareholding in its subsidiaries and there are no contractual arrangements which rebute the control of the Parent Company over its subsidiaries. The financial statements of subsidiaries acquired or disposed off during the year are included in the consolidated Statement of Profit and Loss from the effective date of acquisition or up to the effective date of disposal as appropriate. Intra-group balances and transactions and any unrealised income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. (ii) The Consolidated financial statements include results of the subsidiaries of Bajaj Finance Ltd. (Parent Company) consolidated in accordance with Ind AS 110 Consolidated Financial Statements Name of the Company. : Country of incorporation. : Proportion of ownership as at reporting date. : Consolidated as Bajaj Housing Finance Ltd. : India. : 100% : Subsidiary Bajaj Financial Securities Ltd.* : . : India. : 100% : Subsidiary * On 10 August 2018 the Parent Company acquired 100% shareholding in Bajaj Financial Securities Ltd. from its wholly owned subsidiary Bajaj Housing Finance Ltd. Figures for preparation of consolidated financial statements have been derived from the audited financial statements of the respective companies in the Group. (iii) Disclosure in terms of Schedule III of the Companies Act 2013 (refer annual report for detailed disclosures)
171 Bajaj Finance Ltd. Financial Services Ind AS 113 Fair Value Measurement Fair value measurement The Group measures its qualifying financial instruments at fair value on each Balance Sheet date. Fair value is the price that would be received against sale of 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 in the accessible principal market or the most advantageous accessible market as applicable. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data is 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 into Level I Level II and Level III based on the lowest level input that is significant to the fair value measurement as a whole. For a detailed information on the fair value hierarchy refer note no. 48 and 49. For assets and liabilities that are fair valued 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. For the purpose of fair value disclosures the Group 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.
172 Bajaj Finance Ltd. Financial Services Ind AS 115 Revenue from Contracts with Customers/ Income (iii) Other revenue from operations The Group recognises revenue from contracts with customers (other than financial assets to which Ind AS 109 Financial instruments is applicable) based on a comprehensive assessment model as set out in Ind AS 115 Revenue from contracts with customers. The Group identifies contract(s) with a customer and its performance obligations under the contract determines the transaction price and its allocation to the performance obligations in the contract and recognises revenue only on satisfactory completion of performance obligations. Revenue is measured at the fair value of the consideration received or receivable. (a) Fees and commission income The Group recognises service and administration charges towards rendering of additional services to its loan customers on satisfactory completion of service delivery. Bounce charges levied on customers for non payment of instalments on the contractual date is recognised on realisation. Fees on value added services and products are recognised on rendering of services and products to the customer. Distribution income is earned by distribution of services and products of other entities under distribution arrangements. The income so earned is recognised on successful distribution on behalf of other entities subject to there being no significant uncertainty of its recovery. Foreclosure charges are collected from loan customers for early payment/closure of loan and are recognised on realisation. (c) Sale of services The Group on derecognition of financial assets where a right to service the derecognised financial assets for a fee is retained recognises the fair value of future service fee income over service obligations cost on net basis as service fee income in the Statement of Profit and Loss and correspondingly creates a service asset in Balance Sheet. Any subsequent increase in the fair value of service assets is recognised as service income and any decrease is recognised as an expense in the period in which it occurs. The embedded interest component in the service asset is recognised as interest income in line with Ind AS 109 Financial instruments. (III) Other operating income The Group recognises income on recoveries of financial assets written off on realisation or when the right to receive the same without any uncertainties of recovery is established. (iv) Taxes Incomes are recognised net of the goods and services tax wherever applicable.
173 Bajaj Finance Ltd. Financial Services Ind AS 116 Leases Leases With effect from 1 April 2019 the Group has applied Ind AS 116 Leases for all long term and material lease contracts covered by the Ind AS. The Group has adopted modified retrospective approach as stated in Ind AS 116 for all applicable leases on the date of adoption. Measurement of Lease Liability At the time of initial recognition the Group measures lease liability as present value of all lease payments discounted using the Groups incremental cost of borrowing and directly attributable costs. Subsequently the lease liability is (i) increased by interest on lease liability; (ii) reduced by lease payments made; and (iii) remeasured to reflect any reassessment or lease modifications specified in Ind AS 116 Leases or to reflect revised fixed lease payments. Measurement of Right-of-use assets At the time of initial recognition the Group measures Right-of-use assets as present value of all lease payments discounted using the Groups incremental cost of borrowing w.r.t said lease contract. Subsequently Right-of-use assets is measured using cost model i.e. at cost less any accumulated depreciation and any accumulated impairment losses adjusted for any re-measurement of the lease liability specified in Ind AS 116 Leases. Depreciation on Right-of-use assets is provided on straight line basis over the lease period. The exception permitted in Ind AS 116 Leases for low value assets and short term leases has been adopted by the Group
174 Bajaj Finance Ltd. Financial Services Ind AS 12 Income Taxes Income Tax (i) Current tax Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities in accordance with the Income Tax Act 1961 and the Income Computation and Disclosure Standards (ICDS) prescribed therein. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date. Current tax relating to items recognised outside profit or loss is recognised in correlation to the underlying transaction either in OCI or directly in other equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. (ii) Deferred tax Deferred tax is recognised using the Balance Sheet approach on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for deductible temporary differences to the extent that it is probable that taxable profits will be available against which the deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets if any are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognised outside profit or loss is recognised either in other comprehensive income or in other equity. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority
175 Bajaj Finance Ltd. Financial Services " Ind AS 16 Property Property plant and equipment Property plant and equipment are carried at historical cost of acquisition less accumulated depreciation and impairment losses consistent with the criteria specified in Ind AS 16 Property plant and equipment. Depreciation on property plant and equipment (a) Depreciation is provided on a pro rata basis for all tangible assets on straight line method over the useful life of assets except buildings which is determined on written down value method. (b) Useful lives of assets are determined by the Management by an internal technical assessment except where such assessment suggests a life significantly different from those prescribed by Schedule II Part C of the Companies Act 2013 where the useful life is as assessed and certified by a technical expert. (c) Depreciation on leasehold improvements is provided on straight line method over the primary period of lease of premises or 5 years whichever is less. (d) Depreciation on addition to assets and assets sold during the year is being provided for on a pro rata basis with reference to the month in which such asset is added or sold as the case may be. (e) Tangible assets which are depreciated over a useful life that is different than those indicated in Schedule II are as under Nature of assets : Useful life as per Schedule II : Useful life adopted by the Group Motor vehicles : 8 years : 4 years (f) Assets having unit value up to H 5 000 is depreciated fully in the financial year of purchase of asset. (g) An item of property plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included under other income in the Statement of Profit and Loss when the asset is derecognised. (h) The residual values useful lives and methods of depreciation of property plant and equipment are reviewed at each financial year end and adjusted prospectively if appropriate.
176 Bajaj Finance Ltd. Financial Services Ind AS 19 Employee Benefits Retirement and other employee benefits (i) Gratuity Payment for present liability of future payment of gratuity is made to the approved gratuity fund viz. Bajaj Auto Ltd. Gratuity Fund Trust which covers the same under cash accumulation policy and debt fund of the Life Insurance Corporation of India (LIC) and Bajaj Allianz Life Insurance Company Ltd. (BALICL). However any deficits in plan assets managed by LIC and BALICL as compared to actuarial liability determined by an appointed actuary using the projected unit credit method are recognised as a liability. Gains and losses through remeasurements of the net defined benefit liability or assets are recognised immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. The effect of any planned amendments are recognised in Statement of Profit and Loss. Remeasurements are not reclassified to profit or loss in subsequent periods. (ii) Superannuation Defined contribution to superannuation fund is made as per the scheme of the Group. (iii) Provident fund Contributions are made to Bajaj Auto Ltd. Provident Fund Trust. Deficits if any of the fund as compared to aggregate liability is additionally contributed by the Group and recognised as an expense. Shortfall in fund assets over present obligation determined using the projected unit credit method by an appointed actuary is recognised as a liability. For one of its subsidiaries retirement benefit in the form of provident fund is a defined contribution scheme. The said subsidiary has no obligation other than the contribution payable to the provident fund authorities. The subsidiary recognises contribution payable to the provident fund scheme as an expense when an employee renders the related service. (iv) Compensated absences Privilege leave entitlements are recognised as a liability as per the rules of the Group. The liability for accumulated leaves which can be availed and/or encashed at any time during the tenure of employment is recognised using the projected unit credit method at the actuarially determined value by an appointed actuary. The liability for accumulated leaves which is eligible for encashment within the same calendar year is provided for at prevailing salary rate for the entire unavailed leave balance as at the Balance Sheet date. Remeasurements comprising of actuarial gains and losses the effect of the asset ceiling excluding amounts included in net interest on the net defined benefit liability and the return on plan assets are recognised immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
177 Bajaj Finance Ltd. Financial Services Ind AS 21 The Effects of Changes in Foreign Excha Foreign currency translation Initial recognition Foreign currency transactions are recorded in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. Conversion Foreign currency monetary items are re-translated using the exchange rate prevailing at the reporting date. Nonmonetary items which are measured in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction. Exchange differences All exchange differences are accounted in the Statement of Profit and Loss.
178 Bajaj Finance Ltd. Financial Services Ind AS 28 Investments in Associates and Joint Ven Investment in joint ventures and associate Investments in equity shares of joint ventures and associate are recorded at cost and reviewed for impairment at each reporting date. Where an indication of impairment exists the carrying amount of the investment is assessed and written down immediately to its recoverable amount. On disposal of investments in joint ventures and associate the difference between net disposal proceeds and the carrying amounts are recognised in the Consolidated Statement of Profit and Loss.
179 Bajaj Finance Ltd. Financial Services Ind AS 36 Impairment of Assets Impairment of non-financial assets An assessment is done at each Balance Sheet date to ascertain whether there is any indication that an asset may be impaired. If any such indication exists an estimate of the recoverable amount of asset is determined. If the carrying value of relevant asset is higher than the recoverable amount the carrying value is written down accordingly.
180 Bajaj Finance Ltd. Financial Services " Ind AS 37 Provisions Provisions and contingent liabilities The Group creates a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may but probably will not require an outflow of resources. The Group also discloses present obligations for which a reliable estimate cannot be made. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote no provision or disclosure is made.
181 Bajaj Finance Ltd. Financial Services Ind AS 38 Intangible Assets Intangible assets and amortisation thereof Intangible assets representing softwares are initially recognised at cost and subsequently carried at cost less accumulated amortisation and accumulated impairment. The intangible assets are amortised using the straight line method over a period of five years which is the Managements estimate of its useful life. The useful life of intangible assets are reviewed at each financial year end and adjusted prospectively if appropriate.
182 Bajaj Finance Ltd. Financial Services Ind AS 7 Statement of Cash Flows Cash and cash equivalents Cash and cash equivalents include cash on hand and other short term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
183 Bajaj Finance Ltd. Financial Services " Ind AS 8 Accounting Policies Critical accounting estimates and judgments The preparation of the Groups financial statements requires Management to make use of estimates and judgments. In view of the inherent uncertainties and a level of subjectivity involved in measurement of items it is possible that the outcomes in the subsequent financial years could differ from those based on managements estimates. Accounting estimates and judgments are used in various line items in the financial statements for e.g.: l Business model assessment [Refer note no. 3.4(i)(a) and 9] l Fair value of financial instruments [Refer note no. 3.14 48 and 49] l Effective interest rate (EIR) [Refer note no. 3.1(i)] l Impairment of financial assets [Refer note no. 3.4(i) 9 and 50] l Provisions and contingent liabilities [Refer note no. 3.9 and 43] l Provision for tax expenses [Refer note no. 3.5] l Residual value useful life and indicators of impairment and recoverable value of property plant and equipment [Refer note no. 3.6 and 3.8] Estimation of impairment allowance on financial assets amidst COVID-19 pandemic Estimates and associated assumptions especially for determining the impairment allowance for the Groups financial assets are based on historical experience and other emerging factors on account of the pandemic which may also have an effect on the expected credit loss. The Group believes that the factors considered are reasonable under the current circumstances. The Group has used early indicators of moratorium and delayed repayment metrics observed along with an estimation of potential stress on probability of default and exposure at default due to COVID-19 situation in developing the estimates and assumptions to assess the expected credit losses on loans. Given the dynamic nature of the pandemic situation these estimates are subject to uncertainty and may be affected by the severity and duration of the pandemic.
184 Bajaj Finserv Ltd. Financial Services Ind AS 103 Business Combinations Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquirees identifiable net assets. Acquisition-related costs are expensed as incurred. At the acquisition date the identifiable assets acquired and the liabilities assumed are recognised at their acquisition date fair values. For this purpose the liabilities assumed include contingent liabilities representing present obligation and they are measured at their acquisition fair values irrespective of the fact that outflow of resources embodying economic benefits is not probable. When the Group acquires a business it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms economic circumstances and pertinent conditions as at the acquisition date. If the business combination is achieved in stages any previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss or OCI as appropriate. Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of Ind AS 109 Financial Instruments is measured at fair value with changes in fair value recognised in profit or loss in accordance with Ind AS 109. If the contingent consideration is not within the scope of Ind AS 109 it is measured in accordance with the appropriate Ind AS and shall be recognised in profit or loss. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and subsequent its settlement is accounted for within equity. Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred then the gain is recognised in OCI and accumulated in equity as capital reserve. However if there is no clear evidence of bargain purchase the entity recognises the gain directly in equity as capital reserve without routing the same through OCI. After initial recognition goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment anthology_newing goodwill acquired in a business combination is from the acquisition date allocated to each of the Groups cash-generating units that are expected to benefit from the combination irrespective of whether other assets or liabilities of the acquiree are assigned to those units. A cash generating unit to which goodwill has been allocated is anthology_newed for impairment annually or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than its carrying amount the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods. Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted through goodwill during the measurement period or additional assets or liabilities are recognised to reflect new information obtained about facts and circumstances that existed at the acquisition date that if known would have affected the amounts recognised at that date. These adjustments are called as measurement period adjustments. The measurement period does not exceed one year from the acquisition date.
185 Bajaj Finserv Ltd. Financial Services Ind AS 109 Financial Instruments Financial assets are measured at FVTOCI when both of the following conditions are met The instrument is held within a business model the objective of which is both collecting contractual cash flows and selling financial assets; The contractual terms of the financial asset meet the SPPI anthology_new. Financial assets in this category are those that are intended to be held to collect contractual cash flows and which may be sold in response to needs for liquidity or in response to changes in market conditions. FVTOCI instruments are subsequently measured at fair value with gains and losses arising due to changes in fair value recognised in OCI. Interest income are recognised in Statement of Profit or Loss in the same manner as for financial assets measured at amortised cost. On de-recognition cumulative gains or losses previously recognised in OCI are reclassified from OCI to Statement of Profit and Loss. Financial liabilities Financial liabilities include liabilities that represent a contractual obligation to deliver cash or another financial assets to another entity or a contract that may or will be settled in the entities own equity instruments. Few examples of financial liabilities are trade payables debt securities and other borrowings and subordinated debts. Initial measurement All financial liabilities are recognised initially at fair value and in the case of borrowings and payables net of directly attributable transaction costs. The Groups financial liabilities include trade payables other payables debt securities and other borrowings. Subsequent measurement After initial recognition all financial liabilities are subsequently measured at amortised cost using the EIR method. Any gains or losses arising on derecognition of liabilities are recognised in the Statement of Profit and Loss. Derecognition Company derecognises a financial liability when the obligation under the liability is discharged cancelled or expired. Impairment of Financial Assets The Company recognises an allowance for expected credit losses (ECLs) for all financial assets not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive discounted at the appropriate effective interest rate. ECLs are measured in a three-stage approach on financial assets measured at amortised cost and FVTOCI. The assets migrate through the following three stages based on an assessment of qualitative and quantitative considerations l Significant financial difficulty of the issuer of security l A breach of contract such as default or past due event l Issuer of security may enter bankruptcy or financial reorganisation l Disappearance of an active market for a security because of financial difficulties l Downgrade of rating of the security. ECL are a probability weighted estimate of credit losses measured by determining the probability of default (PD) and loss given default (LGD). For financial assets PD has been computed by using a ratings based matrix. The loss allowance has been measured using ECL except for financial assets which are Government securities and other securities backed by GOI Securities Loans to policyholder since is backed by the policys surrender value. Any receivable from stock exchanges like BSE/NSE since the exchanges guarantees settlement Reinsurance assets as specified by the report of the Committee on Risk based capital. The ECL for debt instruments measured at FVTOCI do not reduce the carrying amount of these financial assets in the Balance Sheet which remains at fair value. Instead an amount equal to the allowance that would arise if the assets were measured at amortised cost is recognised in OCI with a corresponding charge to Statement of Profit and Loss. The accumulated gain recognised in OCI is recycled to the Statement of Profit and Loss upon de-recognition of the assets.
186 Bajaj Finserv Ltd. Financial Services Ind AS 110 Consolidated Financial Statements The consolidated financial statements include financial statements of the following subsidiaries and joint venture of Bajaj Finserv Ltd. consolidated in accordance with Ind AS 110 Consolidated Financial Statements and Ind AS 28 Investments in Associates and Joint Ventures. The consolidated financial statements comprise financial statements of Bajaj Finserv Ltd. (the Company) its subsidiaries and joint venture (collectively the Group) for the year ended 31 March 2020. i. Subsidiaries Subsidiaries are all entities over which the group has control. The group controls an entity when the group is exposed to or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the relevant activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the group. The group combines the financial statements of the parent and its subsidiaries line by line adding together like items of assets liabilities equity income and expenses. Intercompany transactions balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated financial Statement of Profit and Loss and Balance Sheet respectively. ii. Joint venture Interests in joint ventures are accounted for using the equity method after initially being recognised at the cost in the consolidated Balance Sheet. Under the equity method of accounting the investments are initially recognised at cost and adjusted thereafter to recognise the groups share of the post-acquisition profits or losses of the investee in profit and loss and the groups share of other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from joint venture are recognised as a reduction in the carrying amount of the investment. When the groups share of losses in an equity-accounted investment equals or exceeds its interest in the entity including any other unsecured long-term receivables the group does not recognise further losses unless it has incurred obligations or made payments on behalf of the other entity. Unrealised gains on transactions between the group and its associates are eliminated to the extent of the groups interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
187 Bajaj Finserv Ltd. Financial Services Ind AS 115 Revenue from Contracts with Customers/ For life insurance business premium is recognised on insurance contract and investment contracts with DPF as income when due from policyholders. On unit linked policies premium is recognised when associated units are created. In accordance with the terms of insurance policies uncollected premium on lapsed policies is not recognised as income until revived. Top Up/Lump sum contributions are accounted as a part of single premium. Income from unit linked policies which includes fund management charges policy administration charges mortality charges and other charges if any are recovered from the unit linked funds in accordance with terms and conditions of policies issued and are recognised when due. For General insurance business premium (net of GST) including reinstatement premium on direct business and reinsurance accepted is recognised as income at the commencement of risk over the contract period or the period of risk whichever is appropriate on a gross basis and for installment cases it is recognised on installment due dates. Any subsequent revisions to premium are recognised in the year in which they occur over the remaining period of risk or contract period as applicable. Adjustments to premium income arising on cancellation of policies are recognised in the period in which they are cancelled. Reinsurance premium ceded Reinsurance premium ceded is accounted on due basis at the time when related premium income is accounted for. Commission received on reinsurance ceded is recognised as income in the period in which reinsurance premium is ceded. Any subsequent revisions to in case of General Insurance business refunds or cancellations of premiums are recognised in the year in which they occur. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsurers policies and are in accordance with the related reinsurance contract. Gains or losses on buying reinsurance are recognised in the statement of profit and loss immediately at the date of purchase and are not amortised. Ceded reinsurance arrangements do not relieve the Company from its obligations to policyholders. Premium received in advance Premium received in advance represents premium received in respect of policies issued during the year where the risk commences subsequent to the balance sheet date. Re-insurance accepted Reinsurance inward acceptances are accounted for based on reinsurance slips accepted from the reinsurers. The Company also assumes reinsurance risk in the normal course of business for insurance contracts where applicable. Premiums and claims on assumed reinsurance are recognised as revenue or expenses in the same manner as they would be if the reinsurance were considered direct business taking into account the product classification of the reinsured business. Premiums and claims are presented on a gross basis for both ceded and assumed reinsurance.
188 Bajaj Finserv Ltd. Financial Services Ind AS 116 Leases As mandated by Companies (Indian Accounting Standards) Amendment Rules 2019 dated 30 March 2019 the Company has adopted Ind AS 116 'Leases' with effect from 1 April 2019. Ind AS 116 supersedes Ind AS 17 Leases including its appendices (Appendix C of Ind AS 17 Determining whether an Arrangement contains a Lease Appendix A of Ind AS 17 Operating Leases-Incentives and Appendix B of Ind AS 17 Evaluating the Substance of Transactions Involving the Legal Form of a Lease). The Companys lease asset classes primarily consist of leases for office buildings. The Company assesses whether a contract contains a lease at inception of a contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. At the date of commencement of the lease the Company recognises a right-of-use asset (ROU) and a corresponding lease liability for all lease arrangements in which it is a lessee except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease. Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised. The right-of-use assets are initially recognised at cost which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses (if any). Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The lease payments are discounted using the interest rate implicit in the lease or if not readily determinable using the incremental borrowing rate for the average lease period. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it will exercise an extension or a termination option. Lease liability and ROU asset have been separately presented in the Balance Sheet.
189 Bajaj Finserv Ltd. Financial Services " Ind AS 16 Property Property and equipment is stated at cost excluding the costs of day-to-day servicing less accumulated depreciation and accumulated impairment losses. Depreciation is provided on a straight line basis over the estimated useful lives of the following classes of assets Property No. of years Buildings 60 years Electrical fittings 10 years Furniture and fittings 10 years Information technology equipment (including computers) 3 years Server and networks 6 years Air conditioner 5 years Vehicles (in common use) 8 years Vehicles (in use by specified employees) 4 years Office equipment 5 years Mobile phones/Tablets 2 years Leasehold improvements Over the balance period of lease * Electrical fittings installed at leased premises are depreciated over an estimated useful life of 3 years ** Useful life of vehicle allotted to the employees is considered 4 years as per management estimation. Lease hold improvements to leased properties are depreciated over the primary period of lease which is generally 3 years. Assets costing individually less than Rs. 5 000 are depreciated fully in the year of acquisition. Changes in the expected useful life are accounted for by changing the amortisation period or methodology as appropriate and treated as changes in accounting estimates.
190 Bajaj Finserv Ltd. Financial Services Ind AS 19 Employee Benefits Defined Contribution Plan National Pension Scheme Contributions For eligible employees the Group makes contributions to National Pension Scheme. The contributions are charged to the Statement of Profit and Loss Account as relevant in the year the contributions are made.
191 Bajaj Finserv Ltd. Financial Services Ind AS 21 The Effects of Changes in Foreign Excha For General Insurance business transactions in foreign currencies are initially recorded in the functional currency at the spot rate of ex-change ruling at the date of the transaction. However for practical reasons the Company uses an average rate if the average approximates the actual rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated into the functional currency at the spot rate of exchange at the reporting date. All differences arising on nontrading activities are taken to other income/expense in the Statement of Profit and Loss. Nonmonetary items that are measured at historical cost in a foreign currency are translated using the spot exchange rates as at the date of recognition.
192 Bajaj Finserv Ltd. Financial Services Ind AS 36 Impairment of Assets Impairment of non-financial assets At each balance sheet date management assesses whether there is any indication based on internal/external factors that an asset may be impaired. Impairment occurs where the carrying value exceeds the present value of future cash flows expected to arise from the continuing use of the asset and its eventual disposal. The impairment loss to be expensed is determined as the excess of the carrying amount over the higher of the assets net sales price or present value as determined above. An assessment is made at the balance sheet date to see if there is an indication that a previously assessed impairment loss no longer exists or may have decreased. If such indication exists the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to maximum of depreciable historical cost. After impairment depreciation is provided on the revised carrying amount of the asset over the remaining useful life.
193 Bharti Airtel Ltd. Telecommunication Ind AS 1 Presentation of Financial Statements Basis of preparation These consolidated financial statements (financial statements) have been prepared to comply in all material respects with the Indian Accounting Standard (Ind AS) as notified by the Ministry of Corporate Affairs (MCA) under section 133 of the Companies Act 2013 (Act) read together with Rule 3 of the Companies (Indian Accounting Standards) Rules 2015 (as amended from time to time) and other relevant provisions of the Act. The financial statements are approved for issue by the Companys Board of Directors on May 18 2020. The financial statements are based on the classification provisions contained in Ind AS 1 Presentation of Financial Statements and division II of schedule III of the Companies Act 2013. Further for the purpose of clarity various items are aggregated in the consolidated statement of profit and loss (statement of profit and loss) and consolidated balance sheet (balance sheet). Nonetheless these items are dis-aggregated separately in the notes to the financial statements where applicable or required. All the amounts included in the financial statements are reported in millions of Indian Rupees (Rupee or H) and are rounded to the nearest million except per share data and unless stated otherwise. Further due to rounding off certain amounts are appearing as 0. The preparation of the said financial statements requires the use of certain critical accounting estimates and judgements. It also requires the management to exercise judgement in the process of applying the Groups accounting policies. The areas where estimates are significant to the financial statements or areas involving a higher degree of judgement or complexity are disclosed in note 3. The accounting policies as set out in the following paragraphs of this note have been consistently applied by all the group entities to all the periods presented in the said financial statements except in case of adoption of any new standards and/or amendments during the year. To provide more reliable and relevant information about the effect of certain items in the balance sheet and statement of profit and loss the Group has changed the classification of such items which besides other items includes classification/presentation of material balances relating to mobile money business of the Group due to increasing significance of their balances and growth in mobile money business. Liability balances pertaining to mobile money business were earlier presented as trade payables. The liabilities amounting to H 16 478 as of March 31 2019 are now presented separately as Mobile money wallet balance under the head other financial liabilities-current. For the purpose of Statement of Cash Flow Balance held under mobile money trust have been presented as cash and cash equivalents. The movement in Mobile money wallet balance are presented as part of other financial liabilities-current in the Statement of Cash Flows as part of operating activity. In addition to above previous year figures have been regrouped or reclassified to confirm to such current years grouping / classifications. There is no impact on equity or net loss due to these regrouping / reclassifications.
194 Bharti Airtel Ltd. Telecommunication Ind AS 102 Share based Payment Share-based payments The Group operates equity-settled and cash-settled employee share-based compensation plans under which the Group receives services from employees as consideration for stock options either towards shares of the Company or cash settled units. In case of equity-settled awards the fair value of stock options (at grant date) is recognised as an expense in the statement of profit and loss within employee benefits as employee share-based payment expenses over the vesting period with a corresponding increase in share-based payment reserve (a component of equity). However in case of cash-settled awards the credit is recognised as a liability within other non-financial liabilities over the vesting period. Subsequently at each reporting period until the liability is settled and at the date of settlement liability is re-measured at fair value through statement of profit and loss. The total amount so expensed is determined by reference to the grant date fair value of the stock options granted which includes the impact of any market performance conditions and non-vesting conditions but excludes the impact of any service and non-market performance vesting conditions. However the non-market performance vesting and service conditions are considered in the assumption as to the number of options that are expected to vest. The forfeitures are estimated at the time of grant and reduce the said expense rateably over the vesting period. The expense so determined is recognised over the requisite vesting period which is the period over which all of the speci?ed vesting conditions are to be satisfied. As at each reporting date the Group revises its estimates of the number of options that are expected to vest if required. It recognises the impact of any revision to original estimates in the period of change. Accordingly no expense is recognised for awards that do not ultimately vest except for which vesting is conditional upon a market performance / non-vesting condition. These are treated as vested irrespective of whether or not the market / non-vesting condition is satisfied provided that service conditions and all other nonmarket performance are satisfied. Where the terms of an award are modified in addition to the expense pertaining to the original award an incremental expense is recognised for any modification that results in additional fair value or is otherwise beneficial to the employee as measured at the date of modification. Where an equity-settled award is cancelled (including due to non-vesting conditions not being met) it is treated as if it is vested thereon and any un-recognised expense for the award is recognised immediately. In case of cancellation of cash-settled award change in the value of the liability if any is recognised in statement of profit and loss.
195 Bharti Airtel Ltd. Telecommunication Ind AS 103 Business Combinations Business combinations The Group accounts for business combinations using the acquisition method of accounting and accordingly the identifiable assets acquired and the liabilities assumed in the acquiree are recorded at their acquisition date fair values (except certain assets and liabilities which are required to be measured as per the applicable standard) and the non-controlling interest is initially recognised at the non-controlling interests proportionate share of the acquirees net identifiable assets. The consideration transferred for the acquisition of a subsidiary is aggregation of the fair values of the assets transferred the liabilities incurred and the equity interests issued by the parent in exchange for control of the acquiree. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability is subsequently measured at fair value with changes in fair value recognised in profit or loss. Contingent consideration that is classified as equity is not re-measured and its subsequent settlement is accounted for within equity. The excess of the consideration transferred along with the amount of any non-controlling interests in the acquiree and the acquisition-date fair value (with the resulting difference being recognised in statement of profit and loss) of any previous equity interest in the acquiree over the fair value of the identifiable net assets of the acquiree is recorded as goodwill. Acquisition-related costs are expensed in the period in which the costs are incurred. If the initial accounting for a business combination is incomplete as at the reporting date in which the combination occurs the identifiable assets and liabilities acquired in a business combination are measured at their provisional fair values at the date of acquisition. Subsequently adjustments to the provisional values are made retrospectively within the measurement period if new information is obtained about facts and circumstances that existed as of the acquisition date and if known would have affected the measurement of the amounts recognised as of that date or would have resulted in the recognition of those assets and liabilities as of that date; otherwise the adjustments are recorded in the period in which they occur. A contingent liability recognised in a business combination is initially measured at its fair value. Subsequently it is measured at the higher of the amount that would be recognised in accordance with Ind AS 37 Provisions Contingent Liabilities and Contingent Assets or amount initially recognised less when appropriate cumulative income recognised in accordance with Ind AS 115 Revenue from Contracts with Customers
196 Bharti Airtel Ltd. Telecommunication Ind AS 109 Financial Instruments Financial instruments a. Recognition classification and presentation The financial instruments are recognised in the balance sheet when the Group becomes a party to the contractual provisions of the financial instrument. The Group determines the classification of its financial instruments at initial recognition. The Group classifies its financial assets in the following categories: a) those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss) and b) those to be measured at amortised cost. The classification depends on the entitys business model for managing the financial assets and the contractual terms of the cash flows. The Group has classified all the non-derivative financial liabilities as measured at amortised cost. The Group has classified foreign currency convertible bond denominated in USD that can be converted to ordinary shares at the option of the bondholder at a conversion price fixed in Companys functional currency (INR) as a compound financial instrument comprising of a liability component and an equity component. The entire hybrid contract financial assets with embedded derivatives are considered in their entirety for determining the contractual terms of the cash flow and accordingly the embedded derivatives are not separated. However derivatives embedded in nonfinancial instrument / financial liabilities (measured at amortised cost) host contracts are classified as separate derivatives if their economic characteristics and risks are not closely related to those of the host contracts. Financial assets and liabilities arising from different transactions are offset against each other and the resultant net amount is presented in the balance sheet if and only when the Group currently has a legally enforceable right to set off the related recognised amounts and intends either to settle on a net basis or to realise the assets and settle the liabilities simultaneously. b. Measurement - Non-derivative financial instruments I. Initial measurement At initial recognition the Group measures the non-derivative financial instruments at its fair value plus in the case of financial instruments not at fair value through profit or loss transaction costs. Otherwise transaction costs are expensed in the statement of profit and loss. The liability component of a compound financial instrument is initially recognised at the fair value of a similar liability that does not have an equity conversion option. The equity component is initially recognised at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. II. Subsequent measurement - financial assets The subsequent measurement of the nonderivative financial assets depends on their classification as follows: i. Financial assets measured at amortised cost Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost using the effective interest rate (EIR) method (if the impact of discounting / any transaction costs is significant). Interest income from these financial assets is included in finance income. ii. Financial assets at fair value through other comprehensive income (FVTOCI) Equity investments which are not held for trading and for which the Group has elected to present the change in the fair value in other comprehensive income and debt instruments that are held for collection of contractual cash flows and for selling the financial assets where the assets cash flow represent solely payment of principal and interest are measured at FVTOCI. The changes in fair value are taken through OCI except for the impairment (on debt instruments) interest (basis EIR method) dividend and foreign exchange differences which are recognised in the statement of profit and loss. When the financial asset is derecognised the related accumulated fair value adjustments in OCI as at the date of derecognition are reclassified from equity and recognised in the statement of profit and loss. However there is no subsequent reclassification of fair value gains and losses to statement of profit and loss in case of equity instruments. iii. Financial assets at fair value through profit or loss (FVTPL) All equity instruments and financial assets that do not meet the criteria for amortised cost or FVTOCI are measured at FVTPL. Interest (basis EIR method) and dividend income from financial assets at FVTPL is recognised in the statement of profit and loss within finance income separately from the other gains/losses arising from changes in the fair value. Impairment The Company assesses on a forward-looking basis the expected credit losses associated with its assets carried at amortised cost and debt instrument carried at FVTOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk since initial recognition. If credit risk has not increased significantly twelve month expected credit loss (ECL) is used to provide for impairment loss otherwise lifetime ECL is used. However only in case of trade receivables the Company applies the simplified approach which requires expected lifetime losses to be recognised from initial recognition of the receivables. III. Subsequent measurement - financial liabilities Financial liabilities are subsequently measured at amortised cost using the EIR method (if the impact of discounting / any transaction costs is significant). Subsequent to initial recognition the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound financial instrument is not re-measured. Interest related to the financial liability is recognised in profit or loss under finance cost. On conversion at maturity the financial liability is reclassified to equity and no gain or loss is recognised. c. Measurement - derivative financial instruments Derivative financial instruments including separated embedded derivatives that are not designated as hedging instruments in a hedging relationship are classified as financial instruments at fair value through profit or loss - Held for trading. Such derivative financial instruments are initially recognised at fair value. They are subsequently measured at their fair value with changes in fair value being recognised in the statement of profit and loss within finance income / finance costs. d. Hedging activities I. Fair value hedge Some of the Groups entities use derivative financial instruments (e.g. interest rate / currency swaps) to manage / mitigate their exposure to the risk of change in fair value of the borrowings. The Group designates certain interest swaps to hedge the risk of changes in fair value of recognised borrowings attributable to the hedged interest rate risk. The effective and ineffective portion of changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the statement of profit and loss within finance income / finance costs together with any changes in the fair value of the hedged liability that is attributable to the hedged risk. If the hedge no longer meets the criteria for hedge accounting the adjustment to the carrying amount of the hedged item is amortised to the statement of profit and loss over the period to remaining maturity of the hedged item. II. Cash flow hedge Some of the Groups entities use derivative financial instruments (e.g. foreign currency forwards options swaps) to manage their exposure to foreign exchange and price risk. Further the Group designates certain derivative financial instruments (or its components) as hedging instruments for hedging the exchange rate fluctuation risk attributable to either a recognised item or a highly probable forecast transaction (Cash flow hedge). The effective portion of changes in the fair value of derivative financial instruments (or its components) that are designated and qualify as cash flow hedges are recognised in other comprehensive income and held as cash flow hedge reserve (CFHR) within other components of equity. Any gains / (losses) relating to the ineffective portion are recognised immediately in the statement of profit and loss within finance income / finance costs. The amounts accumulated in equity are reclassified to the statement of profit and loss in the periods when the hedged item affects profit / (loss). When a hedging instrument expires or is sold or when a cash flow hedge no longer meets the criteria for hedge accounting any cumulative gains / (losses) existing in equity at that time remains in equity and is recognised (on the basis as discussed in the above paragraph) when the forecast transaction is ultimately recognised in the statement of profit and loss. However at any point of time when a forecast transaction is no longer expected to occur the cumulative gains / (losses) that were reported in equity is immediately transferred to the statement of profit and loss within finance income / finance costs. III. Net investment hedge The Group hedges its net investment in certain foreign subsidiaries. Accordingly any foreign exchange differences on the hedging instrument (e.g. borrowings) relating to the effective portion of the hedge is recognised in other comprehensive income as foreign currency translation reserve (FCTR) within other components of equity so as to offset the change in the value of the net investment being hedged. The ineffective portion of the gain or loss on these hedges is immediately recognised in the statement of profit and loss. The amounts accumulated in equity are included in the statement of profit and loss when the foreign operation is disposed or partially disposed. e. Derecognition The financial liabilities are de-recognised from the balance sheet when the under-lying obligations are extinguished discharged lapsed cancelled expires or legally released. The financial assets are derecognised from the balance sheet when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. The resultant impact of derecognition is recognised in the statement of profit and loss.
197 Bharti Airtel Ltd. Telecommunication Ind AS 110 Consolidated Financial Statements Basis of consolidation a. Subsidiaries Subsidiaries include all the entities over which the Group has control. The Group controls an entity when it is exposed or has right to variable return from its involvement with the entity and has the ability to affect those returns through its power (that is existing rights that give it the current ability to direct the relevant activities) over the entity. The Group reassesses whether or not it controls the entity in case the under-lying facts and circumstances indicate that there are changes to above-mentioned parameters that determine the existence of control. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and they are de-consolidated from the date that control ceases. Noncontrolling interests is the equity in a subsidiary not attributable to a parent and presented separately from the parents equity. Non-controlling interests consist of the amount at the date of the business combination and its share of changes in equity since that date. Profit or loss and other comprehensive income are attributed to the controlling and non-controlling interests in proportion to their ownership interests even if this results in the non-controlling interests having a deficit balance. However in case where there are binding contractual arrangements that determine the attribution of the earnings the attribution specified by such arrangement is considered. The profit or loss on disposal (associated with loss of control) is recognised in the statement of profit and loss being the difference between (i) the aggregate of the fair value of consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill) and liabilities of the subsidiary less any non-controlling interests. In addition any amounts previously recognised in the other comprehensive income in respect of that deconsolidated entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in the other comprehensive income are reclassified to the statement of profit and loss. Any retained interest in the entity is remeasured to its fair value with the resultant change in carrying value being recognised in statement of profit and loss. A change in the ownership interest of a subsidiary without a change of control is accounted for as a transaction with equity holders. Any difference between the amount of the adjustment to noncontrolling interests and any consideration exchanged is recognised in NCI reserve a component of equity. b. Joint ventures and associates A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. Investment in joint ventures and associates are accounted for using equity method from the date on which Group obtains joint control over the joint venture / starts exercising significant influence over the associate. The said investments are anthology_newed for impairment at-least annually and whenever circumstances indicate that their carrying values may exceed the recoverable amount (viz. higher of the fair value less costs to sell and the value-in-use). c. Method of consolidation Accounting policies of the respective individual subsidiary joint venture and associate are aligned wherever necessary to ensure consistency with the accounting policies that are adopted by the Group under Ind AS. The standalone financial statements of subsidiaries are fully consolidated on a line-by-line basis after adjusting for business combination adjustments (refer note 2.4). Intra-group balances and transactions and income and expenses arising from intra-group transactions are eliminated while preparing the said financial statements. The un-realised gains resulting from intra-group transactions are also eliminated. Similarly the un-realised losses are eliminated unless the transaction provides evidence as to impairment of the asset transferred. The Groups investments in its joint ventures and associates are accounted for using the equity method. Accordingly the investments are carried at cost less any impairment losses as adjusted for post-acquisition changes in the Groups share of the net assets of investees. Any excess of the cost of the investment over the Groups share of net assets in its joint ventures / associates at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment. The un-realised gains / losses resulting from transactions with joint ventures and associates are eliminated against the investment to the extent of the Groups interest in the investee. However un-realised losses are eliminated only to the extent that there is no evidence of impairment. If as a result of equity method accounting the Groups interest in its joint venture and/ or associate is reduced to zero additional losses are provided for and a liability is recognised only to the extent that the entity has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. In such a case if the associate or joint venture subsequently reports profits the Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised. At each reporting date the Group determines whether there is objective evidence that the investment is impaired. If there is such evidence the Group calculates the amount of impairment as the difference between the recoverable amount of investment and its carrying value.
198 Bharti Airtel Ltd. Telecommunication Ind AS 113 Fair Value Measurement Basis of measurement The financial statements have been prepared on the accrual and going concern basis and the historical cost convention except where the Ind AS requires a different accounting treatment. The principal variations from the historical cost convention relate to financial instruments classified as fair value through profit or loss or through other comprehensive income (refer note 2.10 (b)) liability for cash-settled awards (refer note 2.16 (d)) the component of carrying values of recognised liabilities that are designated in fair value hedges (refer note 2.10 (d)) - which are measured at fair value. Fair value measurement Fair value is the price at the measurement date at which an asset can be sold or a liability can be transferred in an orderly transaction between market participants. The Groups accounting policies require measurement of certain financial instruments at fair values (either on a recurring or non-recurring basis). In addition the fair values of financial instruments measured at amortised cost are required to be disclosed in the said financial statements. The Group is required to classify the fair valuation method of the financial / non-financial assets and liabilities either measured or disclosed at fair value in the financial statements using a three level fair-value-hierarchy (which reflects the significance of inputs used in the measurement). Accordingly the Group 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. The three levels of the fair-value-hierarchy are described below: Level 1: Quoted (unadjusted) prices for identical assets or liabilities in active markets Level 2: Significant inputs to the fair value measurement are directly or indirectly observable Level 3: Significant inputs to the fair value measurement are unobservable.
199 Bharti Airtel Ltd. Telecommunication Ind AS 115 Revenue from Contracts with Customers/ Revenue recognition Revenue is recognised upon transfer of control of promised products or services to the customer at the consideration which the Group has received or expects to receive in exchange of those products or services net of any taxes / duties discounts and process waivers. When determining the consideration to which the Group is entitled for providing promised products or services via intermediaries the Group assesses whether it is primarily responsible for fulfilling the performance obligation and whether it controls the promised service before transfer to customers. To the extent that the intermediary is considered a principal the consideration to which the Group is entitled is determined to be that received from the intermediary. Revenue is recognised when or as each distinct performance obligation is satisfied. The main categories of revenue and the basis of recognition are as follows: a. Service revenues Service revenues mainly pertain to usage subscription and customer onboarding charges for voice data messaging value added services and Direct to Home (DTH) services. It also includes revenue from interconnection / roaming charges for usage of the Groups network by other operators for voice data messaging and signaling services. Service revenues also includes rental revenue for use of sites and energy revenue for the provision of energy for operation of sites. Telecommunication services (comprising voice data and SMS) are considered to represent a single performance obligation as all are provided over the Groups network and transmitted as data representing a digital signal on the network. The transmission consumes network bandwidth and therefore irrespective of the nature of the communication the customer ultimately receives access to the network and the right to consume network bandwidth. The Group recognises revenue from these services as they are provided. Revenue is recognised based on actual units of telecommunication services provided during the reporting period as a proportion of the total units of telecommunication services to be provided. Subscription charges are recognised over the subscription pack validity period. Customer onboarding revenue is recognised upon successful onboarding of customer i.e. upfront except for Digital TV services business in which case the customer onboarding revenue is deferred over the average expected customer life. Revenues in excess of invoicing are classified as unbilled revenue while invoicing / collection in excess of revenue are classified as deferred revenue / advance from customers. The Group collects Goods and service tax (GST) on behalf of the government and therefore it is not an economic benefit flowing to the Company hence it is excluded from revenue. Service revenues also includes revenue from interconnection / roaming charges for usage of the Groups network by other operators for voice data messaging and signaling services. These are recognised upon transfer of control of services over time. Certain business services revenues include revenue from registration and installation which are amortised over the period of agreement since the date of activation of service. Revenues from long distance operations comprise of voice services and bandwidth services (including installation) which are recognised on provision of services over the period of respective arrangements. Rental revenue is recognized as and when services are rendered on a monthly basis as per the contractual terms prescribed under master service agreement entered with customer. Exit Charges are recognised when uncertainty relating to the amounts receivable on exit is resolved and it is probable that a significant reversal relating to the amounts receivable on exit will not occur. Energy revenue is recognized over the period on a monthly basis upon satisfaction of performance obligation as per contracts with the customers. The transaction price is the consideration received from customers based on prices agreed as per the contract with the customers. The determination of standalone selling prices is not required as the transaction prices are stated in the contract based on the identified performance obligation. As part of the mobile money services the Group earns commission from merchants for facilitating recharges bill payments and other merchant payments. It also earns commissions on transfer of monies from one customer wallet to another. Such commissions are recognised as revenue at a point in time on fulfillment of these services by the Group. b. Multiple element arrangements The Company has entered into certain multipleelement revenue arrangements which involve the delivery or performance of multiple products services or rights to use assets. At the inception of the arrangement all the deliverables therein are evaluated to determine whether they represent distinct performance obligations and if so they are accounted for separately. Total consideration related to the multiple element arrangements is allocated to each performance obligation based on their standalone selling prices. The stand-alone selling prices are determined based on the list prices at which the Company sells equipment and network services separately. c. Equipment sales Equipment sales mainly pertain to sale of telecommunication equipment and related accessories for which revenue is recognised when the control of equipment is transferred to the customer i.e. transferred at a point in time. However in case of equipment sale forming part of multipleelement revenue arrangements which is not a distinct performance obligation revenue is recognised over the customer relationship period. d. Interest income The interest income is recognised using the EIR method. For further details refer note 2.10. e. Costs to obtain or fulfil a contract with a customer The Group incurs certain costs to obtain or fulfill contracts with customers viz. intermediary commission etc. Where based on groups estimate of historic average customer life derived from customer churn rate is longer than 12 months such costs are deferred and are recognized over the average expected customer life. f. Dividend income Dividend income is recognised when the Companys right to receive the payment is established. For further details refer note 2.10.
200 Bharti Airtel Ltd. Telecommunication Ind AS 115 Revenue from Contracts with Customers/ The Company earns revenue primarily from rental services by leasing of passive infrastructure and energy revenue by the provision of energy for operation of sites. Effective April 1 2018 the Company has applied Ind AS 115 Revenue from Contracts with Customers which establishes a comprehensive framework to depict timing and amount of revenue to be recognised. The Company has adopted Ind AS 115 using cumulative effect method where any effect arising upon application of this standard is recognised as at the date of initial application (i.e April 1 2018). There was no impact on adoption of Ind AS 115 to the financial statements of the Company. Revenue is recognized when the Company satisfies the performance obligation by transferring the promised services to the customers. Services are considered performed when the customer obtains control whereby the customer gets the ability to direct the use of such services and substantially obtains all benefits from the services. When there is uncertainty as to measurement or ultimate collectability revenue recognition is postponed until such uncertainty is resolved. In order to determine if it is acting as principal or as an agent the entity shall determine whether the nature of its promise is a performance obligation to provide the specified services itself (i.e. the entity is a principal) or to arrange for those services to be provided by the other party (i.e. the entity is an agent) for all its revenue arrangements Service revenue Service revenue includes rental revenue for use of sites and energy revenue for the provision of energy for operation of sites. Rental revenue is recognized as and when services are rendered on a monthly basis as per the contractual terms prescribed under master service agreement entered with customer. The Company has ascertained that the lease payment received are straight lined over the period of the contract. Exit Charges is recognised when uncertainty relating to the amounts receivable on exit is resolved and it is probable that a significant reversal relating to the amounts receivable on exit will not occur. Interest on delayed payment from operators is recognized as income when uncertainty relating to amount receivable is resolved and it is probable that a significant reversal relating to this amount will not occur. Energy revenue is recognized over the period on a monthly basis upon satisfaction of performance obligation as per contracts with the customers. The transaction price is the consideration received from customers based on prices agreed as per the contract with the customers. The determination of standalone selling prices is not required as the transaction prices are stated in the contract based on the identified performance obligation. Unbilled revenue represents revenues recognized after the last invoice raised to customer to the period end. These are billed in subsequent periods based on the prices specified in the master service agreement with the customers whereas invoicing in excess of revenues are classified as unearned revenues. The Company collects GST on behalf of the government and therefore it is not an economic benefit flowing to the Company hence it is excluded from revenue. Use of significant judgements in revenue recognition The Companys contracts with customers include promises to transfer services to a customer which are energy and rentals. Rentals are not covered within the scope of Ind AS 115 hence identification of distinct performance obligation within Ind AS 115 do not involve significant judgement. Judgement is required to determine the transaction price for the contract. The transaction price could be either a fixed amount of customer consideration or variable consideration with elements such as discounts service level credits waivers etc. The estimated amount of variable consideration is adjusted in the transaction price only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur and is reassessed at the end of each reporting period. In evaluating whether a significant revenue reversal will not occur the Company considers the likelihood and magnitude of the revenue reversal and evaluates factors which results in constraints such as historical experience of the Company with a particular type of contract and the regulatory environment in which the customers operates which results in uncertainty which is less likely to be resolved in near future. The Company provides volume discount to its customers based on slab defined in the revenue contracts. Contract also contains clause on Service Level Penalty/ rewards in case the Company is not able to maintain uptime level mentioned in the agreement. These discount/penalties are called variable consideration. There is no additional impact of variable consideration as per Ind AS 115 since maximum discount is already being given to customer and the same is deducted from revenue. There is no additional impact of SLA penalty as the Company already estimates SLA penalty amount and the same is provided for at each month end. The SLA penalty is presented as net off with revenue in the Statement of profit and loss. Exit charges are recognised in the Statement of Profit and loss when the amounts due are collected and there is no uncertainty relating to discounts and waivers. Determination of standalone selling price do not involve significant judgement for the Company. The Company exercises judgement in determining whether the performance obligation is satisfied at a point in time or over a period of time. The Company considers the indicators on how customer consumes benefits as services are rendered in making the evaluation. Contract fulfillment costs are generally expensed as incurred. The assessment of this criteria requires the application of judgement in particular when considering if costs generate or enhance resources to be used to satisfy future performance obligations and whether costs are expected to be recovered. Dividend Income Dividend Income is recognized when the right to receive payment is established which is generally on the date when shareholders approve the dividend in case of final dividend and approval by Board of Directors in case of interim dividend. Finance income Finance income comprises interest income on funds invested and changes in the fair value of financial assets at fair value through profit or loss and that are recognised in Statement of Profit and Loss. Interest income is recognised as it accrues in Statement of Profit and Loss using the effective interest rate (EIR) which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial instrument or a shorter period where appropriate to the net carrying amount of the financial asset. Finance income does not include dividend income interest on income tax refund etc. which is included in other income.
201 Bharti Airtel Ltd. Telecommunication Ind AS 116 Leases The Group at the inception of a contract assesses the contract as or containing a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset the Group assesses whether the contract involves the use of an identified asset the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and the Group has the right to direct the use of the asset. Group as a lessee On initial application of Ind AS 116 the Group recognised a lease liability measured at the present value of all the remaining lease payments discounted using the Groups incremental borrowing rate at April 1 2019 whereas the Group has elected to measure ROU at its carrying amount as if Ind AS 116 had been applied since the lease commencement date but discounted using the Groups incremental borrowing rate at April 1 2019. For new lease contracts the Group recognises a ROU and a corresponding lease liability with respect to all lease agreements in which it is the lessee in the balance sheet. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date discounted by using the incremental borrowing rate (as the rate implicit in the lease cannot be readily determined). Lease liabilities. include the net present value of fixed payments (including any in-substance fixed payments) any variable lease payments that are based on consumer price index (CPI) the exercise price of a purchase option if the lessee is reasonably certain to exercise that option and payments of penalties for terminating the lease if the lease term reflects the lessee exercising that option. Subsequently the lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments including due to changes in CPI or if the Group changes its assessment of whether it will exercise a purchase extension or termination option or when the lease contract is modified and the lease modification is not accounted for as a separate lease. The corresponding adjustment is made to the carrying amount of the ROU or is recorded in profit or loss if the carrying amount of the related ROU has been reduced to zero and there is a further reduction in the measurement of the lease liability. ROU are measured at cost comprising the amount of the initial measurement of lease liability any lease payments made at or before the commencement date and any initial direct costs less any lease incentives received. Subsequent to initial recognition ROU are stated at cost less accumulated depreciation and any impairment losses and adjusted for certain remeasurements of the lease liability. Depreciation is computed using the straight-line method from the commencement date to the end of the useful life of the underlying asset or the end of the lease term whichever is shorter. The estimated useful lives of ROU are determined on the same basis as those of the underlying asset. In the balance sheet the ROU and lease liabilities are presented separately. In the statement of profit and loss interest expense on lease liabilities are presented separately from the depreciation charge for the ROU. Interest expense on the lease liability is a component of finance costs which are presented separately in the statement of profit or loss. In the statement of cash flows cash payments for the principal portion of lease payments and the interest portion of lease liability are presented as financing activities and short-term lease payments and payments for leases of low-value assets and variable lease payments not included in the measurement of the lease liability if any as operating activities. When a contract includes lease and non-lease components the Group allocates the consideration in the contract on the basis of the relative stand-alone prices of each lease component and the aggregate stand-alone price of the non-lease components. Short-term leases and leases of low-value assets The Group has elected not to recognise ROU and lease liabilities for short term leases that have a lease term of twelve months or less and leases of low value assets. The Group recognises lease payments associated with these leases as an expense on a straight-line basis over the lease term. Group as a lessor Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee the contract is classified as a finance lease. All other leases are classified as operating leases. Amounts due from lessees under a finance lease are recognised as receivables at an amount equal to the net investment in the leased assets. Finance lease income is allocated to the periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the finance lease. Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term. When a contract includes lease and non-lease components the Group applies Ind AS 115 Revenue from Contracts with Customers to allocate the consideration under the contract to each component. The Group enters into Indefeasible right to use (IRU) arrangements wherein the right to use the assets is given over the substantial part of the asset life. However as the title to the assets and the significant risks associated with the operation and maintenance of these assets remains with the Group such arrangements are recognised as operating lease. The contracted price is recognised as revenue during the tenure of the agreement. Unearned IRU revenue received in advance is presented as deferred revenue within liabilities in the balance sheet.
202 Bharti Airtel Ltd. Telecommunication Ind AS 12 Income Taxes Taxes The income tax expense comprises of current and deferred income tax. Income tax is recognised in the statement of profit and loss except to the extent that it relates to items recognised in the other comprehensive income or directly in equity in which case the related income tax is also recognised accordingly. a) Current tax The current tax is calculated on the basis of the tax rates laws and regulations which have been enacted or substantively enacted as at the reporting date in the respective countries where the group entities operate and generate taxable income. The payment made in excess / (shortfall) of the respective group entities income tax obligation for the period are recognised in the balance sheet under non-current assets as income tax assets/ under current liabilities as current tax liabilities. Any interest related to accrued liabilities for potential tax assessments are not included in income tax charge or (credit) but are rather recognised within finance costs. The Group periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation. The Group considers whether it is probable that a taxation authority will accept an uncertain tax treatment. If the Group concludes it is probable that the taxation authority will accept an uncertain tax treatment it determines the taxable profit (tax loss) tax bases unused tax losses unused tax credits or tax rates consistently with the tax treatment used or planned to be used in its income tax filings. If the Group concludes it is not probable that the taxation authority will accept an uncertain tax treatment the entity reflects the effect of uncertainty in determining the related taxable profit (tax loss) tax bases unused tax losses unused tax credits or tax rates b) Deferred tax Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying values in the financial statements. Deferred tax assets/ liabilities recognised for temporary differences arising from a business combination affect the amount of goodwill or the bargain purchase gain that the Group recognises. However deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred tax is not recognised if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects at the end of the reporting period to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. The Group considers the projected future taxable income and tax planning strategies in making this assessment. Moreover deferred tax is recognised on temporary differences arising on investments in subsidiaries joint ventures and associates - unless the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. The unrecognised deferred tax assets / carrying amount of deferred tax assets are reviewed at each reporting date for recoverability and adjusted appropriately. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the asset is realised or the liability is settled. Deferred tax assets include Minimum Alternate Tax (MAT) paid in accordance with the tax laws in India which is likely to give future economic benefits in the form of availability of set off against future income tax liability. MAT is recognised as deferred tax assets in the balance sheet to the extent that it is probable that future taxable profit will be available against which MAT credit can be utilised. Income tax assets and liabilities are offset against each other and the resultant net amount is presented in the balance sheet if and only when (a) the Group currently has a legally enforceable right to set off the current income tax assets and liabilities and (b) when it relate to income tax levied by the same taxation authority and where there is an intention to settle the current income tax balances on net basis.
203 Bharti Airtel Ltd. Telecommunication " Ind AS 16 Property Property plant and equipment (PPE) An item is recognised as an asset if and only if it is probable that the future economic benefits associated with the item will flow to the Group and its cost can be measured reliably. PPE are initially recognised at cost. The initial cost of PPE comprises its purchase price (including non-refundable duties and taxes but excluding any trade discounts and rebates) assets retirement obligations (refer note 2.17 (b)) and any directly attributable cost of bringing the asset to its working condition and location for its intended use. Further it includes assets installed on the premises of customers as the associated risks rewards and control remain with the Group. Subsequent to initial recognition PPE are stated at cost less accumulated depreciation and any impairment losses. When significant parts of PPE are required to be replaced at regular intervals the Group recognises such parts as separate component of assets. When an item of PPE is replaced then its carrying amount is de-recognised from the balance sheet and cost of the new item of PPE is recognised. Further in case the replaced part was not being depreciated separately the cost of the replacement is used as an indication to determine the cost of the replaced part at the time it was acquired. The expenditures that are incurred after the item of PPE has been put to use such as repairs and maintenance are normally charged to the statement of profit and loss in the period in which such costs are incurred. However in situations where the said expenditure can be measured reliably and is probable that future economic benefits associated with it will flow to the Group it is included in the assets carrying value or as a separate asset as appropriate. Depreciation on PPE is computed using the straight-line method over the estimated useful lives. The management basis its past experience and technical assessment has estimated the useful life which is at variance with the life prescribed in Part C of Schedule II of the Companies Act 2013 and has accordingly depreciated the assets over such useful life. Freehold land is not depreciated as it has an unlimited useful life. The Group has established the estimated range of useful lives for different categories of PPE as follows: Categories : Years Leasehold improvement : Period of lease term or upto 20 years as applicable whichever is less Buildings :20 Building on leased land : 20 years or period of lease term whichever is lower Plant and equipment - Network equipment (including passive infrastructure) : 3 - 25 - Customer premise equipment 3 - 7 - Other equipment operating and office equipment Computers/ Servers 3 - 5 - Furniture & fixture and Office equipment 1 - 5 - Vehicles 3 - 5 The useful lives residual values and depreciation method of PPE are reviewed and adjusted appropriately atleast as at each financial year-end to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from these assets. The effect of any change in the estimated useful lives residual values and / or depreciation method are accounted prospectively and accordingly the depreciation is calculated over the PPEs remaining revised useful life. The cost and the accumulated depreciation for PPE sold scrapped retired or otherwise disposed of are derecognised from the balance sheet and the resulting gains / (losses) are included in the statement of profit and loss within other expenses / other income. The cost of capital work-in-progress (CWIP) is presented separately in the balance sheet.
204 Bharti Airtel Ltd. Telecommunication Ind AS 19 Employee Benefits Employee benefits The Groups employee benefits mainly include wages salaries bonuses defined contribution plans defined benefit plans compensated absences deferred compensation and share-based payments. The employee benefits are recognised in the year in which the associated services are rendered by the group employees. Short-term employee benefits are recognised in statement of profit and loss at undiscounted amounts during the period in which the related services are rendered. a. Defined contribution plans The contributions to defined contribution plans are recognised in profit or loss as and when the services are rendered by employees. The Group has no further obligations under these plans beyond its periodic contributions. b. Defined benefit plans In accordance with the local laws and regulations all the employees in India are entitled for the Gratuity plan. The said plan requires a lump-sum payment to eligible employees (meeting the required vesting service condition) at retirement or termination of employment based on a pre-defined formula. Some of the entities outside India has defined benefit plans in form of Retirement Benefits and Severance Pay. The Group provides for the liability towards the said plans on the basis of actuarial valuation carried out quarterly as at the reporting date by an independent qualified actuary using the projected-unit-credit method. The obligation towards the said benefits is recognised in the balance sheet at the present value of the defined benefit obligations less the fair value of plan assets (being the funded portion). The present value of the said obligation is determined by discounting the estimated future cash outflows using appropriate discount rate. The interest income / (expense) are calculated by applying the above mentioned discount rate to the plan assets and defined benefit obligations. The net interest income / (expense) on the net defined benefit obligation is recognised in the statement of profit and loss. However the related re-measurements of the net defined benefit obligation are recognised directly in the other comprehensive income in the period in which they arise. The said re-measurements comprise of actuarial gains and losses (arising from experience adjustments and changes in actuarial assumptions) the return on plan assets (excluding interest). Remeasurements are not reclassified to the statement of profit and loss in any of the subsequent periods. c. Other long-term employee benefits The employees of the Group are entitled to compensated absences as well as other long-term benefits. Compensated absences benefit comprises of encashment and availment of leave balances that were earned by the employees over the period of past employment. The Group provides for the liability towards the said benefits on the basis of actuarial valuation carried out quarterly as at the reporting date by an independent qualified actuary using the projectedunit-credit method. The related re-measurements are recognised in the statement of profit and loss in the period in which they arise.
205 Bharti Airtel Ltd. Telecommunication Ind AS 2 Inventories Inventories are stated at the lower of cost (determined using the first-in-first-out method) and net realisable value. The costs comprise its purchase price and any directly attributable cost of bringing the inventories to its present location and condition. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale
206 Bharti Airtel Ltd. Telecommunication Ind AS 20 Accounting for Government Grants and Di Grants from the government are recognised where there is a reasonable assurance that the grant will be received and the company will comply with all attached conditions. Government grants relating to income are deferred and recognised in the profit or loss over the period necessary to match them with the costs that they are intended to compensate. Government grants relating to the purchase of property plant and equipment are included in non-current liabilities as deferred income and are credited to profit or loss on a straight-line basis over the expected lives of the related assets.
207 Bharti Airtel Ltd. Telecommunication Ind AS 21 The Effects of Changes in Foreign Excha a. Foreign currency transactions a. Functional and presentation currency The financial statements are presented in Indian Rupees which is the functional and presentation currency of the Company. The items included in financial statements of each of the Groups entities are measured using the currency of primary economic environment in which the entity operates (i.e. functional currency). b. Transactions and balances Transactions in foreign currencies are initially recorded in the relevant functional currency at the exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the closing exchange rate prevailing as at the reporting date with the resulting foreign exchange differences on subsequent re-statement / settlement recognised in the statement of profit and loss within finance costs / finance income. Non-monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the exchange rate prevalent at the date of initial recognition (in case they are measured at historical cost) or at the date when the fair value is determined (in case they are measured at fair value) the resulting foreign exchange difference on subsequent re-statement / settlement recognised in the statement of profit and loss except to the extent that it relates to items recognised in the other comprehensive income or directly in equity. The equity items denominated in foreign currencies are translated at historical cost. c. Foreign operations The assets and liabilities of foreign operations (including the goodwill and fair value adjustments arising on the acquisition of foreign entities) are translated into Rupees at the exchange rates prevailing at the reporting date whereas their statements of profit and loss are translated into Rupees at monthly average exchange rates and the equity is recorded at the historical rate. The resulting exchange differences arising on the translation are recognised in other comprehensive income and held in foreign currency translation reserve (FCTR) a component of equity. On disposal of a foreign operation (that is disposal involving loss of control) the component of other comprehensive income relating to that particular foreign operation is reclassified to profit or loss.
208 Bharti Airtel Ltd. Telecommunication Ind AS 23 Borrowing Costs Borrowing costs consist of interest and other ancillary costs that the Group incurs in connection with the borrowing of funds. The borrowing costs directly attributable to the acquisition or construction of any asset that takes a substantial period of time to get ready for its intended use or sale are capitalised. All other borrowing costs are recognised in the statement of profit and loss within finance costs in the period in which they are incurred.
209 Bharti Airtel Ltd. Telecommunication Ind AS 33 Earnings per Share The Company presents the Basic and Diluted EPS. Basic EPS is computed by dividing the profit for the period attributable to the shareholders of the parent by the weighted average number of shares outstanding during the period excluding the treasury shares. Diluted EPS is computed by adjusting the profit for the year attributable to the shareholders and the weighted average number of shares considered for deriving Basic EPS for the effects of all the shares that could have been issued upon conversion of all dilutive potential shares. The dilutive potential shares are adjusted for the proceeds receivable had the shares been actually issued at fair value. Further the dilutive potential shares are deemed converted as at beginning of the period unless issued at a later date during the period.
210 Bharti Airtel Ltd. Telecommunication Ind AS 33 Earnings per Share Basic EPS is calculated by dividing the profit for the period attributable to ordinary equity shareholders of the Company by the weighted average number of Equity shares outstanding during the period. Diluted EPS is calculated by dividing the profit attributable to ordinary equity shareholders of the Company by the weighted average number of Equity shares outstanding during the period plus the weighted average number of Equity shares that would be issued on conversion of all the dilutive potential Equity shares into Equity shares
211 Bharti Airtel Ltd. Telecommunication Ind AS 36 Impairment of Assets Impairment of non-financial assets a. Goodwill Goodwill is anthology_newed for impairment at-least annually and whenever circumstances indicate that it may be impaired. For the purpose of impairment anthology_newing the goodwill is allocated to a cash-generating-unit (CGU) or group of CGUs (CGUs) which are expected to benefit from the acquisition-related synergies and represent the lowest level within the entity at which the goodwill is monitored for internal management purposes within an operating segment. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. Impairment occurs when the carrying value of a CGU / CGUs including the goodwill exceeds the estimated recoverable amount of the CGU / CGUs. The recoverable amount of a CGU / CGUs is the higher of its fair value less costs to sell and its value in use. Value-in-use is the present value of future cash flows expected to be derived from the CGU / CGUs. The total impairment loss of a CGU / CGUs is allocated first to reduce the carrying value of goodwill allocated to that CGU / CGUs and then to the other assets of that CGU / CGUs - on pro-rata basis of the carrying value of each asset. Further detail including the key assumptions adopted to determine the recoverable amount of goodwill are detailed in note 6. b. PPE ROU intangible assets and intangible assets under development PPE (including CWIP) ROU (Right-of-use assets) intangible assets under development and intangible assets with definite lives are reviewed for impairment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. Intangible assets under development is anthology_newed for impairment at-least annually and whenever circumstances indicate that it may be impaired. For the purpose of impairment anthology_newing the recoverable amount (that is higher of the fair value less costs to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets in which case the recoverable amount is determined at the CGU level to which the said asset belongs. If such individual assets or CGU are considered to be impaired the impairment to be recognised in the statement of profit and loss is measured by the amount by which the carrying value of the asset / CGU exceeds their estimated recoverable amount and allocated on pro-rata basis. Reversal of impairment losses Impairment loss in respect of goodwill is not reversed. Other impairment losses are reversed in the statement of profit and loss and the carrying value is increased to its revised recoverable amount provided that this amount does not exceed the carrying value that would have been determined had no impairment loss been recognised for the said asset / CGU previously.
212 Bharti Airtel Ltd. Telecommunication " Ind AS 37 Provisions Provisions a. General Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event it is probable that an outflow of resources will be required to settle the said obligation and the amounts of the said obligation can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the relevant obligation (if the impact of discounting is significant) using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to un-winding of interest over passage of time is recognised within finance costs. b. Asset retirement obligations (ARO) ARO are recognised for those operating lease arrangements where the Group has an obligation at the end of the lease period to restore the leased premises in a condition similar to inception of lease. ARO are provided at the present value of expected costs to settle the obligation and are recognised as part of the cost of that particular asset. The estimated future costs of decommissioning are reviewed annually and any changes in the estimated future costs or in the discount rate applied are adjusted from the cost of the asset. Contingencies A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may but probably will not require an outflow of resources. When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote no provision or disclosure is made. Contingent assets are not recognised and disclosed only where an inflow of economic benefits is probable
213 Bharti Airtel Ltd. Telecommunication Ind AS 38 Intangible Assets Intangible assets are recognised when the Group controls the asset it is probable that future economic benefits attributed to the asset will flow to the Group and the cost of the asset can be measured reliably. Goodwill represents the cost of the acquired businesses in excess of the fair value of identifiable net assets purchased (refer note 2.4). Goodwill is not amortised; however it is anthology_newed annually for impairment and whenever there is an indication that the unit may be impaired (refer note 2.9) and carried at cost less any accumulated impairment losses. The gains / (losses) on the disposal of a cashgenerating-unit (CGU) include the carrying amount of goodwill relating to the CGU sold (in case goodwill has been allocated to group of CGUs; it is determined on the basis of the relative fair value of the operations sold). The intangible assets that are acquired in a business combination are recognised at its fair value there at. Other intangible assets are initially recognised at cost. These assets having finite useful life are carried at cost less accumulated amortisation and any impairment losses. Amortisation is computed using the straight-line method over the expected useful life of intangible assets. The Group has established the estimated useful lives of different categories of intangible assets as follows : a. Software Software are amortised over the period of license generally not exceeding five years. b. Licenses (including spectrum) Acquired licenses and spectrum are amortised commencing from the date when the related network is available for intended use in the relevant jurisdiction. The useful lives range from two to twenty five years. The revenue-share based fee on licenses / spectrum is charged to the statement of profit and loss in the period such cost is incurred. c. Other acquired intangible assets Other acquired intangible assets include the following: Rights acquired for unlimited license access: Over the period of the agreement which ranges upto five years Distribution network: One year to two years Customer base: Over the estimated life of such relationships Non-compete fee: Over the period of the agreement which ranges upto five years The useful lives and amortisation method are reviewed and adjusted appropriately at least at each financial year-end to ensure that the method and period of amortisation are consistent with the expected pattern of economic benefits from these assets. The effect of any change in the estimated useful lives and / or amortisation method is accounted for prospectively and accordingly the amortisation is calculated over the remaining revised useful life. Further the cost of intangible assets under development includes the following: (a) the amount of spectrum allotted to the Group and related costs (including borrowing costs that are directly attributable to the acquisition or construction of qualifying assets (refer note 6) if any for which services are yet to be rolled out and are presented separately in the balance sheet. (b) the amount of software / IT platform under development. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is derecognised.
214 Bharti Airtel Ltd. Telecommunication Ind AS 7 Statement of Cash Flows Cash and cash equivalents include cash in hand bank balances and any deposits with original maturities of three months or less (that are readily convertible to known amounts of cash and cash equivalents and subject to an insignificant risk of changes in value). However for the purpose of the statement of cash flows in addition to above items any bank overdrafts / cash credits that are integral part of the Groups cash management are also included as a component of cash and cash equivalents
215 Bharti Infratel Ltd. Telecommunication Ind AS 102 Share based Payment The Company issues equity-settled and cash-settled share-based options to certain employees. These are measured at fair value on the date of grant. The fair value determined at the grant date of the equity-settled share-based options is expensed over the vesting period based on the Companys estimate of the shares that will eventually vest. The fair value determined on the grant date of the cash settled share based options is expensed over the vesting period based on the Companys estimate of the shares that will eventually vest. At the end of each reporting period until the liability is settled and at the date of settlement the fair value of the liability is recognized with any changes in fair value pertaining to the vested period recognized immediately in the Statement of Profit and Loss. At the vesting date the Companys estimate of the shares expected to vest is revised to equal the number of equity shares that ultimately vest. Fair value is measured using Black-Scholes framework and is recognized as an expense together with a corresponding increase in equity/ liability as appropriate over the period in which the options vest using the graded vesting method. The expected life used in the model is adjusted based on managements best estimate for the effects of non-transferability exercise restrictions and behavioral considerations. The expected volatility and forfeiture assumptions are based on historical information. Where the terms of a share-based payments are modified the minimum expense recognized is the expense as if the terms had not been modified if the original terms of the award are met. An additional expense is recognized for any modification that increases the total fair value of the share-based payment transaction or is otherwise beneficial to the employee as measured at the date of modification. Where an equity-settled award is cancelled it is treated as if it is vested on the date of cancellation and any expense not yet recognized for the award is recognized immediately. This includes any award where non-vesting conditions within the control of either the entity or the employee are not met. However if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted the cancelled and new awards are treated as if they were a modification of the original award as described in the previous paragraph. The dilutive effect of outstanding options if any is reflected as additional share dilution in the computation of diluted earnings per share
216 Bharti Infratel Ltd. Telecommunication Ind AS 109 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 Initial Recognition and Measurement All financial assets are recognised 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. Subsequent Measurement For purposes of subsequent measurement financial assets are classified in four categories: Debt instruments at amortised cost Debt instruments at fair value through other comprehensive income (FVTOCI) Debt instruments derivatives and equity instruments at fair value through Profit or Loss (FVTPL) Equity instruments measured at fair value through other comprehensive income (FVTOCI) Debt Instruments at Amortised Cost This category applies to the Companys trade receivables unbilled revenue security deposits etc. A debt instrument is measured at the amortised cost if both the following conditions are met: The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows and 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. Debt instrument at fair value through other comprehensive income (FVTOCI) A debt instrument is classified at FVTOCI if both of the following criteria are met: The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets and The assets contractual cash flows represent SPPI. Debt instruments included within the FVTOCI 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 in the Statement of Profit and Loss. On derecognition of the asset cumulative gain or loss previously recognised in OCI is reclassified from the equity to Statement of Profit and Loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income. The Company has classified investment in tax free bonds within this category. Debt instrument at fair value through profit or loss (FVTPL) FVTPL is a residual category for debt instruments. Any debt instrument which does not meet the criteria for categorization at amortized cost or at FVTOCI is classified at FVTPL. Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the Statement of Profit and Loss. This category applies to the Companys investment in government securities mutual funds taxable bonds and non convertible debentures. In addition the Company may elect to designate a debt instrument which otherwise meets amortized cost or FVTOCI 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). The Company has not designated any debt instrument at FVTPL. Equity investments All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading and contingent consideration recognised by an acquirer in a business combination if any to which Ind AS 103 applies are classified as at fair value through Profit or loss. There are no such equity investments measured at fair value through profit or loss or fair value through other comprehensive income in the company. De-recognition:- A financial asset (or where applicable a part of a financial asset) is primarily derecognised (i.e. removed from the Companys balance sheet) when: The contractual rights to receive cash flows from the asset have expired or The Company has transferred its contractual rights to receive cash flows from the financial 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. 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 Financial assets that are debt instruments and are initially measured at fair value with subsequent measurement at amortised cost e.g Trade receivables unbilled revenue etc. The Company follows simplified approach for recognition of impairment loss allowance for trade receivables. The application of simplified approach does not require the Company to track changes in credit risk. Rather it recognises impairment loss allowance based on lifetime ECLs at each reporting date right from its initial recognition. For recognition of impairment loss on other financial assets and risk exposure the Company determines whether there has been a significant increase in the credit risk since initial recognition. If credit risk has not increased significantly twelve month ECL is used to provide for impairment loss. However if credit risk has increased significantly lifetime ECL is used. If in the 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 a twelve month ECL. ECL is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the entity expects to receive (i.e. all cash shortfalls) discounted at the original EIR. Financial Liabilities Initial Recognition and Measurement Financial liabilities are classified at initial recognition as financial liabilities at fair value through profit or loss loans and borrowings or payables 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 Companys financial liabilities include trade and other payables security deposits lease liabilities etc. Subsequent measurement The measurement of financial liabilities depends on their classification as described below: Financial liabilities at fair value through profit or loss (FVTPL) 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. Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such 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/ loss are not subsequently transferred to Statement of Profit and Loss. 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. Financial Liabilities at Amortised cost This category includes security deposit received trade payables etcAfter initial recognition such liabilities are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in 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 A financial liability is derecognised 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 de-recognition 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 and Loss. Reclassification of Financial Assets The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Companys senior management determines change in the business model as a result of external or internal changes which are significant to the Companys operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If the Company reclassifies financial assets it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains losses (including impairment gains or losses) or interest. Offsetting of Financial Instruments Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis to realise the assets and settle the liabilities simultaneously.
217 Bharti Infratel Ltd. Telecommunication Ind AS 113 Fair Value Measurement The Company measures financial instruments at fair value at each reporting 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 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 participants 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 prices (unadjusted) in active markets for identical assets or liabilities. Level 2 - Inputs other than quoted prices included within 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 assets or liabilities that are not based on observable market data (unobservable inputs) For assets and liabilities that are recognised in the financial statements 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. This note summarises accounting policy for fair value measurement. Other fair value related disclosures are given in the relevant notes.
218 Bharti Infratel Ltd. Telecommunication Ind AS 116 Leases A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Company as a lessee The Company recognizes right-of-use asset representing its right to use the underlying asset for the lease term at the lease commencement date. The cost of the right-of-use asset measured at inception 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 less any lease incentives received 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 asset is depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. Right-of-use assets are anthology_newed for impairment whenever there is any indication that their carrying amounts may not be recoverable. Impairment loss if any is recognised in the statement of profit and loss. 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 leases with reasonably similar characteristics the Company may adopt the incremental borrowing rate for the entire portfolio of leases as a whole. The lease payments shall include fixed payments variable lease payments residual value guarantees exercise price of a purchase option where the Company is reasonably certain to exercise that option and payments of penalties for terminating the lease if the lease term reflects the lessee exercising an option to terminate the lease. The lease liability is subsequently remeasured by increasing the carrying amount to reflect interest on the lease liability reducing the carrying amount to reflect the lease payments made and remeasuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised in-substance fixed lease payments. The Company recognises the amount of the re-measurement of lease liability as an adjustment to the right-of-use asset. Where the carrying amount of the right-of-use asset is reduced to zero and there is a further reduction in the measurement of the lease liability the Company recognizes any remaining amount of the re-measurement in statement of profit and loss. The Company may elect not to apply the requirements of Ind AS 116 to leases for which the underlying asset is of low value. The lease payments associated with these leases are recognized as an expense on a straight-line basis over the lease term. The Company has opted to recognize the asset retirement obligation liability as part of the cost of an item of property plant and equipment in accordance with Ind AS 16. Company as a lessor Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Company to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Companys net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease. Leases where the Company does not transfer substantially all the risks and rewards incidental to ownership of the asset are classified as operating leases. Lease rentals under operating leases are recognized as income on a straight-line basis over the lease term. Contingent rents are recognized as revenue in the period in which they are earned
219 Bharti Infratel Ltd. Telecommunication Ind AS 12 Income Taxes Taxes The income tax expense comprises of current and deferred income tax. Income tax is recognised in the statement of profit and loss except to the extent that it relates to items recognised in the other comprehensive income or directly in equity in which case the related income tax is also recognised accordingly. Current tax The current tax is calculated on the basis of the tax rates laws and regulations which have been enacted or substantively enacted as at the reporting date. The payment made in excess / (shortfall) of the Companys income tax obligation for the period are recognised in the balance sheet as current income tax assets / liabilities. Any interest related to accrued liabilities for potential tax assessments are not included in Income tax charge or (credit) but are rather recognised within finance costs. The management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. The expense on dividends are linked directly to past transactions or events that generated distributable profits than to distribution to owners. Therefore the company shall recognise the income tax on dividends in profit or loss other comprehensive income or equity according to where the entity originally recognised those past transactions or events Deferred tax Deferred tax is recognised using the balance sheet approach on temporary differences arising between the tax bases of assets and liabilities and their carrying values in the financial statements. However deferred tax is not recognised if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. The unrecognised deferred tax assets / carrying amount of deferred tax assets are reviewed at each reporting date for recoverability and adjusted appropriately. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets and liabilities are off-set against each other and the resultant net amount is presented in the balance sheet if and only when (a) the Company currently has a legally enforceable right to set-off the current income tax assets and liabilities and (b) when it relates to income tax levied by the same taxation authority
220 Bharti Infratel Ltd. Telecommunication " Ind AS 16 Property Property plant and equipment including Capital work in progress is stated at cost except assets acquired under Schemes of Arrangement which are stated at fair values as per the Schemes net of accumulated depreciation and accumulated impairment losses if any. Such cost includes the cost of replacing part of the Property plant and equipment and borrowing costs for long term construction projects if the recognition criteria are met. When significant parts of property plant and equipment are required to be replaced in intervals the Company recognizes such parts as separate component of assets with specific useful lives and provides depreciation over their useful life. Subsequent costs are included in the assets carrying amount or recognized as a separate asset as appropriate only when it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repair and maintenance costs are recognised in the Statement of Profit and Loss as incurred. The present value of the expected cost for the decommissioning of the asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met. Refer note 4 regarding significant accounting judgements estimates and assumptions and provisions for further information about the recorded decommissioning provision. An item of property plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the Statement of Profit and Loss when the asset is derecognised. Assets are depreciated to the residual values on a straight-line basis over the estimated useful lives. Estimated useful lives of the assets are as follows: Useful lives Office Equipment 2 years / 5 years Computer --do-- Vehicles --do-- Furniture and Fixtures --do-- Plant & Machinery - to 20 Years Leasehold Improvement-Period of Lease or useful life whichever is less The existing useful lives of tangible assets are different from the useful lives as prescribed under Part C of Schedule II to the Companies Act 2013 and the Company believes that this is the best estimate on the basis of technical evaluation and actual usage period. The existing residual values of tangible assets are different from 5% as prescribed under Part C of Schedule II to the Companies Act 2013 and the Company believes that this is the best estimate on the basis of actual realization. The assets residual values and useful lives are reviewed at each financial year end or whenever there are indicators for impairment and adjusted prospectively. On transition to Ind AS the Company has elected to continue with the carrying value of all its property plant and equipment (including assets acquired under Schemes of Arrangement) except with an adjustment in decommissioning cost recognised as at April 1 2015 measured as per the previous GAAP and use that carrying value as the cost of the property plant and equipment.
221 Bharti Infratel Ltd. Telecommunication Ind AS 19 Employee Benefits Short term employee benefits are recognised in the period during which the services have been rendered. The Company post employment benefits include defined benefit plan and defined contribution plans. The Company also provides other benefits in the form of deferred compensation and compensated absences. A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions to a statutory authority and will have no legal or constructive obligation to pay further amounts. The Company contributions to defined contribution plans are recognized in Statement of Profit & Loss when the related services are rendered. The Company has no further obligations under these plans beyond its periodic contributions. A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. Under the defined benefit retirement plan the Company provides retirement obligation in the form of Gratuity. Under the plan a lump sum payment is made to eligible employees at retirement or termination of employment based on respective employee salary and years of experience with the Company. The cost of providing benefits under this plan is determined on the basis of actuarial valuation carried out quarterly as at the reporting date by an independent qualified actuary using the projected unit credit method. Actuarial gains and losses are recognised in full in the period in which they occur in other comprehensive income forming part of Statement of Profit and Loss. The obligation towards the said benefit is recognised in the balance sheet as the difference between the fair value of the plan assets and the present value of the plan liabilities. Scheme liabilities are calculated using the projected unit credit method and applying the principal actuarial assumptions as at the date of Balance Sheet. Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance policies. All expenses excluding remeasurements of the net defined benefit liability (asset) in respect of defined benefit plans are recognized in the profit or loss as incurred. Remeasurements comprising actuarial gains and losses and the return on the plan assets (excluding amounts included in net interest on the net defined benefit liability (asset)) are recognized immediately in the Balance Sheet with a corresponding debit or credit through other comprehensive income in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods. The Company provides other benefits in the form of compensated absences and long term service awards. The employees of the Company are entitled to compensated absences based on the unavailed leave balance. The Company records liability based on actuarial valuation computed under projected unit credit method. Actuarial gains / losses are immediately taken to the Statement of Profit and Loss and are not deferred. The Company presents the entire leave encashment liability as a current liability in the balance sheet since the Company does not have an unconditional right to defer its settlement for more than 12 months after the reporting date. Under the long term service award plan a lump sum payment is made to an employee on completion of specified years of service. The Company records the liability based on actuarial valuation computed under projected unit credit method. Actuarial gains / losses are immediately taken to the Statement of Profit and Loss and are not deferred. The amount charged to the Statement of Profit and Loss in respect of these plans is included within operating costs
222 Bharti Infratel Ltd. Telecommunication Ind AS 21 The Effects of Changes in Foreign Excha Functional and presentation currency The Companys financial statements are presented in INR which is also the Companys functional currency. Presentation currency is the currency in which the companys financial statements are presented. Functional currency is the currency of the primary economic environment in which an entity operates and is normally the currency in which the entity primarily generates and expends cash. All the financial information presented in Indian Rupees (INR) has been rounded to the nearest of million rupees except where otherwise stated. Transactions and Balances Transactions in foreign currencies are initially recorded by the Company at the functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Differences arising on settlement or translation of monetary items are recognised in Statement of Profit or Loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e. translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss are also recognised in OCI or profit or loss respectively).
223 Bharti Infratel Ltd. Telecommunication Ind AS 23 Borrowing Costs Borrowing costs directly attributable to the acquisition construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
224 Bharti Infratel Ltd. Telecommunication Ind AS 36 Impairment of 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 anthology_newing for an asset is required the Company estimates the assets recoverable amount. An assets recoverable amount is the higher of an assets or cash-generating units (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. In assessing value in use the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal recent market transactions are taken into account. If no such transactions can be identified an appropriate valuation model is used. Impairment losses if any are recognized in Statement of Profit and Loss as a component of depreciation and amortisation expense. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the assets recoverable amount since the last impairment loss was recognised. The reversal is limited to the extent the carrying amount of the asset does not exceed its recoverable amount nor exceed the carrying amount that would have been determined net of depreciation or amortisation had no impairment loss been recognised for the asset in prior years. Such reversal is recognized in the Statement of Profit and Loss when the asset is carried at the revalued amount in which case the reverse is treated as a revaluation increase. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the statement of profit and 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 determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
225 Bharti Infratel Ltd. Telecommunication " Ind AS 37 Provisions General Provisions are recognised 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 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 (i.e. unwinding of discount) is recognised as a finance cost. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources would be required to settle the obligation the provision is reversed. Contingent Assets/ Liabilities Contingent assets are not recognised. However when realisation of income is virtually certain then the related asset is no longer a contingent asset and is recognised as an asset. Contingent liabilities are disclosed in notes to accounts 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 or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made. Asset Retirement Obligations Asset retirement obligations (ARO) are provided for those operating lease arrangements where the Company has a binding obligation at the end of the lease period to restore the leased premises in a condition similar to inception of lease. ARO are provided at the present value of expected costs to settle the obligation using estimated cash flows and are recognized as part of the cost of the particular asset. The cash flows are discounted at a current pre-tax rate that reflects the risks specific to the site restoration obligation. The unwinding of the discount is expensed as incurred and recognized in the Statement of Profit and Loss as a finance cost. The estimated future costs of decommissioning are reviewed annually and adjusted as appropriate. Changes in the estimated future costs or in the discount rate applied are added to or deducted from the cost of the asset.
226 Bharti Infratel Ltd. Telecommunication Ind AS 38 Intangible Assets Intangible assets are recognized when the entity controls the asset it is probable that future economic benefits attributed to the asset will flow to the entity and the cost of the asset can be reliably measured. At initial recognition the separately acquired intangible assets are recognised at cost. Intangible assets with finite useful lives are carried at cost less accumulated amortisation and accumulated impairment losses if any. Intangible assets are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset are reviewed at least at the end of eachfinancial year. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method as appropriate and are treated as changes in accounting estimates. The amortisation expense on intangible assets is recognised in the Statement of Profit and Loss unless such expenditure forms part of carrying value of another asset Software is capitalized at the amounts paid to acquire the respective license for use and is amortised over the period of license generally not exceeding three years. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit and Loss when the asset is derecognised
227 Bharti Infratel Ltd. Telecommunication Ind AS 7 Statement of Cash Flows Cash and cash equivalents in the balance sheet comprise cash at banks and in hand and short-term deposits with an original maturity of three months or less which are subject to an insignificant risk of changes in value. Bank overdrafts that are repayable on demand and form an integral part of the Companys cash management are included as a component of cash and cash equivalents for the purpose of the Statement of Cash Flows.
228 Bharti Infratel Ltd. Telecommunication " Ind AS 8 Accounting Policies Current versus non-current classification The Company presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated as current when it is: Expected to be realised or intended to be sold or consumed in normal operating cycle Held primarily for the purpose of trading Expected to be realised within twelve months after the reporting period or Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period All other assets are classified as non-current. A liability is current when: It is expected to be settled in normal operating cycle It is held primarily for the purpose of trading It is due to be settled within twelve months after the reporting period or There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period The Company classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities. The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents. The Company has identified twelve months as its operating cycle. The preparation of the Companys 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 In the process of applying the Companys accounting policies management has made the following judgements which have the most significant effect on the amounts recognised in the financial statements: Leases Company as lessor The Company has assessed that its master service agreement (MSA) with operators contains lease of its tower sites and plant and equipment and has determined based on evaluation of the terms and conditions of the arrangements such as various lessees sharing the same tower sites with specific area the fair value of the asset and all the significant risks and rewards of ownership of these properties retained by the Company that such contracts are in the nature of operating lease and has accounted for as such. Lease rentals under operating leases are recognised as income on straight line basis over the lease term. Company as lessee The Company determines the lease term as the non-cancellable period of a lease together with both periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option; and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option. In assessing whether the Company is reasonably certain to exercise an option to extend a lease or not to exercise an option to terminate a lease it considers all relevant facts and circumstances that create an economic incentive for the Company to exercise the option to extend the lease or not to exercise the option to terminate the lease. The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of a lease requires significant judgment. The Company uses significant judgement in assessing the lease term (including anticipated renewals) and the applicable discount rate. The discount rate is generally based on the incremental borrowing rate calculated as the weighted average rate specific to the portfolio of leases with similar characteristics. 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 has 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. Impairment of non-financial assets The carrying amounts of the Companys non-financial assets other than deferred tax assets are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists then the assets recoverable amount is estimated. The recoverable amount of an asset or cash-generating unit (CGU) is the greater of its value in use and its fair value less costs to sell. In assessing value in use the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment anthology_newing assets that cannot be anthology_newed individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (CGU). The Companys corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired then the recoverable amount is determined for the CGU to which the corporate asset belongs. An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount and are recognised in Statement of Profit and Loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of goodwill if any allocated to the units and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis. Impairment losses recognised in prior periods are assessed at end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortisation if no impairment loss had been recognised. Such reversal is recognised in the statement of profit and loss except when the asset is carried at revalued amount the reversal is treated as a revaluation increase. Property plant and equipment Refer Note 3(a) for the estimated useful life of Property plant and equipment. Property plant and equipment also represent a significant proportion of the asset base of the Company. Therefore the estimates and assumptions made to determine their carrying value and related depreciation are critical to the Companys financial position and performance. The charge in respect of periodic depreciation is derived after determining an estimate of an assets expected useful life and the expected residual value at the end of its life. Increasing an assets expected life or its residual value would result in a reduced depreciation charge in the Statement of Profit and Loss. The useful lives and residual values of Company assets are determined by management at the time the asset is acquired and reviewed periodically. 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 technology. During the financial year 2014-15 the Company had re-assessed the useful life and residual value of all its assets accordingly effective April 1 2014 it has revised the useful life of certain class of shelters from 15 years to 10 years and revised the residual value of certain plant and machineries (batteries and DG sets) from Nil and 5% to 25% and 10% respectively. Further with effect from April 1 2018 the Company has reassessed the residual value of batteries and Diesel generators from 25% to 35% and from 10% to 20% respectively. Further with effect from April 1 2019 the Company has reassessed the residual value of air conditioners from Nil to 5%. Set out below is impact of such change on future period depreciation:- Decrease in depreciation March 31 2020 995 after March 31 2020 1 690 Allowance of doubtful trade receivable The expected credit loss is mainly based on the ageing of the receivable balances and historical experience. Based on the industry practices and the business environment in which the entity operates management considers that the trade receivables are provided if the payment are more than 90 days past due. The receivables are assessed on an individual basis or grouped into homogeneous groups and assessed for impairment collectively depending on their significance. Moreover trade receivables are written off on a case-to-case basis if deemed not to be collectible on the assessment of the underlying facts and circumstances. Asset retirement obligation The Company uses various leased premises to install its tower assets. A provision is recognised for the cost to be incurred for the restoration of these premises at the end of the lease period which is estimated based on actual quotes which are reasonable and appropriate under these circumstances. It is expected that these provisions will be utilised at the end of the lease period of the respective sites as per respective lease agreements. Share based payment The Company initially measures the cost of cash-settled transactions with employees using a binomial model to determine the fair value of the liability incurred. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option volatility and dividend yield and making assumptions about them. For cash-settled share-based payment transactions the liability needs to be remeasured at the end of each reporting period up to the date of settlement with any changes in fair value recognised in the profit or loss. This requires a reassessment of the estimates used at the end of each reporting period.
229 Cipla Ltd. Pharmaceuticals Ind AS 1 Presentation of Financial Statements Basis of preparation (i) Compliance with Indian Accounting Standards (Ind AS): The consolidated financial statements of the Group as at and for the year ended 31st March 2020 have been prepared and presented in accordance with Indian Accounting Standards (Ind-AS) notified under Section 133 of the Companies Act 2013 (the Act) [Companies (Indian Accounting Standards) Rules 2015] as amended from time to time and other relevant provisions of the Act and accounting principles generally accepted in India. (ii) Basis of measurement The consolidated financial statements have been prepared on a historical cost basis and on accrual basis except for the following: o Financial assets and liabilities are measured at fair value or at amortised cost depending on classification; o Derivative financial instruments and contingent consideration is measured at fair value; o Assets-held-for-sale measured at fair value less cost to sell; o Defined benefit plans plan assets measured at fair value; o Lease liability and Right of use of assets measured at fair value; o Share-based payments measured at fair value ; and o Investment in associates are accounted for using equity method. Current and non-current classification: All assets and liabilities have been classified as current and non-current as per the Groups normal operating cycle and other criteria set out in the Schedule III of the Act and Ind AS 1 Presentation of Financial Statements. 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 Groups normal operating cycle; b) it is held primarily for the purpose of being traded; c) it is expected to be realised within twelve months after the reporting date; or d) it is cash or a cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting date. Liabilities: A liability is classified as current when it satisfies any of the following criteria: a) it is expected to be settled in the Groups normal operating cycle; b) it is held primarily for the purpose of being traded; c) it is due to be settled within twelve months after the reporting date; or d) the Group does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting date. Terms of a liability that could at the option of the counterparty result in its settlement by the issue of equity instruments do not affect its classification. Current assets and liabilities include the current portion of current assets and liabilities respectively. All other assets and liabilities are classified as non-current. Deferred tax assets and liabilities are always disclosed as non-current.
230 Cipla Ltd. Pharmaceuticals Ind AS 102 Share based Payment Share-based payments a) Equity settled share-based payment transactions The Group operates equity-settled sharebased remuneration plans for its employees. All services received in exchange for the grant of any share-based payment are measured at their fair values on the grant date and is recognised as an employee expense in the profit or loss with a corresponding increase in equity over the period that the employees become unconditionally entitled to the options. The increase in equity recognised in connection with share-based payment transaction is presented as a separate component in equity under Employee stock options reserve. The amount recognised as an expense is adjusted to reflect the actual number of stock options that vest. Grant date is the date when the Group and employees have shared an understanding of terms and conditions on the arrangement. Where employees are rewarded using sharebased payments the fair value of employees services is determined indirectly by reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example profitability and sales growth). All share-based remuneration is ultimately recognised as an expense in the consolidated profit or loss. If vesting periods or other vesting conditions apply the expense is allocated over the vesting period based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any adjustment to cumulative sharebased compensation resulting from a revision is recognised in the current period. The number of vested options ultimately exercised by holder does not impact the expense recorded in any period. Market conditions are taken into account when estimating the fair value of the equity instruments granted. Upon exercise of share options the proceeds received net of any directly attributable transaction costs are allocated to share capital up to the nominal (or par) value of the shares issued with any excess being recorded as share premium. b) Cash settled share-based payment transactions For cash settled share based payments a liability is recognised for the services acquired measured initially at the fair value of the liability. At the end of each reporting period until the liability is settled and at the date of settlement the fair value is re-measured with any changes in fair value is recognised in the consolidated profit or loss.
231 Cipla Ltd. Pharmaceuticals Ind AS 103 Business Combinations Business combinations The Group uses the acquisition method of accounting to account for business combinations. The acquisition date is the date on which control is transferred to the acquirer. Judgement is applied in determining the acquisition date and determining whether control is transferred from one party to another. Control exists when the Group is exposed to or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through power over the entity. In assessing control potential voting rights are considered only if the rights are substantive. The Group measures goodwill as of the applicable acquisition date at the fair value of the consideration transferred including the recognised amount of any non-controlling interest in the acquiree less the net recognised amount of the identifiable assets acquired and liabilities assumed. When the fair value of the net identifiable assets acquired and liabilities assumed exceeds the consideration transferred a bargain purchase gain is recognised immediately in the OCI and accumulates the same in equity as capital reserve where there exists clear evidence of the underlying reasons for classifying the business combination as a bargain purchase else the gain is directly recognised in equity as capital reserve. Consideration transferred includes the fair values of the assets transferred liabilities incurred by the Group to the previous owners of the acquiree and equity interests issued by the Group. Consideration transferred also includes the fair value of any contingent consideration. Consideration transferred does not include amounts related to the settlement of preexisting relationships and employee service related payments. Any goodwill that arises on account of such business combination is anthology_newed annually for impairment. Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity then it is not re-measured and the settlement is accounted for within equity. Otherwise other contingent consideration is re-measured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recorded in the consolidated profit or loss. A contingent liability of the acquiree is assumed in a business combination only if such a liability represents a present obligation and arises from a past event and its fair value can be measured reliably. On an acquisition-by-acquisition basis the Group recognises any non-controlling interest in the acquiree either at fair value or at the noncontrolling interests proportionate share of the acquirees identifiable net assets. Transaction costs that the Group incurs in connection with a business combination such as finders fees legal fees due diligence fees and other professional and consulting fees are expensed as incurred.
232 Cipla Ltd. Pharmaceuticals Ind AS 105 Non current Assets Held for Sale and D Assets classified as held-for-sale Assets are classified as held-for-sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell. An impairment loss is recognised for any initial or subsequent write-down of the asset to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the asset is recognised at the date of de-recognition. Assets are not depreciated or amortised while they are classified as held-for-sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held-for-sale continue to be recognised. Assets classified as held-for-sale are presented separately from the other assets in the Balance sheet. The liabilities of a disposal group classified as held-for-sale are presented separately from other liabilities in the Consolidated Balance sheet.
233 Cipla Ltd. Pharmaceuticals Ind AS 109 Financial Instruments Fair value measurement The Group measures financial instruments at fair value at each reporting date. 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. (i) Financial assets (a) Classification: The Group classifies its financial assets in the following measurement categories: o Those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss) and o Those to be measured at amortised cost. The classification depends on the entitys 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 that are not held for trading this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at FVTOCI. (b) Initial recognition and measurement: 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 Group commits to purchase or sell the asset. All financial assets are recognised 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. (c) Subsequent measurement: For the purposes of subsequent measurement financial assets are classified in below categories: o Debt instruments at amortised cost. o Debt instruments measured at fair value through other comprehensive income (FVTOCI). o Derivatives and equity instruments at fair value through profit or loss (FVTPL). o Equity instruments measured at fair value through other comprehensive income (FVTOCI). (d) Equity investments: All equity investments in scope of Ind AS 109 are measured at fair value. Equity instruments which are held for trading are classified as FVTPL. For all other equity instruments the Group decides to classify the same either as at FVTOCI or FVTPL. The Group makes such election on an instrument-by-instrument basis. The classification is made on initial recognition and is irrevocable. If the Group decides to classify an equity instrument as at FVTOCI then all fair value changes on the instrument excluding dividends are recognised in the OCI. There is no recycling of the amounts from OCI to consolidated profit or loss even on sale of investment. However the Group may transfer the cumulative gain or loss within equity. Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in the consolidated profit or loss. Transaction cost of financial assets at FVTPL are expensed in the consolidated profit or loss. (e) De-recognition: The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expires or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset. When the Group 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 Group continues to recognise the transferred asset to the extent of the Groups continuing involvement. In that case the Group 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 Group has retained. 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 Group could be required to repay. (f) Impairment of financial assets: In accordance with Ind AS 109 the Group applies the expected credit loss (ECL) model for measurement and recognition of impairment loss on trade receivables or any contractual right to receive cash or another financial asset. For this purpose the Group follows a simplified approach for recognition of impairment loss allowance on the trade receivable balances. The application of this simplified approach does not require the Group to track changes in credit risk. Rather it recognises impairment loss allowance based on lifetime ECLs at each reporting date right from its initial recognition. As a practical expedient the Group uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forwardlooking estimates. At every reporting date the historical observed default rates are updated and changes in the forwardlooking estimates are analysed. (ii) Financial liabilities (a) Classification: 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. (b) Initial recognition and measurement: 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 Groups financial liabilities include trade and other payables loans and borrowings including bank overdrafts financial guarantee contracts and derivative financial instruments. (c) Subsequent measurement: The measurement of financial liabilities depends on their classification as described below: 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 the 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 the consolidated profit or loss. Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such 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 recognised in OCI. These gains/ losses are not subsequently transferred to the profit or loss. However the Group may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in consolidated any financial liability as fair value through profit and loss. (d) 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 consolidated 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 feD2es or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the consolidated profit or loss. This category generally applies to interestbearing loans and borrowings. (e) De-recognition: 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 de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the consolidated profit or loss. (iii) Derivative financial instruments The Group uses derivative financial instruments such as foreign exchange forward and currency option contracts interest rate swaps to hedge its foreign currency risks and interest rate risks respectively. Such derivative financial instruments are initially recognised at fair value on the date on which 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. (iv) Cash flow hedge The Group classifies its foreign exchange forward and currency option contracts and interest rate swaps that hedge foreign currency risk associated with highly probable forecasted as cash flow hedges and measures them at fair value. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the profit or loss and is included in the Other income/ expenses line item. Amounts previously recognised in other comprehensive income and accumulated in equity relating to effective portion (as described above) are reclassified to the consolidated profit or loss in the periods when the hedged item affects consolidated profit or loss in the same line as the recognised hedged item. When the hedging instrument expires or is sold or terminated or when a hedge no longer meets the criteria for hedge accounting any cumulative deferred gain/loss at that time remains in equity until the forecast transaction occurs. When the forecast transaction is no longer expected to occur the cumulative gain/ loss that was reported in equity are immediately reclassified to consolidated profit or loss. (v) 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 recognised amounts and there is an intention to settle on a net basis or realise 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 Group or the counterparty. vi) Financial guarantee contracts Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value and subsequently at the higher of: o the amount determined in accordance with the expected credit loss model as per Ind AS 109; and o the amount initially recognised less where appropriate cumulative amount of income recognised in accordance with the principles of Ind AS 115. The fair value of financial guarantees is determined based on the present value of the difference in cash flows between the contractual payments required under the debt instrument and the payments that would be required without the guarantee or the estimated amount that would be payable to a third party for assuming the obligations. Where guarantees in relation to loans or other payables of associates are provided for no compensation the fair values are accounted for as contributions and recognised as part of the cost of the investment. (vii) Put option The potential cash payments related to put options issued by the Group over the equity of subsidiary companies are accounted for as financial liabilities when such options may only be settled by exchange of a fixed amount of cash or another financial asset for a fixed number of shares in the subsidiary. In the absence of specific guidance under Ind AS 32 on accounting of such put option (NCI Put Option) initially the Group recognises the amount that may become payable under the option on exercise at fair value as financial liability. Subsequently the Group recognises the change in fair value of the option with a corresponding charge directly to equity. The Group recognises the cost of writing put options determined as the excess of the fair value of the options over any consideration received as a finance cost. Put option liabilities have been valued based on either: o Discounted cash flow valuation models; or o Observable market transactions (e.g. funding rounds and non-controlling interest buy-outs). In the event that the option expires unexercised the liability is derecognised with a corresponding adjustment to equity.
234 Cipla Ltd. Pharmaceuticals Ind AS 110 Consolidated Financial Statements Principles of consolidation The consolidated financial statements relate to Cipla Limited its subsidiaries and associates. Subsidiaries are all entities over which the Company exercises control. The Company exercises control if and only if it has the following: o power over the entity; o exposure or rights to variable returns from its involvement with the entity; and o the ability to use its power over the entity to affect the amount of its returns. The consolidated financial statements have been prepared on the following basis: o The consolidated financial statements of the Group have been combined on a line-by-line basis by adding together the book values of like items of assets liabilities income and expenses after fully eliminating intra-group balances and intra-group transactions and resulting unrealised profits. Unrealised losses resulting from intra-group transactions are eliminated unless cost cannot be recovered. o The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised within equity. o The profit and other comprehensive income attritubutable to non-controlling interest of subsidiaries are shown separately in the consolidated profit or loss and consolidated statement of changes in equity. o An associate is an entity over which the investor has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policies. Investments in associates are accounted for using the equity method unless otherwise stated. o Under the equity method on initial recognition the investment in an associate is recognised at cost. The carrying amount of the investment in associates is increased or decreased to recognise the Groups share of the profit or loss after the date of acquisition unless the share purchase agreement specify otherwise. When necessary adjustments are made to bring the accounting policies in line with those of the Group. Unrealised gains and losses on transactions between the Group and its associates are eliminated to the extent of the Groups interest in those entities. Where unrealised losses are eliminated the underlying asset is also anthology_newed for impairment. o The financial statements of the subsidiaries and associates used for the purpose of consolidation are drawn up to the same reporting date as that of the Group. o The consolidated financial statements have been prepared using uniform accounting policies for like transactions and other events in similar circumstances and are presented to the extent possible in the same manner as the Companys separate financial statements. o Upon loss of control the Company derecognises the assets and liabilities of the subsidiary any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in the consolidated profit or loss. If the Company retains any interest in the previous subsidiary then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee or as a FVTOCI or FVTPL financial asset depending on the level of influence retained.
235 Cipla Ltd. Pharmaceuticals Ind AS 115 Revenue from Contracts with Customers/ Revenue recognition A contract with a customer exists only when the parties to the contract have approved it and are committed to perform their respective obligations the Group can identify each partys rights regarding the distinct goods or services to be transferred (performance obligations) the Group can determine the transaction price for the goods or services to be transferred the contract has commercial substance and it is probable that the Group will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer. Revenues are recorded in the amount of consideration to which the Group expects to be entitled in exchange for performance obligations upon transfer of control to the customer and is measured at the fair value of the consideration received or receivable net of estimated incentives returns chargeback rebates sales tax and applicable trade discounts allowances Goods and Services Tax (GST) and amounts collected on behalf of third parties. (i) Sale of products: The majority of customer contracts that the Group enters into consist of a single performance obligation for the delivery of pharmaceutical products. The Group recognises revenue from product sales when control of the product transfers generally upon shipment or delivery to the customer or in certain cases upon the corresponding sales by customer to a third party. The Group records product sales net of estimated incentives/discounts returns chargeback rebates and other related charges. These are generally accounted for as variable consideration estimated in the same period the related sales occur. The methodology and assumptions used to estimate rebates and returns are monitored and adjusted regularly in the light of contractual and legal obligations historical trends past experience and projected market conditions. The revenue for such variable consideration is included in the Companys estimate of the transaction price only if it is highly probable that a significant reversal of revenue will not occur once any uncertainty is resolved. In making this assessment the Company considers its historical record of performance on similar contracts. (ii) Sales by clearing and forwarding agents: Revenue from sales of generic products in India is recognised upon delivery of products to distributors by clearing and forwarding agents of the Company. Control in respect of ownership of generic products are transferred by the Company when the goods are delivered to distributors from clearing and forwarding agents. Clearing and forwarding agents are generally compensated on a commission basis as a percentage of sales made by them. (iii) Out licensing arrangements: Revenues include amounts derived from product out-licensing agreements. The Group enters into collaborations and out-licensing arrangement of the Groups products to other parties. Licensing arrangements performance obligations generally include intellectual property (IP) rights certain R&D and contract manufacturing services. The Group accounts for IP rights and services separately if they are distinct i.e. if they are separately identifiable from other items in the arrangement and if the customer can benefit from them on their own or with other resources that are readily available to the customer. The consideration is allocated between IP rights and services based on their relative stand-alone selling prices. Revenue from IP rights is recognised at the point in time when control of the distinct license is transferred to the customer the Group has a present right to payment and risks and rewards of ownership are transferred to the customer. Revenue from sales-based milestones and royalties promised in exchange for a license of IP is recognised only when or as the later of subsequent sale or the performance obligation to which some or all of the sales-based royalty has been allocated is satisfied. The Group estimates variable consideration in the form of sales-based milestones by using the expected value or most likely amount method depending upon which the Group expects to better predict the amount of consideration to which it will be entitled. (iv) Service fee: Revenue from services rendered is recognised in the consolidated profit or loss as the underlying services are performed. Upfront non-refundable payments received under these arrangements are deferred and recognised as revenue over the expected period over which the related services are expected to be performed. v) Interest income: Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable which is the rate that discounts estimated future cash receipts through the expected life of the financial asset to that assets net carrying amount on initial recognition. (vi) Dividends: Dividend income from investments is recognised when the right to receive payment has been established provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably.
236 Cipla Ltd. Pharmaceuticals Ind AS 116 Leases Leases 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 fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets even if that right is not explicitly specified in an arrangement. (i) Group as a lessee The Groups lease asset classes primarily consist of leases for land buildings vehicle and computers. The Group assesses whether a contract contains a lease at inception of a contract. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset the Group assesses whether: (i) the contract involves the use of an identified asset (ii) the Group has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Group has the right to direct the use of the asset. At the date of commencent of the lease the Group recognises right-of-use asset (ROU) and corresponding lease liability for all lease arrangement in which it is a lessee except for leases with a term of twelve months or less (short term leases) and low value leases. For these short-term and low value leases the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease. Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised. The right-of-use assets are initially recognised at cost which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses. Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment anthology_newing the recoverable amount (i.e the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs. The lease liability is initially measured at amortised cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or if not readily determinable using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Group changes its assessment if whether it will exercise an extension or a termination option. Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows. (ii) Group as a lessor Leases for which the Group is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee the contract is classified as a finance lease. All other leases are classified as operating leases. When the Group is an intermediate lessor it accounts for its interests in the head lease and the sublease separately. The sublease is classified as a finance or operating lease by reference to the right of-use asset arising from the head lease. For operating leases rental income is recognised on a straight-line basis over the term of the relevant lease. (iii) Arrangements in the nature of lease The Group enters into agreements comprising a transaction or series of related transactions that does not take the legal form of a lease but conveys the right to use the asset in return for a payment or series of payments. In case of such arrangements the Group applies the requirements of Ind AS 116 Leases to the lease element of the arrangement. For the purpose of applying the requirements under Ind AS 116 Leases payments and other consideration required by the arrangement are separated at the inception of the arrangement into those for lease and those for other elements. (iv) Transition to Ind AS 116 Effective 1st April 2019 the Group has adopted lnd AS 116 "Leases" using the modified retrospective method. The Group has applied the standard to its leases with the cumulative impact recognised on the date of initial application (1st April 2019). Accordingly previous period information has not been restated. On 1st April 2019 the Group has recognised a lease liability measured at the present value of the remaining lease payments and right-of-use (ROU) asset at an amount equal to lease liability (adjusted for any related prepayments). Accordingly on transition to lnd AS 116 the Group recognised lease liabilities and corresponding equivalent ROU assets.The Group has elected not to apply the requirements of lnd AS 116 to short-term leases and certain leases for which the underlying asset is of low value. In the statement of profit or loss for the current period operating lease expenses which were recognised as other expenses in previous periods is now recognised as depreciation expense for the right-of-use asset and finance cost for imputed interest on lease liability. The adoption of this standard did not have any significant impact on the profit for the period and earnings per share. The following is the summary of practical expedients elected on initial application: o Applied a single discount rate to a portfolio of leases of similar assets in similar economic environment with a similar end date. o Applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term on the date of initial application. o Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application. o Applied the practical expedient to grand father the assessment of which transactions are leases. Accordingly Ind AS 116 is applied only to contracts that were previously identified as leases under Ind AS 17. Comparatives as at and for the year ended 31st March 2019 have not been retrospectively adjusted and therefore will continue to be reported under the accounting policies included as part of our Annual Report for year ended 31st March 2019.
237 Cipla Ltd. Pharmaceuticals Ind AS 12 Income Taxes Taxes Income tax expense comprises of current tax expense and deferred tax expense/benefit. Current and deferred taxes are recognised in the consolidated profit or loss except when they relate to items that are recognised in other comprehensive income or directly in equity in which case the current and deferred tax are also recognised in other comprehensive income or directly in equity. (i) Current income tax: Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the provisions of the applicable income tax law of the respective jurisdiction. The current tax is calculated using tax rates that have been enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. ii) Deferred tax: Deferred tax is recognised using the Balance sheet approach on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilised except when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction affects neither the accounting profit nor taxable profit or loss. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured using substantively enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. Minimum Alternate Tax (MAT) credit is recognised as an asset only when and to the extent it is resonably certain that the Group will pay normal income tax during the specified period. Such asset is reviewed at each reporting date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Group will pay normal income tax during the specified period. The Group recognises deferred tax liability for all taxable temporary differences associated with investments in subsidiaries and associates except to the extent that both of the following conditions are satisfied: o When the Group is able to control the timing of the reversal of the temporary difference; and o It is probable that the temporary difference will not reverse in the foreseeable future. Dividend distribution tax arising out of payment of dividends to shareholders under the Indian Income tax regulations and tax on dividend received from foreign subsidiary is not considered as tax expense for the Group and all such taxes are recognised in the statement of changes in equity as part of the associated dividend payment and receipt. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities.
238 Cipla Ltd. Pharmaceuticals " Ind AS 16 Property Property plant and equipment (i) Recognition and measurement: All items of property plant and equipment including freehold land are initially recorded at cost. Cost of property plant and equipment comprises purchase price non-refundable taxes levies and any directly attributable cost of bringing the asset to its working condition for the intended use. The cost includes the cost of replacing part of the property plant and equipment and borrowing costs that are directly attributable to the acquisition construction or production of a qualifying property plant and equipment. Subsequent to initial recognition property plant and equipment other than freehold land are measured at cost less accumulated depreciation and any accumulated impairment losses. Freehold land has an unlimited useful life and therefore is not depreciated. The carrying values of property plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. (Refer note 1.8 for more details). The Group had applied for the one time transition exemption of considering the carrying cost on the transition date i.e. 1st April 2015 as the deemed cost under Ind AS and regarded thereafter as historical cost.When parts of an item of property plant and equipment have different useful lives they are accounted for as separate items (major components) of property plant and equipment. The cost of an item of property plant and equipment is recognised as an asset if and only if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Items such as spare parts stand-by equipment and servicing equipment that meet the definition of property plant and equipment are capitalised at cost and depreciated over their useful life. Costs in the nature of repairs and maintenance are recognised in the consolidated profit or loss as and when incurred. The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for the provision is met. Advances paid towards the acquisition of property plant and equipment outstanding at each reporting date is disclosed as capital advance under non-current assets. Capital work-in-progress included in non-current assets comprises of direct costs related incidental expenses and attributable interest. Capital work-in-progress are not depreciated as these assets are not yet available for use. (ii) Depreciation: Depreciation on property plant and equipment (other than freehold land) is provided based on useful life of the assets as prescribed in Schedule II of the Act. Depreciation on property plant and equipment which are added/disposed off during the year is provided on pro-rata basis with reference to the month of addition/ deletion in the consolidated profit or loss. For certain class of assets based on the technical evaluation and assessment the Group believes that the useful lives adopted by it best represent the period over which an asset is expected to be available for use. Accordingly for these assets the useful lives estimated by the Group are different from those prescribed in the Schedule II. The residual values useful lives and methods of depreciation of property plant and equipment are reviewed at each financial year end and if expectations differ from previous estimates the change(s) are accounted for as a change in an accounting estimate in accordance with Ind AS 8 Accounting Policies Changes in Accounting Estimates and Errors. The estimated useful lives are as follows Property plant and equipment; Useful Life Buildings Factory and Administrative Buildings; 25 to 60 years Buildings Ancillary structures; 3 to 10 years Plant and equipments; 2 to 25 years Furniture and fixtures; 3 to 10 years Vehicles; 4 to 8 years (iii) De-recognition: An item of property plant and equipment is de-recognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated profit or loss.
239 Cipla Ltd. Pharmaceuticals Ind AS 19 Employee Benefits Employee Benefits (i) Short term employee benefits Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. (ii) Defined contribution plans Post-retirement contribution plans such as Employees' Pension scheme Labour Welfare Fund Employee State Insurance Corporation (ESIC) are charged to the consolidated profit or loss for the year when the contributions to the respective funds accrue. The Group does not have any obligation other than the contribution made. In respect of Indian subsidiaries eligible employees receive benefits from a provident fund which is a defined contribution plan. Both the eligible employee and respective companies make monthly contributions to this provident fund plan equal to a specified percentage of the covered employees salary. Amounts collected under provident fund plan are deposited in a Government administered provident fund. Indian subsidiaries have no further obligation to plan beyond its monthly contributions. In respect of USA subsidiaries there is a 401(k) plan that provides defined contribution retirement benefits for all the employees. Participants may contribute a portion of their compensation to the plan subject to the limitations under the Internal Revenue Code. The Companys contributions to the plan are at the discretion of the Board. Obligations for contributions to 401(k) plan are recognised as an employee benefits expense in profit or loss as incurred. For other foreign subsidiaries contributions to defined contribution plans are charged to the consolidated profit or loss as and when the services are received from the employees. (iii) Defined benefit plan a) Employee's provident fund: In accordance with The Employees' Provident Fund and Miscellaneous Provision Act 1952 all eligible employees of the Company are entitled to receive benefits under the provident fund plan in which both the employee and employer (at a determined rate) contribute monthly to Cipla Limited Employees Provident Fund Trust a Trust set up by the Company to manage the investments and distribute the amounts to employees at the time of separation from the Group or retirement whichever is earlier. This plan is a defined obligation plan as the Company is obligated to provide its members a rate of return which should at a minimum meet the interest rate declared by the Government - administered provident fund. A part of the Companys contribution is transferred to the Government - administered pension fund. The contributions made by the Company and the shortfall of interest if any are recognised as an expense in the consolidated profit or loss under "Employee benefits expense". b) Gratuity obligations: Post-retirement benefit plans such as gratuity for eligible employees of the Company and its Indian subsidiaries is determined on the basis of actuarial valuation made by an independent actuary as at the reporting date. Re- easurement comprising actuarial gains and losses theeffect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding net interest) is recognised in other comprehensive income in the period in which they occur. Re-measurement recognised in other comprehensive income is included in retained earnings and will not be reclassified to the consolidated profit or loss. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the consolidated profit or loss. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in the consolidated profit or loss as past service cost. (iv) Other benefit plan: Liability in respect of compensated absences becoming due or expected to be availed within one year from the reporting date is recognised on the basis of undiscounted value of estimated amount required to be paid or estimated value of benefit expected to be availed by the employees. Liability in respect of compensated absences becoming due or expected to be availed more than one year after the reporting date is estimated on the basis of an actuarial valuation performed by an independent actuary using the projected unit credit method at the year-end. Actuarial gains/losses are immediately taken to the consolidated profit or loss and are not deferred. (v) Termination benefits: Termination benefits are recognised in the consolidated profit or loss when: o The Group has a present obligation as a result of past event; o A reliable estimate can be made of the amount of the obligation; and o It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation.
240 Cipla Ltd. Pharmaceuticals Ind AS 2 Inventories Inventories Raw materials and packing materials are valued at lower of cost and net realisable value after providing for obsolescence if any. However these items are considered to be realisable at cost if the finished products in which they will be used are expected to be sold at or above cost. Stores spares and consumables work-in-progress stock-in-trade and finished goods are valued at lower of cost and net realisable value. Cost includes expenditures incurred in acquiring the inventories production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of finished goods and work-in-progress cost includes an appropriate share of overheads based on normal operating capacity. Cost of inventories is determined on a weighted moving average basis. Stores and spares are inventories that do not qualify to be recognised as property plant and equipment and consists of packing materials engineering spares (such as machinery spare parts) and consumables (such as lubricants cotton waste and oils) which are used in operating machines or consumed as indirect materials in the manufacturing process. The factors that the Group considers in determining the provision for slow moving obsolete and other non-saleable inventory include estimated shelf life planned product discontinuances price changes ageing of inventory and introduction of competitive new products to the extent each of these factors impact the Groups business and markets. The Group considers all these factors and adjusts the inventory provision to reflect its actual experience on a periodic basis.
241 Cipla Ltd. Pharmaceuticals Ind AS 20 Accounting for Government Grants and Di Government grants Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an asset it is recognised as income in equal amounts over the expected useful life of the related asset and presented within other income. When loans or similar assistance are provided by the government or related institutions with an interest rate below the current applicable market rate the effect of this favourable interest is regarded as a government grant. The loan or assistance is initially recognised and measured at fair value and the government grant is measured as the difference between initial carrying value of the loan and the proceeds received. The loan is subsequently measured at amortised cost. Export entitlement from Government authority are recognised in the consolidated profit or loss as other operating revenue when the right to receive credit as per the terms of the scheme is established in respect of the exports made by the Group and where there is no significant uncertainity regarding the ultimate collection of the relevant export proceeds.
242 Cipla Ltd. Pharmaceuticals Ind AS 21 The Effects of Changes in Foreign Excha Functional currency and rounding of amounts: The consolidated financial statements are presented in Indian Rupee (H) which is also the functional currency of the parent Company. All amounts disclosed in the consolidated financial statements and notes have been rounded off to the nearest crore or decimal thereof as per the requirement of Schedule III unless otherwise stated. Amount less than H50 000/- is presented as H0.00 crore. Items included in the consolidated financial statements of each of the Groups entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency) unless use of different currency is appropriate. Foreign currency translation Foreign currency transactions and balances: Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary items denominated in foreign currency at prevailing reporting date exchange rates are recognised in the consolidated profit or loss. Non-monetary items are measured at historical cost (translated using the exchange rates at the transaction date) except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined. Group Companies: The financial statements of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated as follows: o Assets and liabilities are translated at the closing rate prevailing on the reporting date; o Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate; o Income and expenses are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates in which case income and expenses are translated at the dates of the transactions); and o All resulting exchange differences are recognised in other comprehensive income. On disposal of a foreign operation the related cumulative translation differences recognised in equity are re-classified to consolidated profit or loss and are recognised as part of the gain or loss on disposal.
243 Cipla Ltd. Pharmaceuticals Ind AS 23 Borrowing Costs Borrowing costs Borrowing costs consists of interest ancillary costs and other costs in connection with the borrowing of funds and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to interest costs. Borrowing costs attributable to acquisition and/or construction of qualifying assets are capitalised as a part of the cost of such assets up to the date such assets are ready for their intended use. Other borrowing costs are charged to the consolidated profit or loss.
244 Cipla Ltd. Pharmaceuticals Ind AS 36 Impairment of Assets Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists or when annual impairment anthology_newing for an asset is required the Group estimates the assets recoverable amount. An assets recoverable amount is the higher of an assets or cash-generating units (CGU) fair value less costs of disposal and its value-in-use. Recoverable amount is determined for an individual asset unless the asset does not generate cash inflows that are largely independent of those from other assets or Group of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. The goodwill acquired in a business combination is for the purpose of impairment anthology_newing allocated to cash-generating units that are expected to benefit from the synergies of the combination. Goodwill that forms part of the carrying amount of an investment in an associate is not recognised separately and therefore is not anthology_newed for impairment separately. Instead the entire amount of the investment in an associate is anthology_newed for impairment as a single asset when there is objective evidence that the investment in an associate may be impaired. An impairment loss in respect of equity accounted investee is measured by comparing the recoverable amount of investment with its carrying amount. An impairment loss is recognised in the profit or loss and reversed if there has been a favorable change in the estimates used to determine the recoverable amount. Impairment losses including impairment on inventories are recognised in the consolidated profit or loss.
245 Cipla Ltd. Pharmaceuticals " Ind AS 37 Provisions Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of managements 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. Contingencies Disclosure of contingent liabilities is made when there is a possible obligation or a present obligation that may but probably will not require an outflow of resources. Where there is possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote no provision or disclosure is made. Contingent assets are not recognised in the consolidated financial statements. However contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise the asset and related income are recognised in the period in which the change occurs.
246 Cipla Ltd. Pharmaceuticals Ind AS 38 Intangible Assets Intangible assets (i) Recognition and measurement: Intangible assets such as marketing intangibles trademarks technical know-how brands and computer software product related intangibles distribution network non-compete rights government contracts acquired separately are measured on initial recognition at cost. Further payments to third parties for in-licensed products generally take the form of up-front and milestones payments which are capitalised following a cost accumulation approach to variable payments (milestones) for the acquisition of intangible assets when receipt of economic benefits out of the separately purchased transaction is considered to be probable. Following initial recognition intangible assets are carried at cost less accumulated amortisation and accumulated impairment loss if any. Subsequent expenditures are capitalised only when they increase the future economic benefits embodied in the specific asset to which they relate. (ii) Goodwill: Goodwill represents the excess of consideration transferred together with the amount of non-controlling interest in the acquiree over the fair value of the identifiable net assets acquired. Goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investees the carrying amount of goodwill is included in the carrying amount of the investment and any impairment loss on such an investment is not allocated to any asset including goodwill that forms part of the carrying value of the equity accounted investee. (iii) In-Process Research and Development assets (IPR&D) or Intangible assets under development: Acquired research and development intangible assets that are under development are recognised as In-Process Research and Development assets (IPR&D) or Intangible assets under development. IPR&D assets are not amortised but evaluated for potential impairment on an annual basis or when there are indications that the carrying value may not be recoverable. Subsequent expenditure on an in-process research or development project acquired separately or in a business combination and recognised as an intangible asset is: o Recognised as an expense when incurred if it is research expenditure; o Capitalised if the cost can be reliably measured the product or process is technically and commercially feasible and the Group has sufficient resources to complete the development and to use and sell the asset. (iv) Expenditure on regulatory approval: Expenditure for obtaining regulatory approvals and registration of products for overseas markets is charged to the consolidated profit or loss. (v) Amortisation: The Group amortises intangible assets with a finite useful life using the straight-line method over the following useful lives: (Refer Annual Report) (vi) De-recognition of intangible assets: Intangible assets are de-recognised either on their disposal or where no future economic benefits are expected from their use. Losses arising on such de-recognition are recorded in the consolidated profit or loss and are measured as the difference between the net disposal proceeds if any and the carrying amount of respective intangible assets as on the date of de-recognition.
247 Cipla Ltd. Pharmaceuticals Ind AS 40 Investment Property Investment properties Property that is held for long-term rental yields or for capital appreciation or both and that is not occupied by the Group is classified as investment property. Investment property is measured initially at its cost including related transaction costs and borrowing costs where applicable. Subsequent expenditure is capitalised to the assets carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced the carrying amount of the replaced part is de-recognised. Investment properties are depreciated using the straight-line method over their estimated useful lives. Investment properties generally have a useful life of 5-60 years. The useful life has been determined based on technical evaluation performed by the managements expert.
248 Cipla Ltd. Pharmaceuticals Ind AS 7 Statement of Cash Flows Cash and cash equivalents Cash and cash equivalents comprise cash on hand and cash at bank 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.
249 Cipla Ltd. Pharmaceuticals " Ind AS 8 Accounting Policies Consistency of accounting policy: The accounting policies are applied consistently to all the periods presented in the financial statements except where a newly issued accounting standard is initially adopted or a revision to an existing standard requires a change in the accounting policy hitherto in use. Use of estimates and judgements The preparation of consolidated financial statements requires management of the Group to make judgements estimates and assumptions that affect the reported assets and liabilities revenue and expenses and disclosures relating to contingent liabilities. Management believes that the estimates used in the preparation of the consolidated financial statements are prudent and reasonable. Estimates and underlying assumptions are reviewed by management at each reporting date. Actual results could differ from these estimates. Any revision of these estimates is recognised prospectively in the current and future periods. Following are the critical judgements and estimates: 1.3.1 Judgements (i) Leases: Ind AS 116 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease if the use of such option is reasonably certain. The Group makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term the Group considers factors such as any significant leasehold improvements undertaken over the lease term costs relating to the termination of the lease and the importance of the underlying asset to Groups operations taking into account the location of the underlying asset and the availability of suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances. (ii) Income taxes: The major tax jurisdictions for the Group are India US and South Africa though the Group foreign jurisdictions. Significant judgments are involved in determining the provision for income taxes including judgment 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. The recognition of taxes that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on the specific facts and circumstances.D8 In assessing the realisability of deferred tax assets management considers whether some portion or all of the deferred tax assets will not be realised. The ultimate realisation of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversals of deferred income tax liabilities projected future taxable income and tax planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred income tax assets are deductible management believes that the Group will realise the benefits of those deductible differences. The amount of the deferred income tax assets considered realisable however could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced. (iii) Research and development costs: Management monitors progress of internal research and development projects by using a project management system. Significant judgement is required in distinguishing research from the development phase. Development costs are recognised as an asset when all the criteria are met whereas research costs are expensed as incurred. Management also monitors whether the recognition requirements for development costs continue to be met. This is necessary due to inherent uncertainty in the economic success of any product development. (iv) Provisions and contingent liabilities: The Group exercises judgement in determining if a particular matter is possible probable or remote. The Group also exercises judgement in measuring and recognising provisions and the exposures to contingent liabilities related to pending litigation or other outstanding claims subject to negotiated settlement mediation government regulation as well as other contingent liabilities. Judgement is necessary in assessing the likelihood that a pending claim will succeed or a liability will arise and to quantify the possible range of the financial settlement. Because of the inherent uncertainty in this evaluation process actual outcome may be different from the originally concluded position. (v) Business Combinations: The Company uses the acquisition method of accounting to account for business combinations. The acquisition date is the date on which control is transferred to the acquirer. Judgement is applied in determining the acquisition date determining whether control is transferred from one party to another and whether acquisition constitute a business or asset acquisition. Control exists when the Company is exposed to or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through power over the entity. In assessing control potential voting rights are considered only if the rights are substantive. Estimates (i) Useful lives of property plant and equipment and intangible assets: Property plant and equipment and intangibles assets represent a significant proportion of the asset base of the Group. The charge in respect of periodic depreciation is derived after determining an estimate of an assets expected useful life and the expected residual value at the end of its life. The useful lives and residual values of Group'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 technology. (ii) Sales returns: The Group accounts for sales returns by recording an allowance for sales returns concurrent with the recognition of revenue at the time of a product sale. This allowance is based on the Group's estimate of expected sales returns. The Group deals in various products and operates in various markets. Accordingly the estimate of sales returns is determined primarily by the Groups historical experience in the markets in which the Group operates. With respect to established products the Group considers its historical experience of sales returns levels of inventory in the distribution channel estimated shelf life product discontinuances price changes of competitive products and the introduction of competitive new products to the extent each of these factors impact the Groups business and markets. (iii) Provision for chargeback rebates and discounts: Provisions for chargeback rebates discounts other deductions and medicaid payments are estimated and provided for in the year of sales and recorded as reduction of revenue. A chargeback claim is a claim made by the wholesaler for the difference between the price at which the product is initially invoiced to the wholesaler and the net price at which it is agreed to be procured from the Company. Provisions for such chargebacks are accrued and estimated based on historical average chargeback rate actually claimed over a period of time current contract prices with wholesalers/ other customers and estimated inventory holding by the wholesaler. (iv) Shelf stock adjustments: Shelf stock adjustments are credits issued to customers to reflect decreases in the selling price of products sold by the Company and are accrued when the prices of certain products decline as a result of increased competition upon the expiration of limited competition or exclusivity periods. These credits are customary in the pharmaceutical industry and are intended to reduce the customer inventory cost to better reflect the current market prices. The determination to grant a shelf stock adjustment to a customer is based on the terms of the applicable contract which may or may not specifically limit the age of the stock on which a credit would be offered. (v) Expected credit loss: The Group applies Expected Credit Loss (ECL) model for measurement and recognition of loss allowance on the following: Trade receivables and lease receivables Financial assets measured at amortised cost (other than trade receivables and lease receivables) Financial assets measured at fair value through other comprehensive income (FVTOCI) In accordance with Ind AS 109 the Group applies ECL model for measurement and recognition of impairment loss on the trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115. For this purpose the Group follows simplified approach for recognition of impairment loss allowance on the trade receivable balances. The application of simplified approach does not require the Group to track changes in credit risk. Rather it recognises impairment loss allowance based on lifetime ECLs at each reporting date right from its initial recognition. As a practical expedient the Group uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forward-looking estimates. At every reporting date the historical observed default rates are updated and changes in the forward-looking estimates are analysed. In case of other assets the Group determines if there has been a significant increase in credit risk of the financial asset since initial recognition. If the credit risk of such assets has not increased significantly an amount equal to twelve months ECL is measured and recognised as loss allowance. However if credit risk has increased significantly an amount equal to lifetime ECL is measured and recognised as loss allowance. (vi) Accounting for defined benefit plans In accounting for post-retirement benefits several statistical and other factors that attempt to anticipate future events are used to calculate plan expenses and liabilities. These factors include expected return on plan assets discount rate assumptions and rate of future compensation increases. To estimate these factors actuarial consultants also use estimates such as withdrawal turnover and mortality rates which require significant judgment. The actuarial assumptions used by the Group may differ materially from actual results in future periods due to changing market and economic conditions regulatory events judicial rulings higher or lower withdrawal rates or longer or shorter participant life spans. (vii) Impairment: An impairment loss is recognised for the amount by which an assets or cash-generating units carrying amount exceeds its recoverable amount. To determine the recoverable amount management estimates expected future cash flows from each asset or cashgenerating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. In the process of measuring expected future cash flows management makes assumptions about future operating results. These assumptions relate to future events and circumstances. The actual results may vary and may cause significant adjustments to the Groups assets. In most cases determining the applicable discount rate involves estimating the appropriate adjustment to market risk and the appropriate adjustment to assetspecific risk factors. (viii) Fair value of financial instruments: Management uses valuation techniques in measuring the fair value of financial instruments where active market quotes are not available. Details of the assumptions used are given in the notes regarding financial assets and liabilities. In applying the valuation techniques management makes maximum use of market inputs and uses estimates and assumptions that are as far as possible consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arms length transaction at the reporting date. Recent accounting pronouncements Ministry of Corporate Affairs (MCA) notifies new standards or amendments to the existing standards. There is no such notification which would have been applicable from 1st April 2020. New and amended standards adopted by the Group: The Group has applied the following standards and amendments for the first time for their annual reporting period commencing 1st April 2019: o Ind AS 116 Leases o Amendment to Ind AS 109 Financial Instruments Prepayment Features with Negative Compensation o Amendment to Ind AS 12 Income Taxes Appendix C Uncertainty over Income Tax Treatments and Dividend distribution tax o Amendment to Ind AS 28 Investments in Associates and Joint Ventures o Amendment to Ind AS 19 Employee Benefits plan amendment curtailment or settlement. These amendments did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
250 Coal India Ltd. Energy Ind AS 1 Presentation of Financial Statements Basis of preparation of financial statements i. The financial statements of the Company (CIL Consolidated) have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the section 133 of Companies Act 2013 (The Act ) Indian Accounting Standards) Rules 2015. ii. The financial statements have been prepared on historical cost basis of measurement except for - certain financial assets and liabilities measured at fair value (refer accounting policy on financial instruments in para 2.15); - Defined benefit plans- plan assets measured at fair value; - Inventories at Cost or NRV whichever is lower (refer accounting policy in para no. 2.21). Rounding of amounts Amounts in these financial statements have been unless otherwise indicated rounded off to rupees in crore upto two decimal points. Current and Non-Current Classification The Company presents assets and liabilities in the Balance Sheet based on current/ non-current classification. An asset is treated as current by the Company when: (a) it expects to realise the asset or intends to sell or consume it in its normal operating cycle; (b) it holds the asset primarily for the purpose of trading; (c) it expects to realise the asset within twelve months after the reporting period; or (d) the asset is cash or a cash equivalent (as defined in Ind AS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current. A liability is treated as current by the Company when: (a) it expects to settle the liability in its normal operating cycle; (b) it holds the liability primarily for the purpose of trading; (c) the liability is due to be settled within twelve months after the reporting period; or (d) it does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could at the option of the counterparty result in its settlement by the issue of equity instruments do not affect its classification. All other liabilities are classified as non-current.
251 Coal India Ltd. Energy Ind AS 105 Non current Assets Held for Sale and D Non-current assets held for sale The Company classifies non-current assets and (or disposal groups) as held for sale if their carrying amounts will be recovered principally through a sale rather than through continuing use. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the sale expected within one year from the date of classification. For these purposes sale transactions include exchanges of non-current assets for other non-current assets when the exchange has commercial substance. The criteria for held for sale classification is regarded met only when the assets or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups) its sale is highly probable; and it will genuinely be sold not abandoned. The Company treats sale of the asset or disposal group to be highly probable when: - The appropriate level of management is committed to a plan to sell the asset (or disposal group) - An active programme to locate a buyer and complete the plan has been initiated - The asset (or disposal group) is being actively marketed for sale at a price that is reasonable in relation to its current fair value - The sale is expected to qualify for recognition as a completed sale within one year from the date of classification and - Actions required to complete the plan indicate that it is unlikely those significant changes to the plan will be made or that the plan will be withdrawn.
252 Coal India Ltd. Energy Ind AS 106 Exploration for and Evaluation of Mine Stripping Activity Expense/Adjustment In case of opencast mining the mine waste materials (overburden) which consists of soil and rock on the top of coal seam is required to be removed to get access to the coal and its extraction. This waste removal activity is known as Stripping.In opencast mines the company has to incur such expenses over the life of the mine (as technically estimated). Therefore as a policy in the mines with rated capacity of one million tonnes per annum and above cost of Stripping is charged on technically evaluated average stripping ratio (OB: COAL) at each mine with due adjustment for stripping activity asset and ratio-variance account after the mines are brought to revenue. Net of balances of stripping activity asset and ratio variance at the Balance Sheet date is shown as Stripping Activity Adjustment under the head Non - Current Provisions / Other Non-Current Assets as the case may be. The reported quantity of overburden as per record is considered in calculating the ratio for OBR accounting where the variance between reported quantity and measured quantity is within the permissible limits as detailed hereunder:- Annual Quantum of OBR Of the Mine: Permissible limits of variance (%) Less than 1 Mill. CUM : + /- 5% Between 1 and 5 Mill. CUM : + /- 3% More than 5 Mill. CUM : + /- 2% However where the variance is beyond the permissible limits as above the measured quantity is considered. In case of mines with rated capacity of less than one million tonne the above policy is not applied and actual cost of stripping activity incurred during the year is recognised in Statement of Profit and Loss.
253 Coal India Ltd. Energy Ind AS 109 Financial Instruments 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 Initial recognition and measurement All financial assets are recognised initially at fair value in the case of financial assets not recorded at fair value through profit or loss plus transaction costs that are attributable to the acquisition of the financial asset. 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. Subsequent measurement For purposes of subsequent measurement financial assets are classified in four categories: - Debt instruments at amortised cost - Debt instruments at fair value through other comprehensive income (FVTOCI) - Debt instruments derivatives and equity instruments at fair value through profit or loss (FVTPL) - Equity instruments measured at fair value through other comprehensive income (FVTOCI) Debt instruments at amortised cost A debt instrument 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 profit or loss. The losses arising from impairment are recognised in the profit or loss. Debt instrument at FVTOCI A debt instrument is classified as at the FVTOCI 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 assets contractual cash flows represent SPPI. Debt instruments included within the FVTOCI 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 P&L. On derecognition of the asset cumulative gain or loss previously recognised in OCI is reclassified from the equity to P&L. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR method. Debt instrument at FVTPL FVTPL is a residual category for debt instruments. Any debt instrument which does not meet the criteria for categorization as at amortized cost or as FVTOCI is classified as at FVTPL. In addition the Company may elect to designate a debt instrument which otherwise meets amortized cost or FVTOCI 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). The Company has not designated any debt instrument as at FVTPL. Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the P&L. Equity investments in subsidiaries associates and Joint Ventures In accordance of Ind AS 101 (First time adoption of Ind AS) the carrying amount of these investments as per previous GAAP as on the date of transition is considered to be the deemed cost. Subsequently Investment in subsidiaries associates and joint ventures are measured at cost. In case of consolidated financial statement Equity investments in associates and joint ventures are accounted as per equity method as prescribed in para 10 of Ind AS 28. Other Equity Investment All other equity investments in scope of Ind AS 109 are measured at fair value through profit or loss. For all other equity instruments the Company may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value. The Company makes such election on an instrument by-instrument basis. The classification is made on initial recognition and is irrevocable. If the Company decides to classify an equity instrument as at FVTOCI then all fair value changes on the instrument excluding dividends are recognized in the OCI. There is no recycling of the amounts from OCI to P&L even on sale of investment. However the Company may transfer the cumulative gain or loss within equity. Equity instruments included within the FVTPL category are measured at fair value with all changes recognized in the P&L. Derecognition A financial asset (or where applicable a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the balance sheet) when: - The rights to receive cash flows from the asset have expired or - 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. 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 Companys 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. 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(other than fair value) 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 trade receivables and bank balance b) Financial assets that are debt instruments and are measured as at FVTOCI c) Lease receivables under Ind AS 17 d) Trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115. The Company follows simplified approach for recognition of impairment loss allowance on: - Trade receivables or contract revenue receivables; and - All lease receivables resulting from transactions within the scope of Ind AS 17 The application of simplified approach does not require the Company to track changes in credit risk. Rather it recognises impairment loss allowance based on lifetime ECLs at each reporting date right from its initial recognition. Financial liabilities Initial recognition and measurement The Companys financial liabilities include trade and other payables loans and borrowings including bank overdrafts. 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. Subsequent measurement The measurement of financial liabilities depends on their classification as described below: Financial liabilities 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 Company 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 as such 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/ loss 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 and loss. The Company has not designated any financial liability as at fair value through profit and loss. Financial liabilities at amortised cost After initial recognition these are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the effective interest rate 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 effective interest rate. The effective interest rate amortisation is included as finance costs in the statement of profit and loss. This category generally applies to borrowings. Derecognition A financial liability is derecognised 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 between the carrying amount of a financial liability (or part of a financial liability) extinguished or transferred to another party and the consideration paid including any non-cash assets transferred or liabilities assumed shall be recognised in profit or loss. Reclassification of financial assets The Company determines classification of financial assets and liabilities on initial recognition. After initial recognition no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Companys senior management determines change in the business model as a result of external or internal changes which are significant to the Companys operations. Such changes are evident to external parties. A change in the business model occurs when the Company either begins or ceases to perform an activity that is significant to its operations. If Company reclassifies financial assets it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Company does not restate any previously recognised gains losses (including impairment gains or losses) or interest. The following table shows various reclassification and how they are accounted for: Please refer Annual report for table Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the consolidated balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis to realise the assets and settle the liabilities simultaneously.
254 Coal India Ltd. Energy Ind AS 110 Consolidated Financial Statements Basis of consolidation Subsidiaries Subsidiaries are all entities over which the Company has control. The Company controls an entity when the Company is exposed to or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the relevant activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are deconsolidated from the date when control ceases. The acquisition method of accounting is used to account for business combinations by the Company. The Company combines the financial statements of the parent and its subsidiaries line by line adding together like items of assets liabilities equity cash flows income and expenses. Intercompany transactions balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses between group companies are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. All the companies within the CIL Consolidated normally uses accounting policies as adopted by the CIL Consol idated for like transactions and events in similar circumstances. In case of significant deviations of a particular constituent company within CIL Consolidated appropriate adjustments are made to the financial statement of such constituent company to ensure conformity with the CIL Consolidated accounting policies. Non-controlling interests in the resul ts and equi ty of subsidiaries are shown separately in the consolidated statement of profi t and loss consolidated statement of changes in equity and balance sheet respectively. Associates Associates are all entities over which the Company has significant influence but no control or joint control. This is generally the case where the Company holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting after initially being recognised at cost except when the investment or a portion thereof classified as held for sale in which case it is accounted in accordance with Ind AS 105. The Company impairs its net investment in the associates on the basis of objective evidence. Joint arrangements Joint arrangements are those arrangements where the Company is having joint control with one or more other parties. Joint control is the contractually agreed sharing of control of the arrangement which exist only when decisions about the relevant activities require the unanimous consent of the parties sharing control. 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 Joint Operations Joint operations are those joint arrangements whereby the Company is having rights to the assets and obligations for the liabil ities relating to the arrangements. 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. Joint ventures Joint ventures are those joint arrangements whereby the Company is having rights to the net assets of the arrangements. Interests in joint ventures are accounted for using the equity method after initially being recognised at cost in the consolidated balance sheet. Investments in Joint venture are accounted for using the equity method of accounting after initially being recognized at cost except when the investment or a portion thereof is classified as held for sale in which case it is accounted in accordance with Ind AS 105. The Company impairs its net investment in the joint venture on the basis of objective evidence. Equity method Under the equity method of accounting the investments are initially recognised at cost and adjusted thereafter to recognise the Companys share of the post-acquisition profits or losses of the investee in profit and loss and the Companys share of other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment. When the Companys share of losses in an equity-accounted investment equals or exceeds its interest in the entity including any other unsecured longterm receivables the Company does not recognise further losses unless it has incurred obligations or made payments on behalf of the other entity. Unrealised gains on transactions between the Company and its associates and joint ventures are eliminated to the extent of the Companys interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the policies adopted by the Company. Changes in ownership interests The Company treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Company. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any fair value of consideration paid or received is recognised within equity. When the Company ceases to consolidate or equity account for an investment because of a loss of control joint control or signi ficant influence any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate joint venture or financial asset. In addition any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Company had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. If the ownership interest in a joint venture or an associate is reduced but joint control or significant influence is retained only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.
255 Coal India Ltd. Energy Ind AS 115 Revenue from Contracts with Customers/ Revenue recognition Revenue from contracts with customers Revenue from contracts with customers is recognized when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company has generally concluded that it is the principal in its revenue arrangements because it typically controls the goods or services before transferring them to the customer. The principles in Ind AS 115 are applied using the following five steps: Step 1 : Identifying the contract: The Company account for a contract with a customer only when all of the following criteria are met: a) the parties to the contract have approved the contract and are committed to perform their respective obligations; b) the Company can identify each partys rights regarding the goods or services to be transferred; c) the Company can identify the payment terms for the goods or services to be transferred; d) the contract has commercial substance (i.e. the risk timing or amount of the Companys future cash flows is expected to change as a result of the contract); and e) it is probable that the Company will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer. The amount of consideration to which the Company will be entitled may be less than the pri ce stated in the contract if the consideration is variable because the Company may offer the customer a price concession discount rebates refunds credits or be entitled to incentives performance bonuses or similar items. Combination of contracts The Company combines two or more contracts entered into at or near the same time with the same customer (or related parties of the customer) and account for the contracts as a single contract if one or more of the following criteria are met: a) the contracts are negotiated as a package with a single commercial objective; b) the amount of consideration to be paid in one contract depends on the price or performance of the other contract; or c) the goods or services promised in the contracts (or some goods or services promised in each of the contracts) are a single performance obligation. Contract modification The Company account for a contract modification as a separate contract if both of the following conditions are present: a) the scope of the contract increases because of the addition of promised goods or services that are distinct and b) the price of the contract increases by an amount of consideration that reflects the companys stand-alone selling prices of the additional promised goods or services and any appropriate adjustments to that price to reflect the circumstances of the particular contract. Step 2 : Identifying performance obligations At contract inception the Company assesses the goods or services promised in a contract with a customer and identify as a performance obligation each promise to transfer to the customer either: a) a good or service (or a bundle of goods or services) that is distinct; or b) a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer. Step 3 : Determining the transaction price The Company consider the terms of the contract and its customary business practices to determine the transaction price. The transaction price is the amount of consideration to which the company expects to be entitled in exchange for transferring promised goods or servi ces to a customer excluding amounts collected on behalf of third parties. The consideration promised in a contract with a customer may include fixed amounts variable amounts or both. When determining the transaction price a Company consider the effects of all of the following: - Variable consideration; - Constraining estimates of variable consideration; - The existence of significant financing component; - Non cash consideration; - Consideration payable to a customer. An amount of consideration can vary because of discounts rebates refunds credits price concessions incentives performance bonuses or other similar items. The promised consideration can also vary if the companys entitlement to the consideration is contingent on the occurrence or non-occurrence of a future event. In some contracts penalties are specified. In such cases penalties are accounted for as per the substance of the contract. Where the penalty is inherent in determination of transaction price it form part of variable consideration. The Company includes in the transaction price some or all of an amount of estimated variable consideration only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The Company does not adjust the promised amount of consideration for the effects of a significant financing component if it expects at contract inception that the period between when it transfers a promised goods or service to a customer and when the customer pays for that good or service will be one year or less. The Company recognizes a refund liability if the Company receives consideration from a customer and expects to refund some or all of that consideration to the customer. A refund liability is measured at the amount of consideration received (or receivable) for which the company does not expect to be entitled (i.e. amounts not included in the transaction price). The refund liability (and corresponding change in the transaction price and therefore the contract liability) is updated at the end of each reporting period for changes in circumstances. After contract inception the transaction price can change for various reasons including the resolution of uncertain events or other changes in circumstances that change the amount of consideration to which the Company expects to be entitled in exchange for the promised goods or services. Step 4 : Allocating the transaction price: The objective when allocating the transaction price is for the Company to allocate the transaction price to each performance obligation (or distinct good or service) in an amount that depicts the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised goods or services to the customer. To allocate the transaction price to each performance obligation on a relative stand-alone selling price basis the Company determines the standalone selling price at contract inception of the distinct good or service underlying each performance obligation in the contract and allocate the transaction price in proportion to those stand-alone selling prices. Step 5 : Recognizing revenue: The Company recognizes revenue when (or as) the Company satisfies a performance obligation by transferring a promised good or service to a customer. A good or service is transferred when (or as) the customer obtains control of that good or service. The Company transfers control of a good or service over time and therefore satisfies a performance obligation and recognizes revenue over time if one of the following criteria is met: a) the customer simul taneously receives and consumes the benefi ts provided by the companys performance as the Company performs; b) the Companys performance creates or enhances an asset that the customer controls as the asset is created or enhanced; c) the Companys performance does not create an asset with an alternative use to the Company and the Company has an enforceable right to payment for performance completed to date. For each performance obligation satisfied over time the Company recognizes revenue over time by measuring the progress towards complete satisfaction of that performance obligation. The Company applies a single method of measuring progress for each performance obligation satisfied over time and the Company applies that method consistently to similar performance obligations and in similar circumstances. At the end of each reporting period the Company remeasure its progress towards complete satisfaction of a performance obligation satisfied over time. Company apply output methods to recognize revenue on the basis of direct measurements of the value to the customer of the goods or services transferred to date relative to the remaining goods or services promised under the contract. Output methods include methods such as surveys of performance completed to date appraisals of results achieved milestones reached time elapsed and units produced or units delivered. As circumstances change over time the Company update its measure of progress to reflect any changes in the outcome of the performance obligation. Such changes to the Companys measure of progress is accounted for as a change in accounting estimate in accordance with Ind AS 8 Accounting Policies Changes in Accounting Estimates and Errors. The Company recognizes revenue for a performance obligation satisfied over time only if the Company can reasonably measure its progress towards complete satisfaction of the performance obligation. When (or as) a performance obligation is satisfied the company recognize as revenue the amount of the transaction price (which excludes estimates of variable consideration that are constrained that is al located to that performance obligation. If a performance obligation is not satisfied over time the Company satisfies the performance obligation at a point in time. To determine the point in time at which a customer obtains control of a promised good or service and the Company satisfies a performance obligation the Company consider indicators of the transfer of control which include but are not limited to the following: a) the Company has a present right to payment for the good or service; b) the customer has legal title to the good or service; c) the Company has transferred physical possession of the good or service; d) the customer has the significant risks and rewards of ownership of the good or service; e) the customer has accepted the good or service. When either party to a contract has performed the Company present the contract in the balance sheet as a contract asset or a contract liability depending on the relationship between the companys performance and the customers payment. The Company present any unconditional rights to consideration separately as a receivable. Contract assets: A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Company performs by transferring goods or services to a customer before the customer pays consideration or before payment is due a contract asset is recognized for the earned consideration that is conditional. Trade receivables: A receivable represents the Companys right to an amount of consideration that is unconditional (i.e. only the passage of time is required before payment of the consideration is due). Contract liabilities: A contract liability is the obligation to transfer goods or services to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer a contract liability is recognized when the payment made or due (whichever is earlier). Contract liabilities are recognized as revenue when the Company performs under the contract. Interest Interest income is recognised using the Effective Interest Method. Dividend Dividend income from investments is recognised when the rights to receive payment is established. Other Claims Other claims (including interest on delayed realization from customers) are accounted for when there is certainty of realisation and can be measured reliably.
256 Coal India Ltd. Energy Ind AS 116 Leases Leases A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Company as a lessee At the commencement date a lessee shall recognise a right-of-use asset at cost and a lease liability at the present value of the lease payments that are not paid at that date for all leases unless the lease term is 12 months or less or the underlying asset is of low value. Subsequently right-of-use asset is measured using cost model whereas the lease liability is measured by increasing the carrying amount to reflect interest on the lease liability reducing the carrying amount to reflect the lease payments made and remeasuring the carrying amount to reflect any reassessment or lease modifications. Finance charges are recognised in finance costs in the Statement of Profit and Loss unless the costs are included in the carrying amount of another asset applying other applicable standards. Right-of-use asset is depreciated over the useful life of the asset if the lease transfers ownership of the asset to the lessee by the end of the lease term or if the cost of the right-to-use asset reflects that the lessee will exercise a purchase option. Otherwise the lessee shall depreciate the rightto- use asset from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. Company as a lessor All leases as either an operating lease or a finance lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership of an underlying asset. Operating lease-lease payments from operating leases are recognised as income on either a straight-line basis unless another systematic basis is more representative of the pattern in which benefit from the use of the underlying asset is diminished. Finance leases-assets held under a finance lease is initially recognised in its balance sheet and present them as a receivable at an amount equal to the net investment in the lease using the interest rate implicit in the lease to measure the net investment in the lease.
257 Coal India Ltd. Energy Ind AS 12 Income Taxes Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. Current tax is the amount of income taxes payable (recoverable) in respect of the taxable profit (tax loss) for a period. Taxable profit differs from profit before income tax as reported in the statement of profit and loss and other comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The companys liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary difference to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates except where the company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Unrecognised deferred tax assets are reassessed at the end of each reporting year and are recognised to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised based on tax rate (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the company expects at the end of the reporting period to recover or settle the carrying amount of its assets and liabilities. Current and deferred tax are recognised in profit or loss except when they relate to items that are recognised in other comprehensive income or directly in equity in which case the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination the tax effect is included in the accounting for the business combination.
258 Coal India Ltd. Energy " Ind AS 16 Property Property Plant and Equipment (PPE) Land is carried at historical cost. Historical cost includes expenditure which are directly attributable to the acquisition of the land like rehabilitation expenses resettlement cost and compensation in lieu of employment incurred for concerned displaced persons etc. After recognition an i tem of al l other Property plant and equipment are carried at i ts cost less any accumulated depreciation and any accumulated impairment losses under Cost Model. The cost of an item of property plant and equipment comprises: (a) its purchase price including import duties and non-refundable purchase taxes after deducting trade discounts and rebates. (b) any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. (c) the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located the obligation for which the Company incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period. Each part of an item of property plant and equipment with a cost that is significant in relation to the total cost of the item depreciated separately. However significant part(s) of an item of PPE having same useful life and depreciation method are grouped together in determining the depreciation charge. Costs of the day to-day servicing described as for the repairs and maintenance are recognised in the statement of profit and loss in the period in which the same are incurred. Subsequent cost of replacing parts significant in relation to the total cost of an item of property plant and equipment are recognised in the carrying amount of the item if it is probable that future economic benefits associated with the item will flow to the Company; and the cost of the item can be measured reliably. The carrying amount of those parts that are replaced is derecognised in accordance with the derecognition policy mentioned below. When major inspection is performed its cost is recognised in the carrying amount of the item of property plant and equipment as a replacement if it is probable that future economic benefits associated with the item will flow to the Company; and the cost of the item can be measured reliably. Any remaining carrying amount of the cost of the previous inspection (as distinct from physical parts) is derecognised. An item of Property plant or equipment is derecognised upon disposal or when no future economic benefits are expected from the continued use of assets. Any gain or loss arising on such derecognition of an item of property plant and equipment is recognised in profi t and Loss. Depreciation on property plant and equipment except freehold land is provided as per cost model on straight line basis over the estimated useful lives of the asset as follows: Other Land (incl. Leasehold Land) : Life of the project or lease term whichever is lower Building : 3-60 years Roads : 3-10 years Telecommunication : 3-9 years Railway Sidings : 15 years Plant and Equipment : 5-30 years Computers and Laptops : 3 Years Office equipment : 3-6 years Furniture and Fixtures : 10 years Vehicles : 8-10 years Based on technical evaluation the management believes that the useful lives given above best represents the period over which the management expects to use the asset. Hence the useful lives of the assets may be different from useful lives as prescribed under Part C of schedule II of companies act 2013. The estimated useful life of the assets is reviewed at the end of each financial year. The residual value of Property plant and equipment is considered as 5% of the original cost of the asset except some items of assets such as Coal tub winding ropes haulage ropes stowing pipes & safety lamps etc. for which the technically estimated useful life has been determined to be one year with nil residual value. Depreciation on the assets added / disposed of during the year is provided on pro-rata basis with reference to the month of addition / disposal. Value of Other Land includes land acquired under Coal Bearing Area (Acquisition & Development) (CBA) Act 1957 Land Acquisition Act 1894 Right to Fair Compensation and Transparency in Land Acquisition Rehabilitation and Resettlement (RFCTLAAR) Act 2013 Long term transfer of government land etc. which is amortised on the basis of the balance life of the project; and in case of Leasehold land such amortisation is based on lease period or balance life of the project whichever is lower. Fully depreciated assets retired from active use are disclosed separately as surveyed off assets at its residual value under Property plant Equipment and are anthology_newed for impairment. Capital Expenses incurred by the company on construction/development of certain assets which are essential for production supply of goods or for the access to any existing Assets of the company are recognised as Enabling Assets under Property Plant and Equipment. Transition to Ind AS The company elected to continue with the carrying value as per cost model (for all of its property plant and equipment as recognised in the financial statements as at the date of transition to Ind ASs measured as per the previous GAAP. Exploration and Evaluation Assets Exploration and evaluation assets comprise capitalised costs which are attributable to the search for coal and related resources pending the determination of technical feasibility and the assessment of commercial viability of an identified resource which comprises inter alia the following: - acquisition of rights to explore - researching and analysing historical exploration data; - gathering exploration data through topographical geo chemical and geo physical studies; - exploratory drilling trenching and sampling; - determining and examining the volume and grade of the resource; - surveying transportation and infrastructure requirements; - Conducting market and finance studies. The above includes employee remuneration cost of materials and fuel used payments to contractors etc. As the intangible component represents an insignificant/indistinguishable portion of the overall expected tangible costs to be incurred and recouped from future exploitation these costs along with other capitalised exploration costs are recorded as exploration and evaluation asset. Exploration and evaluation costs are capitalised on a project by project basis pending determination of technical feasibility and commercial viability of the project and disclosed as a separate line item under non-current assets. They are subsequently measured at cost less accumulated impairment/provision. Once proved reserves are determined and development of mines/project is sanctioned exploration and evaluation assets are transferred to Development under capital work in progress. However if proved reserves are not determined the exploration and evaluation asset is derecognised. Development Expenditure When proved reserves are determined and development of mines/project is sanctioned capitalised exploration and evaluation cost is recognised as assets under construction and disclosed as a component of capi tal work in progress under the head Development . Al l subsequent development expenditure is also capitalised. The development expenditure capitalised is net of proceeds from the sale of coal extracted during the development phase. Commercial Operation The project/mines are brought to revenue; when commercial readiness of a project/mine to yield production on a sustainable basi s is established either on the basis of conditions specifically stated in the project report or on the basis of the following criteria: (a) From beginning of the financial year immediately after the year in which the project achieves physical output of 25% of rated capacity as per approved project report or (b) 2 years of touching of coal or (c) From the beginning of the financial year in which the value of production is more than total expenses. Whichever event occurs first; On being brought to revenue the assets under capital work in progress are reclassified as a component of property plant and equipment under the nomenclature Other Mining Infrastructure . Other Mining Infrastructure are amortised from the year when the mine is brought under revenue in 20 years or working life of the project whichever is less.
259 Coal India Ltd. Energy Ind AS 19 Employee Benefits Employee Benefits Short-term Benefits All short term employee benefits are recognized in the period in which they are incurred. Post-employment benefits and other long term employee benefits Defined contributions plans A defined contribution plan is a post-employment benefit plan for Provident fund and Pension under which the company pays fixed contribution into fund maintained by a separate statutory body (Coal Mines Provident Fund) constituted under an enactment of law and the company will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognised as an employee benefit expense in the statement of profit and loss in the periods during which services are rendered by employees. Defined benefits plans A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. Gratuity leave encashment are defined benefit plans (with ceilings on benefits). The companys net obligation in respect of defined benefit plans is calculated by estimating the amount of future benefit that employees have earned in return of their service in the current and prior periods. The benefit is discounted to determine its present value and reduced by the fair value of plan assets if any. The discount rate is based on the prevailing market yields of Indian Government securities as at the reporting date that have maturity dates approximating the terms of the companys obligations and that are denominated in the same currency in which the benefits are expected to be paid. The application of actuarial valuation involves making assumptions about discount rate expected rates of return on assets future salary increases mortality rates etc. Due to the long term nature of these plans such estimates are subject to uncertainties. The calculation is performed at each balance sheet by an actuary using the projected unit credit method. When the calculation results in to the benefit to the company the recognised asset is limited to the present value of the economic benefits available in the form of any future refunds from the plan or reduction in future contributions to the plan. An economic benefit is available to the company if it is realisable during the life of the plan or on settlement of plan liabilities. Re-measurement of the net defined benefit liability which comprise actuarial gain and losses considering the return on plan assets (excluding interest) and the effects of the assets ceiling (if any excluding interest) are recognised immediately in the other comprehensive income. The company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then net defined benefit liability (asset) taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in profit and loss. When the benefits of the plan are improved the portion of the increased benefit relating to past service by employees is recognised as expense immediately in the statement of profit and loss. Other Employee benefits Certain other employee benefits namely benefit on account of LTA LTC Life Cover scheme Group personal Accident insurance scheme settlement allowance post-retirement medical benefit scheme and compensation to dependents of deceased in mine accidents etc. are also recognised on the same basis as described above for defined benefits plan. These benefits do not have specific funding.
260 Coal India Ltd. Energy Ind AS 2 Inventories Inventories Stock of Coal Inventories of coal/coke are stated at lower of cost and net realisable value. Cost of inventories are calculated using the Weighted Average Method. Net realisable value represents the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Book stock of coal is considered in the accounts where the variance between book stock and measured stock is upto + /- 5% and in cases where the variance is beyond + /- 5% the measured stock is considered. Such stock are valued at net realisable value or cost whichever is lower. Coke is considered as a part of stock of coal. Coal & coke-fines are valued at lower of cost or net realisable value and considered as a part of stock of coal. Slurry (coking/semi-coking) middling of washeries and by products are valued at net realisable value and considered as a part of stock of coal. Stores & Spares The Stock of stores & spare parts (which also includes loose tools) at central & area stores are considered as per balances appearing in priced stores ledger and are valued at cost calculated on the basis of weighted average method. The inventory of stores & spare parts lying at collieries / sub-stores / drilling camps/ consuming centres are considered at the year end only as per physically verified stores and are valued at cost. Provisions are made at the rate of 100% for unserviceable damaged and obsolete stores and spares and at the rate of 50% for stores & spares not moved for 5 years. Other Inventories Workshop jobs including work-in-progress are valued at cost. Stock of press jobs (including work in progress) and stationary at printing press and medicines at central hospital are valued at cost. However Stock of stationery (other than lying at printing press) bricks sand medicine (except at Central Hospitals) aircraft spares and scraps are not considered in inventory considering their value not being significant.
261 Coal India Ltd. Energy Ind AS 20 Accounting for Government Grants and Di Grants from Government Government Grants are not recognised until there is reasonable assurance that the company will comply with the conditions attached to them and that there is reasonable certainty that grants will be received. Government grants are recognised in Statement of Profit & Loss on a systematic basis over the periods in which the company recognises as expenses the related costs for which the grants are intended to compensate. Government Grants related to assets are presented in the balance sheet by setting up the grant as deferred income and are recognised in Statement of Profit and Loss on systematic basis over the useful life of asset. Grants related to income (i.e. grant related to other than assets) are presented as part of statement of profit and loss under the head Other Income. A government grant/assistance that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs is recognised in profit or loss of the period in which it becomes receivable. The Government grants or grants in the nature of promoters contribution should be recognised directly in Capital Reserve whi ch forms part of the Shareholders fund.
262 Coal India Ltd. Energy Ind AS 21 The Effects of Changes in Foreign Excha Foreign Currency The companys reported currency and the functional currency for majority of its operations is in Indian Rupees (INR) being the principal currency of the economic environment in which it operates. Transactions in foreign currencies are converted into the reported currency of the company using the exchange rate prevailing at the transaction date. Monetary assets and liabilities denominated in foreign currencies outstanding at the end of the reporting period are translated at the exchange rates prevailing as at the end of reporting period. Exchange differences arising on the settlement of monetary assets and liabilities or on translating monetary assets and liabilities at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognised in statement of profit and loss in the period in which they arise. Non-monetary items denominated in foreign currency are valued at the exchange rates prevailing on the date of transactions.
263 Coal India Ltd. Energy Ind AS 23 Borrowing Costs Borrowing Costs Borrowing costs are expensed as and when incurred except where they are directly attributable to the acquisition construction or production of qualifying assets i.e. the assets that necessarily takes substantial period of time to get ready for its intended use in which case they are capitalised as part of the cost of those asset up to the date when the qualifying asset is ready for its intended use.
264 Coal India Ltd. Energy Ind AS 33 Earnings per Share Earnings per share Basic earnings per share are computed by dividing the net profit after tax by the weighted average number of equity shares outstanding during the period. Diluted earnings per shares is computed by dividing the profit after tax by the weighted average number of equity shares considered for deriving basic earnings per shares and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares.
265 Coal India Ltd. Energy Ind AS 36 Impairment of Assets Impairment of Assets (other than financial assets) The Company assesses at the end of each reporting period whether there is any indication that an asset may be impaired. If any such indication exists the Company estimates the recoverable amount of the asset. An assets recoverable amount is the higher of the assets or cash-generating units value in use and its fair value less costs of disposal and is determined for an individual asset unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets in which case the recoverable amount is determined for the cashgenerating unit to which the asset belongs. Company considers individual mines as separate cash generating units for the purpose of anthology_new of impairment. If the recoverable amount of an asset is estimated to be less than its carrying amount the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognised in the Statement of Profit and Loss.
266 Coal India Ltd. Energy " Ind AS 37 Provisions Provisions Contingent Liabilities & Contingent Assets Provisions are recognized when the company has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Where the time value of money is material provisions are stated at the present value of the expenditure expected to settle the obligation. All provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Where it is not probable that an outflow of economic benefits will be required or the amount cannot be estimated reliably the obligation is disclosed as a contingent liability unless the probability of outflow of economic benefits is remote. Possible obligations whose existence will only be confirmed by the occurrence or non-occurrence of one or more future uncertain events not wholly within the control of the company are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote. Contingent Assets are not recognised in the financial statements. However when the realisation of income is virtually certain then the related asset is not a contingent asset and its recognition is appropriate. Mine Closure Site Restoration and Decommissioning Obligation The companys obligation for land reclamation and decommissioning of structures consists of spending at both surface and underground mines in accordance with the guidelines from Ministry of Coal Government of India. The company estimates its obligation for Mine Closure Site Restoration and Decommissioning based upon detailed calculation and technical assessment of the amount and timing of the future cash spending to perform the required work.Mine Closure expenditure is provided as per approved Mine Closure Plan. The estimates of expenses are escalated for inflation and then discounted at a discount rate that reflects current market assessment of the time value of money and the risks such that the amount of provision reflects the present value of the expenditures expected to be required to settle the obligation. The company records a corresponding asset associated with the liability for final reclamation and mine closure. The obligation and corresponding assets are recognised in the period in which the liability is incurred. The asset representing the total site restoration cost (as estimated by Central Mine Planning and Design Institute Limited) as per mine closure plan is recognised as a separate item in PPE and amortised over the balance project/mine life. The value of the provision is progressively increased over time as the effect of discounting unwinds; creating an expense recognised as financial expenses. Further a specific escrow fund account is maintained for this purpose as per the approved mine closure plan. The progressive mine closure expenses incurred on year to year basis forming part of the total mine closure obligation is initially recognised as receivable from escrow account and thereafter adjusted with the obligation in the year in which the amount is withdrawn after the concurrence of the certifying agency.
267 Coal India Ltd. Energy Ind AS 38 Intangible Assets Intangible Assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition intangible assets are carried at cost less any accumulated amortisation (calculated on a straight-line basis over their useful lives) and accumulated impairment losses if any. Internally generated intangibles excluding capitalised development costs are not capitalised. Instead the related expenditure is recognised in the statement of profit and loss and other comprehensive income in the period in which the expenditure is incurred. The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortised over their useful economic lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisat ion method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method as appropriate and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit and loss. An intangible asset with an indefinite useful life is not amortised but is anthology_newed for impairment at each reporting date. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit and loss. Exploration and Evaluation assets attributable to blocks identified for sale or proposed to be sold to outside agencies (i.e. for blocks not earmarked for CIL) are however classified as Intangible Assets and anthology_newed for impairment. Cost of Software recognized as intangible asset is amortised on straight line method over a period of legal right to use or three years whichever is less; with a nil residual value. Research and Development is recognised as an expenditure as and when incurred.
268 Coal India Ltd. Energy Ind AS 40 Investment Property Investment Property Property (land or a building or part of a building or both) held to earn rentals or for capital appreciation or both rather than for use in the production or supply of goods or services or for administrative purposes; or sale in the ordinary course of businesses are classified as investment property. Investment property is measured initially at its cost including related transaction costs and where applicable borrowing costs. Investment properties are depreciated using the straight-line method over their estimated useful lives.
269 Coal India Ltd. Energy Ind AS 7 Statement of Cash Flows Cash & Cash equivalents Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less which are subject to an insignificant risk of changes in value. For the purpose of the consolidated statement of cash flows cash and cash equivalents consist of cash and short-term deposits as defined above net of outstanding bank overdrafts as they are considered an integral part of the companys cash management.
270 Coal India Ltd. Energy " Ind AS 8 Accounting Policies Judgements Estimates and Assumptions The preparation of the financial statements in conformity with Ind AS requires management to make estimates judgements and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities the disclosures of contingent assets and liabilities at the date of financial statements and the amount of revenue and expenses during the reported period. Application of accounting policies involving complex and subjective judgements and the use of assumptions in these financial statements have been disclosed. Accounting estimates could change from period to period. Actual results could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimate are recognised in the period in which the estimates are revised and if material their effects are disclosed in the notes to the financial statements. Judgements In the process of applying the Companys accounting policies management has made the following judgements which have the most significant effect on the amounts recognised in the financial statements: Formulation of Accounting Policies Accounting policies are formulated in a manner that result in financial statements containing relevant and reliable information about the transactions other events and conditions to which they apply. Those policies need not be applied when the effect of applying them is immaterial. In the absence of an Ind AS that specifically applies to a transaction other event or condition management has used its judgement in developing and applying an accounting policy that results in information that is: a) relevant to the economic decision-making needs of users and b) reliable in that financial statements: (i) represent faithfully the financial position financial performance and cash flows of the Company; (ii) reflect the economic substance of transactions other events and conditions and not merely the legal form; (iii) are neutral i.e. free from bias; (iv) are prudent; and (v) are complete in all material respects on a consistent basis In making the judgement management refers to and considers the applicability of the following sources in descending order: (a) the requirements in Ind ASs dealing with similar and related issues; and (b) the definitions recognition criteria and measurement concepts for assets liabilities income and expenses in the Framework. In making the judgement management considers the most recent pronouncements of International Accounting Standards Board and in absence thereof those of the other standard-setting bodies that use a similar conceptual framework to develop accounting standards other accounting literature and accepted industry practices to the extent that these do not conflict with the sources in above paragraph. The Company operates in the mining sector (a sector where the exploration evaluation development production phases are based on the varied topographical and geomining terrain spread over the lease period running over decades and prone to constant changes) the accounting policies whereof have evolved based on specific industry practices supported by research committees and approved by the various regulators owing to its consistent application over the last several decades. In the absence of specific accounting literature guidance and standards in certain specific areas which are in the process of evolution. The Company continues to strive to develop accounting policies in line with the development of accounting literature and any development therein shall be accounted for prospectively as per the procedure laid down above more particularly in Ind AS 8. The financial statements are prepared on going concern basis using accrual basis of accounting. Materiality Ind AS applies to items which are material. Management uses judgement in deciding whether individual items or groups of item are material in the financial statements. Materiality is judged by reference to the size and nature of the item. The deciding factor is whether omission or misstatement could individually or collectively influence the economic decisions that users make on the basis of the financial statements. Management also uses judgement of materiality for determining the compliance requirement of the Ind AS. In particular circumstances either the nature or the amount of an item or aggregate of items could be the determining factor. Further the Company may also be required to present separately immaterial items when required by law. W.e.f 01.04.2019 Errors/omissions discovered in the current year relating to prior periods are treated as immaterial and adjusted during the current year if all such errors and omissions in aggregate does not exceed 1% of total revenue from Operations (net of statutory levies) as per the last audited financial statement of the company. Operating lease Company has entered into lease agreements. The Company has determined based on an evaluation of the terms and conditions of the arrangements such as the lease term not constituting a major part of the economic life of the commercial property and the fair value of the asset that it retains all the significant risks and rewards of ownership of these properties and accounts for the contracts as operating leases. 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 consolidated 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. Impairment of non-financial assets There is an indication of impairment if the carrying value of an asset or cash generating unit exceeds its recoverable amount which is the higher of its fair value less costs of disposal and its value in use. Company considers individual mines as separate cash generating units for the purpose of anthology_new of impairment. The value in use calculation is based on a DCF model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the assets performance of the CGU being anthology_newed. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. These estimates are most relevant to other mining infrastructures. The key assumptions used to determine the recoverable amount for the different CGUs are disclosed and further explained in respective notes. Taxes Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised based upon the likely timing and the level of future taxable profits together with future tax planning strategies. Defined benefit plans The cost of the defined benefit gratuity plan and other post-employment medical benefits and the present value of the gratuity 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 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. The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation. The mortality rate is based on publicly available mortality tables of the country. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rate. Fair value measurement of financial instruments When the fair values of financial 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 generally accepted valuation techniques including the DCF model. The inputs to these models are taken from observable markets where possible but where this is not feasible a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as liquidity risk credit risk volatility and other relevant input /considerations. Changes in assumptions and estimates about these factors could affect the reported fair value of financial instruments. Intangible asset under development The Company capitalises intangible asset under development for a project in accordance with the accounting policy. Initial capitalisation of costs is based on managements judgement that technological and economic feasibility is confirmed usually when a project report is formulated and approved. Provision for Mine Closure Site Restoration and Decommissioning Obligation In determining the fair value of the provision for Mine Closure Site Restoration and Decommissioning Obligation assumptions and estimates are made in relation to discount rates the expected cost of site restoration and dismantling and the expected timing of those costs. The Company estimates provision using the DCF method considering life of the project/mine based on - Estimated cost per hectare as specified in guidelines issued by Ministry of Coal Government of India. - The discount rate (pre tax rate) that reflect current market assessments of the time value of money and the risks specific to the liability.
271 DLF Ltd. Real Estate Ind AS 1 Presentation of Financial Statements Basis of Preparation These consolidated financial statements (financial statements) of the Group its associates joint operations and joint ventures have been prepared in accordance with the Indian Accounting Standards (hereinafter referred to as the Ind AS) as notified by Ministry of Corporate Affairs (MCA) under Section 133 of the Companies Act 2013 (Act) read with the Companies (Indian Accounting Standards) Rules 2015 as amended from time to time and presentation requirements of Division II of Schedule III to the Companies Act 2013 (Ind AS compliant Schedule III) as applicable to the consolidated financial statements. The consolidated financial statements have been prepared on going concern basis in accordance with accounting principles generally accepted in India. Further the consolidated financial statements have been prepared on historical cost basis except for certain financial assets and financial liabilities derivative financial instruments and share based payments which are measured at fair values as explained in relevant accounting policies. The changes in accounting policies are explained in note 3(z). The financial statements are presented in ` in lakhs except when otherwise indicated. Current and non-current classification The Group presents assets and liabilities in the balance sheet based on current/ non-current classification. An asset is treated as current when it is: Expected to be realised or intended to be sold or consumed in normal operating cycle; Held primarily for the purpose of trading; Expected to be realised within twelve months after the reporting period; or Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current. A liability is current when: It is expected to be settled in normal operating cycle; It is held primarily for the purpose of trading; It is due to be settled within twelve months after the reporting period; or There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The Group classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities. The operating cycle is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents.
272 DLF Ltd. Real Estate Ind AS 10 Events after the Reporting Period Cash dividend and non-cash distribution to equity holders The Group recognises a liability to make cash or non-cash distributions to equity holders when the distribution is authorised and the distribution is no longer at the discretion of the Group. 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 equity. Non-cash distributions are measured at the fair value of the assets to be distributed with fair value re-measurement recognised directly in equity. Upon distribution of non-cash assets any difference between the carrying amount of the liability and the carrying amount of the assets distributed is recognised in the statement of profit and loss.
273 DLF Ltd. Real Estate Ind AS 103 Business Combinations Business combinations and goodwill The Group applies the acquisition method in accounting for business combinations for the businesses which are not under common control. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquirees identifiable net assets. Acquisition-related costs are expensed as incurred. At the acquisition date the identifiable assets acquired and the liabilities assumed are recognised at their acquisition date fair values. For this purpose the liabilities assumed include contingent liabilities representing present obligation and they are measured at their acquisition fair values irrespective of the fact that outflow of resources embodying economic benefits is not probable. However the following assets and liabilities acquired in a business combination are measured at the basis indicated below: (i) Deferred tax assets or liabilities and the assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with Ind AS 12 Income Tax and Ind AS 19 Employee Benefits respectively. (ii) Potential tax effects of temporary differences and carry forwards of an acquiree that exist at the acquisition date or arise as a result of the acquisition are accounted in accordance with Ind AS 12. (iii) Liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payments arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with Ind AS 102 Share-based Payments at the acquisition date. (iv) Assets (or disposal groups) that are classified as held for sale in accordance with Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that standard. (v) Reacquired rights are measured at a value determined on the basis of the remaining contractual term of the related contract. Such valuation does not consider potential renewal of the reacquired right. Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of Ind AS 109 Financial Instruments is measured at fair value with changes in fair value recognised in profit or loss. If the contingent consideration is not within the scope of Ind AS 109 it is measured in accordance with the appropriate Ind AS. Contingent consideration that is classified as equity is not re-measured at subsequent reporting dates and its subsequent settlement is accounted for within equity. When the Group acquires a business it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms economic circumstances and pertinent conditions as at the acquisition date. If the business combination is achieved in stages any previously held equity interest is re-measured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss or OCI as appropriate. Goodwill is measured as excess of the aggregate of the fair value of the consideration transferred the amount recognised for non-controlling interests and fair value of any previous interest held over the fair value of the net of identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred then the gain is recognised in OCI and accumulated in equity as capital reserve. However if there is no clear evidence of bargain purchase the entity recognises the gain directly in equity as capital reserve without routing the same through other comprehensive income. After initial recognition goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment anthology_newing goodwill acquired in a business combination is from the acquisition date allocated to each of the Groups cash-generating units that are expected to benefit from the combination irrespective of whether other assets or liabilities of the acquiree are assigned to those units. A cash generating unit to which goodwill has been allocated is anthology_newed for impairment annually or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than its carrying amount the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods. Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted through goodwill during the measurement period or additional assets or liabilities are recognised to reflect new information obtained about facts and circumstances that existed at the acquisition date that if known would have affected the amounts recognized at that date. These adjustments are called as measurement period adjustments. The measurement period does not exceed one year from the acquisition date. Business combinations under common control Business combinations involving entities or businesses under common control have been accounted for using the pooling of interest method. The assets and liabilities of the combining entities are reflected at their carrying amounts. No adjustments have been made to reflect fair values or to recognise any new assets or liabilities. Property acquisitions and business combinations Where property is acquired via corporate acquisitions or otherwise management considers the substance of the assets and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business. Where such acquisitions are not judged to be an acquisition of a business they are not treated as business combinations. Rather the cost to acquire the corporate entity or assets and liabilities is allocated between the identifiable assets and liabilities (of the entity) based on their relative fair values at the acquisition date. Accordingly no goodwill or deferred tax arises.
274 DLF Ltd. Real Estate Ind AS 105 Non current Assets Held for Sale and D Non-current assets held for sale The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale/ distribution rather than through continuing use. Actions required to complete the sale/ distribution should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the sale expected within one year from the date of classification. For these purposes sale transactions include exchanges of non-current assets for other non-current assets when the exchange has commercial substance. The criteria for held for sale classification is regarded met only when the assets or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales/ distribution of such assets (or disposal groups) its sale is highly probable; and it will genuinely be sold not abandoned. The group treats sale of the asset or disposal group to be highly probable when: The appropriate level of management is committed to a plan to sell the asset; An active programme to locate a buyer and complete the plan has been initiated; The asset (or disposal group) is being actively marketed for sale at a price that is reasonable in relation to its current fair value; The sale is expected to qualify for recognition as a completed sale within one year from the date of classification; and Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Non-current assets held for sale/ for distribution to owners and disposal groups are measured at the lower of their carrying amount and the fair value less costs to sell. Assets and liabilities classified as held for sale are presented separately in the balance sheet. Property plant and equipment investment property and intangible assets once classified as held for sale to owners are not depreciated or amortised.
275 DLF Ltd. Real Estate Ind AS 108 Operating Segments Segment Information In line with the provisions of Ind AS 108 operating segments and basis the review of operations being done by the board and the management the operations of the Group fall under colonization and real estate business which is considered to be the only reportable segment. The Group derives its major revenues from construction and development of real estate projects and its customers are widespread. The Group is operating in India which is considered as a single geographical segment.
276 DLF Ltd. Real Estate Ind AS 109 Financial Instruments 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. 1) Financial Assets Initial recognition and measurement Financial assets are classified at initial recognition as subsequently measured at amortised cost fair value through other comprehensive income (OCI) and fair value through profit or loss. The classification of financial assets at initial recognition depends on the financial assets contractual cash flow characteristics and the Groups business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient the Group initially measures a financial asset at its fair value plus in the case of a financial asset not at fair value through profit or loss net of transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under Ind AS 115. Refer to the accounting policies in section 3(i) Revenue from contracts with customers. In order for a financial asset to be classified and measured at amortised cost or fair value through OCI it needs to give rise to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding. This assessment is referred to as the SPPI anthology_new and is performed at an instrument level. The Groups business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows selling the financial assets or both. Subsequent measurement i. Financial assets at amortised cost a financial asset is measured at the amortised cost if both the following conditions are met: The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows; and 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. ii. Investments in equity instruments of joint ventures and associates Investments in equity instruments of joint ventures and associates are accounted for at cost in accordance with Ind AS 27 Separate Financial Statements. iii. Investments Investments in equity instruments which are held for trading are classified as at fair value through profit or loss (FVTPL). For all instruments the Group makes an irrevocable choice upon initial recognition on an instrument by instrument basis to classify the same either as at fair value through other comprehensive income (FVOCI) or fair value through profit or loss (FVTPL). Amounts presented in other comprehensive income are not subsequently transferred to profit or loss. However the Group transfers the cumulative gain or loss within equity. Dividends on such investments are recognised in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Investments classified as FVOCI are disclosed in respective notes. iv. Investments in mutual funds Investment in mutual funds are measured at fair value through profit or loss (FVTPL). v. Derivative instrument - The Group holds derivative financial instruments to hedge its foreign currency exposure for underlying external commercial borrowings (ECB). Derivative financial instruments has been accounted for at FVTPL. De-recognition of financial assets A financial asset (or where applicable a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Groups consolidated balance sheet) when: The rights to receive cash flows from the asset have expired or The Group 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 Group has transferred substantially all the risks and rewards of the asset or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset. 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 group could be required to repay. Impairment of financial assets In accordance with Ind AS 109 the Group applies expected credit loss (ECL) model for measurement and recognition of impairment loss for financial assets. ECL is the weighted-average of difference between all contractual cash flows that are due to the Group in accordance with the contract and all the cash flows that the Group expects to receive discounted at the original effective interest rate with the respective risks of default occurring as the weights. When estimating the cash flows the Group is required to consider All contractual terms of the financial assets (including prepayment and extension) over the expected life of the assets. Cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. (i) Trade receivables In respect of trade receivables the Group applies the simplified approach of Ind AS 109 which requires measurement of loss allowance at an amount equal to lifetime expected credit losses. Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of a financial instrument. (ii) Other financial assets In respect of its other financial assets the Group assesses if the credit risk on those financial assets has increased significantly since initial recognition. If the credit risk has not increased significantly since initial recognition the Group measures the loss allowance at an amount equal to 12-month expected credit losses else at an amount equal to the lifetime expected credit losses. When making this assessment the Group uses the change in the risk of a default occurring over the expected life of the financial asset. To make that assessment the Group compares the risk of a default occurring on the financial asset as at the balance sheet date with the risk of a default occurring on the financial asset as at the date of initial recognition and considers reasonable and supportable information that is available without undue cost or effort that is indicative of significant increases in credit risk since initial recognition. The Group assumes that the credit risk on a financial asset has not increased significantly since initial recognition if the financial asset is determined to have low credit risk at the balance sheet date. 2) Non-derivative financial liabilities Initial recognition and measurement Financial liabilities are classified at initial recognition as financial liabilities at fair value through profit or loss loans and borrowings and payables net of directly attributable transaction costs. The Groups financial liabilities include trade and other payables security deposits loans and borrowings and other financial liabilities including bank overdrafts and financial guarantee contracts. Subsequent measurement Subsequent to initial recognition the measurement of financial liabilities depends on their classification as described below: 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 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. Financial guarantee contracts Financial guarantee contracts are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified party fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognized as a financial liability at the time the guarantee is issued at fair value adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently the liability is measured at the higher of the amount of expected loss allowance determined as per impairment requirements of Ind AS 109 and the amount recognised less cumulative amortization. De-recognition of financial liabilities 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 de-recognition 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 and loss. 3) Reclassification of financial instruments The Group determines classification of financial assets and liabilities on initial recognition. After initial recognition no reclassification is made for financial assets which are equity instruments and financial liabilities. For financial assets which are debt instruments a reclassification is made only if there is a change in the business model for managing those assets. Changes to the business model are expected to be infrequent. The Groups senior management determines change in the business model as a result of external or internal changes which are significant to the Groups operations. Such changes are evident to external parties. A change in the business model occurs when the Group either begins or ceases to perform an activity that is significant to its operations. If the Group reclassifies financial assets it applies the reclassification prospectively from the reclassification date which is the first day of the immediately next reporting period following the change in business model. The Group does not restate any previously recognised gains losses (including impairment gains or losses) or interest. Convertible Instruments Convertible instruments are separated into liability and equity components based on the terms of the contract. On issuance of the convertible instruments the fair value of the liability component is determined using a market rate for an equivalent non-convertible instrument. This amount is classified as a financial liability measured at amortised cost (net of transaction costs) until it is extinguished on conversion or redemption. The remainder of the proceeds are allocated to the conversion option that is recognised and included in equity since conversion option meets Ind AS 32 criteria for fixed to fixed classification. Transaction costs are deducted from equity net of associated income tax. The carrying amount of the conversion option is not remeasured in subsequent years. Transaction costs are apportioned between the liability and equity components of the convertible instruments based on the allocation of proceeds to the liability and equity components when the instruments are initially recognised. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis to realise the assets and settle the liabilities simultaneously.
277 DLF Ltd. Real Estate Ind AS 115 Revenue from Contracts with Customers/ Revenue from contract or services with customer and other streams of revenue Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. The Group has generally concluded that it is the principal in its revenue arrangements because it typically controls the goods and services before transferring them to the customers. i. Revenue from Contracts with Customers: Revenue is measured at the fair value of the consideration received/ receivable taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government and is net of rebates and discounts. The Group assesses its revenue arrangements against specific criteria to determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal in all of its revenue arrangements. Revenue is recognised in the income statement to the extent that it is probable that the economic benefits will flow to the Group and the revenue and costs if applicable can be measured reliably. The Group has applied five step model as per Ind AS 115 Revenue from contracts with customers to recognise revenue in the consolidated financial statements. The Group satisfies a performance obligation and recognises revenue over time if one of the following criteria is met: a) The customer simultaneously receives and consumes the benefits provided by the Groups performance as the Group performs; or b) The Groups performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or c) The Groups performance does not create an asset with an alternative use to the Group and the entity has an enforceable right to payment for performance completed to date. For performance obligations where any of the above conditions are not met revenue is recognised at the point in time at which the performance obligation is satisfied. Revenue is recognised either at point of time or over a period of time based on various conditions as included in the contracts with customers. Point of Time: Revenue from real-estate projects Revenue is recognised at the Point in Time w.r.t. sale of real estate units including land plots apartments commercial units development rights as and when the control passes on to the customer which coincides with handing over of the possession to the customer. Over a period of time: Revenue is recognised over period of time for following stream of revenues: Revenue from Co-development projects Co-development projects where the Group is acting as contractor revenue is recognised in accordance with the terms of the co-developer agreements. Under such contracts assets created does not have an alternative use and Group has an enforceable right to payment. The estimated project cost includes construction cost development and construction material internal development cost external development charges borrowing cost and overheads of such project. The estimates of the saleable area and costs are reviewed periodically and effect of any changes in such estimates is recognized in the period such changes are determined. However when the total project cost is estimated to exceed total revenues from the project the loss is recognized immediately. Revenue from golf course operations Income from golf operations course capitation sponsorship etc. is fixed and recognised as per the management agreement with the parties as and when Group satisfies performance obligation by delivering the promised goods or services as per contractual agreed terms. Rental and maintenance income Revenue in respect of rental and maintenance services is recognised on an accrual basis in accordance with the terms of the respective contract as and when the Group satisfies performance obligations by delivering the services as per contractual agreed terms. Power supply Revenue from power supply together with claims made on customers is recognised in terms of power purchase agreements entered into with the respective purchasers. Other Service and operating income Subscription and non-refundable membership fee is recognised on proportionate basis over the period of the subscription/ membership. Revenue from hotel operations (including food and beverages) and related services is recognised net of discounts and sales related taxes in the period in which the services are rendered. Revenue from recreational activities and laundry income is recognized when the services are rendered. Income from forfeiture of properties and interest from banks and customers under agreements to sell is accounted for on an accrual basis except in cases where ultimate collection is considered doubtful. ii. Volume rebates and early payment rebates The Group provides move in rebates/ early payment rebates/ down payment rebates to the customers. Rebates are offset against amounts payable by the customer and revenue to be recognised. To estimate the variable consideration for the expected future rebates the Group estimates the expected value of rebates that are likely to be incurred in future and recognises the revenue net of rebates and recognises the refund liability for expected future rebates. iii. Contract balances Contract assets A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group performs by transferring goods or services to a customer before the customer pays consideration or before payment is due a contract asset is recognised for the earned consideration that is conditional. Trade receivables A receivable represents the Groups right to an amount of consideration that is unconditional (i.e. only the passage of time is required before payment of the consideration is due). Refer to accounting policies of financial assets in section 3 (v) Financial instruments initial recognition and subsequent measurement. Contract liabilities A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to the customer a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Group performs under the contract. Cost of revenue Cost of real estate projects Cost of constructed properties other than SEZ projects includes cost of land (including cost of development rights/ land under agreements to purchase) estimated internal development costs external development charges borrowing costs overheads construction costs and development/ construction materials which is charged to the statement of profit and loss based on the revenue recognized as explained in accounting policy for revenue from real estate projects above in consonance with the concept of matching costs and revenue. Cost of SEZ projects Cost of constructed properties includes estimated internal development costs external development charges overheads borrowing cost construction costs and development/ construction materials which is charged to the statement of profit and loss based on the revenue recognized as explained in accounting policy for revenue from real estate SEZ projects above in consonance with the concept of matching costs and revenue. Final adjustment is made on completion of the specific project. Cost of land and plots Cost of land and plots includes land (including development rights) acquisition cost estimated internal development costs and external development charges which is charged to the statement of profit and loss based on the percentage of land/ plotted area in respect of which revenue is recognised as explained in accounting policy for revenue from Sale of land and plots in consonance with the concept of matching cost and revenue. Final adjustment is made on completion of the specific project. Cost of development rights Cost of development rights includes proportionate development rights cost borrowing costs and other related cost which is charged to statement of profit and loss as explained in accounting policy for revenue in consonance with the concept of matching cost and revenue.
278 DLF Ltd. Real Estate Ind AS 116 Leases Leases The Group assesses at contract inception whether a contract is or contains a lease. That is if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Group as a lessee The Group applies a single recognition and measurement approach for all leases except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. Right-of-use assets The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is available for use). Right-of-use assets are measured at cost less any accumulated depreciation and impairment losses and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised initial direct costs incurred and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the lease term as follows: Land 28-82 years Buildings 2-24 years If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are also subject to impairment. Refer to the accounting policies in note 3(r) on impairment of non-financial assets. Lease liabilities At the commencement date of the lease the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable variable lease payments that depend on an index or a rate and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition the carrying amount of lease liabilities is remeasured if there is a modification a change in the lease term a change in the lease payments (e.g. changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset. The Groups lease liabilities are included in other financial liabilities. Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to its short-term leases (i.e. those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of assets that are considered to be low value. Lease payments on short-term leases and leases of low value assets are recognised as expense on a straight-line basis over the lease term. Group as a lessor Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income from operating lease is recognized on a straight-line basis over the lease terms of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned. Fit-out rental income is recognised in the statement of profit and loss on accrual basis. Leases are classified as finance leases when substantially all of the risks and rewards of ownership transfer from the Group to the lessee. Amounts due from lessees under finance leases are recorded as receivables at the Groups net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.
279 DLF Ltd. Real Estate " Ind AS 16 Property Property plant and equipment Recognition and initial measurement Property plant and equipment at their initial recognition are stated at their cost of acquisition. On transition to Ind AS the Group had elected to measure all of its property plant and equipment at the previous GAAP carrying value (deemed cost). The cost comprises purchase price borrowing cost if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discount and rebates are deducted in arriving at the purchase price. Subsequent costs are included in the assets carrying amount or recognised as a separate asset as appropriate only when it is probable that incremental future economic benefits associated with the item will flow to the Group. When significant parts of plant and equipment are required to be replaced at intervals the Group depreciates them separately based on their specific useful lives. Likewise when a major inspection is performed its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. Any remaining carrying amount of the cost of the previous inspection is derecognised. All other repair and maintenance costs are recognised in statement of profit and loss as incurred. The Group identifies and determines cost of each component/ part of the asset separately if the component/ part have a cost which is significant to the total cost of the asset and has useful life that is materially different from that of the remaining asset. Subsequent measurement (depreciation and useful lives) Property plant and equipment are subsequently measured at cost net of accumulated depreciation and accumulated impairment losses if any. Depreciation on property plant and equipment is provided on a straight-line basis over the estimated useful lives of the assets as follows: Buildings;10 to 60;60 Plant and machinery;5 to 15;15 Leasehold improvements;3 to 9;- Computers and data processing units - Servers and networks;6;3 - Desktops laptops and other devices;3;3 Furniture and fixtures;5 to 10;10 Office equipment;3 to 10;5 Vehicles;8 to 10;8 to 10 Helicopters;20;20 The Group based on technical assessment made by technical expert and management estimate depreciates certain items of buildings plant and machinery furniture and fixtures and office equipment over estimated useful lives which are different from the useful life prescribed in Schedule II to the Companies Act 2013. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used. The leasehold improvements are depreciated over the period of lease or life of asset whichever is less. The residual values useful lives and method of depreciation are reviewed at the end of each financial year and adjusted prospectively if appropriate. De-recognition An item of property plant and equipment and any significant part initially recognised is de-recognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss when the asset is de-recognised. Capital work-in-progress and intangible assets under development Capital work-in-progress and intangible assets under development represents expenditure incurred in respect of capital projects/ intangible assets under development and are carried at cost less accumulated impairment loss if any. Cost includes land related acquisition expenses development/ construction costs borrowing costs and other direct expenditure.
280 DLF Ltd. Real Estate Ind AS 19 Employee Benefits Retirement and other employee benefits Provident fund Retirement benefit in the form of provident fund is a defined benefit scheme. The Group makes contribution to statutory provident fund trust set up in accordance with the Employees Provident Funds and Miscellaneous Provisions Act 1952. The Group has to meet the interest shortfall if any. Accordingly the contribution paid or payable and the interest shortfall if any is recognised as an expense in the period in which services are rendered by the employee. If the contribution payable to the scheme for service received before the balance sheet date exceeds the contribution already paid the deficit payable to the scheme is recognized as a liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date then excess is recognized as an asset to the extent that the pre-payment will lead to for example a reduction in future payment or a cash refund. Gratuity Gratuity is a post-employment benefit and is in the nature of a defined benefit plan. The liability recognised in the balance sheet in respect of gratuity is the present value of the defined benefit/ obligation at the balance sheet date together with adjustments for unrecognised actuarial gains or losses and past service costs. The defined benefit/ obligation is calculated at or near the balance sheet date by an independent actuary using the projected unit credit method. This is based on standard rates of inflation salary growth rate and mortality. Discount factors are determined close to each year-end by reference to market yields on government bonds that have terms to maturity approximating the terms of the related liability. Service cost on the Groups defined benefit plan is included in employee benefits expense. Net interest expense on the net defined benefit liability is included in finance costs. Actuarial gains/ losses resulting from re-measurements of the liability are included in other comprehensive income in the period in which they occur and are not reclassified to profit or loss in subsequent periods. Compensated absences Liability in respect of compensated absences becoming due or expected to be availed within one year from the balance sheet date is recognised on the basis of discounted value of estimated amount required to be paid or estimated value of benefit expected to be availed by the employees. Liability in respect of compensated absences becoming due or expected to be availed more than one year after the balance sheet date is estimated on the basis of an actuarial valuation performed by an independent actuary using the projected unit credit method. Actuarial gains and losses arising from past experience and changes in actuarial assumptions are charged to statement of profit and loss in the year in which such gains or losses are determined. Pension Pension is a post-employment benefit and is in the nature of a defined benefit plan. The liability recognised in the balance sheet in respect of pension is the present value of the defined benefit obligation at the balance sheet date together with adjustments for unrecognised actuarial gains or losses and past service costs. The defined benefit obligation is calculated at or near the balance sheet date by an independent actuary using the projected unit credit method. This is based on standard rates of inflation salary growth rate and mortality. Discount factors are determined close to each year-end by reference to market yields on government bonds that have terms to maturity approximating the terms of the related liability. Service cost on the Groups defined benefit plan is included in employee benefits expense. Net interest expense on the net defined benefit liability is included in finance costs. Actuarial gains/ losses resulting from re-measurements of the liability are included in other comprehensive income in the period in which they occur and are not reclassified to profit or loss in subsequent periods. Short-term employee benefits Expense in respect of short-term benefits is recognised on the basis of the amount paid or payable for the period during which services are rendered by the employee. Contribution made towards superannuation fund (funded by payments to Life Insurance Corporation of India) is charged to statement of profit and loss on accrual basis.
281 DLF Ltd. Real Estate Ind AS 21 The Effects of Changes in Foreign Excha Foreign currency transactions Functional and presentation currency The consolidated financial statements are presented in Indian Rupee (INR or `) which is also the functional and presentation currency of the parent company. Transactions and balances Foreign currency transactions are recorded in the functional currency by applying the exchange rate between the functional currency and the foreign currency at the date of the transaction. However for practical reasons the group uses an average rate if the average approximates the actual rate at the date of the transaction. Foreign currency monetary items outstanding at the balance sheet date are converted to functional currency using the closing rate. Non-monetary items denominated in a foreign currency which are carried at historical cost are reported using the exchange rate at the date of the transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e. translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss are also recognised in OCI or profit or loss respectively). Exchange differences arising on settlement of monetary items or restatement as at reporting date at rates different from those at which they were initially recorded are recognized in the statement of profit and loss in the year in which they arise.
282 DLF Ltd. Real Estate Ind AS 23 Borrowing Costs Borrowing costs Borrowing costs directly attributable to the acquisition and/ or construction/ production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are charged to the statement of profit and loss as incurred. Borrowing costs consist of interest and other costs that the Group incurs in connection with the borrowing of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
283 DLF Ltd. Real Estate Ind AS 28 Investments in Associates and Joint Ven Investments in associates and joint ventures Associates An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. 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. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining whether significant influence or joint control are similar to those necessary to determine control over the subsidiaries. The Groups investments in its associate and joint venture are accounted for using the equity method. Under the equity method the investment in an associate or a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Groups share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not anthology_newed for impairment individually. The statement of profit and loss reflects the Groups share of the results of operations of the associate or joint venture. Any change in OCI of those investees is presented as part of the Groups OCI. In addition when there has been a change recognised directly in the equity of the associate or joint venture the Group recognises its share of any changes when applicable in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture. If an entitys share of losses of an associate or a joint venture equals or exceeds its interest in the associate or joint venture (which includes any long term interest that in substance form part of the Groups net investment in the associate or joint venture) the entity discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. If the associate or joint venture subsequently reports profits the entity resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised. The aggregate of the Groups share of profit or loss of an associate and a joint venture is shown on the face of the statement of profit and loss. The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. When necessary adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate or joint venture. At each reporting date the Group determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value and then recognises the loss as Share of profit of an associate and a joint venture in the statement of profit or loss. Upon loss of significant influence over the associate or joint control over the joint venture the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in statement of profit or loss. With respect to investment in Joint operations the Group recognises its direct right to the assets liabilities revenue and expenses of Joint operations and its share of any jointly held or incurred assets liabilities revenue and expenses. These have been incorporated in the consolidated financial statements under the appropriate headings.
284 DLF Ltd. Real Estate Ind AS 33 Earnings per Share Earnings per share Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting attributable taxes) by the weighted-average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events as bonus issue bonus element in a rights issue share split and reverse share split (consolidation of shares) that have changed the number of equity shares outstanding without a corresponding change in resources. For the purpose of calculating diluted earnings per share the net profit or loss for the period attributable to equity shareholders and the weighted-average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.
285 DLF Ltd. Real Estate Ind AS 36 Impairment of Assets Impairment of non-financial assets At each reporting date the Group assesses whether there is any indication based on internal/ external factors that an asset may be impaired. If any such indication exists the Group estimates the recoverable amount of the asset. An assets recoverable amount is the higher of an assets or cash-generating units (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount and the impairment loss is recognised in the statement of profit and loss. In assessing value in use the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal recent market transactions are taken into account. If no such transactions can be identified an appropriate valuation model is used. These calculations are corroborated by valuation multiples quoted share prices for publicly traded companies or other available fair value indicators. The Group bases its impairment calculation on detailed budgets and forecast calculation. These budgets and forecast calculations generally cover a period of five years. For longer periods a long term growth rate is calculated and applied to project future cash flows after the fifth year. If at the reporting date there is an indication that a previously assessed impairment loss no longer exists the recoverable amount is reassessed and the asset is reflected at the recoverable amount. Impairment losses previously recognized are accordingly reversed in the statement of profit and loss. A cash generating unit to which goodwill has been allocated is anthology_newed for impairment annually or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than its carrying amount the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods. Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained.
286 DLF Ltd. Real Estate " Ind AS 37 Provisions Provisions contingent assets and contingent liabilities Provisions are recognized only when there is a present obligation (legal or constructive) 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 when a reliable estimate of the amount of obligation can be made at the reporting date. Provisions are discounted to their present values where the time value of money is material 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. When the Group expects some or all of a provision to be reimbursed 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. Onerous contracts If the Group has a contract that is onerous the present obligation under the contract is recognised and measured as a provision. However before a separate provision for an onerous contract is established the Group recognises any impairment loss that has occurred on assets dedicated to that contract. An onerous contract is a contract under which the unavoidable costs (i.e. the costs that the Group cannot avoid because it has the contract) of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the least net cost of exiting from the contract which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates. Contingent liability is disclosed for: Possible obligations which will be confirmed only by future events not wholly within the control of the Group or Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. Contingent assets are neither recognised nor disclosed except when realisation of income is virtually certain related asset is disclosed.
287 DLF Ltd. Real Estate Ind AS 38 Intangible Assets Intangible assets Recognition and initial measurement Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. On transition to Ind AS the Group had elected to measure all of its intangible assets at the previous GAAP carrying value (deemed cost). The cost comprises purchase price borrowing cost if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Internally generated intangibles excluding capitalised development costs are not capitalised and the related expenditure is reflected in statement of profit and loss in the period in which the expenditure is incurred. The Group has acquired exclusive usage rights for 30 years under the build own operate and transfer scheme in respect of properties developed as automated multi-level car parking and commercial space and classified them under the Intangible Assets Right under build own operate and transfer arrangement. Subsequent measurement (amortisation) Following initial recognition intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses if any. The cost of capitalized software is amortized over a period of three to five years from the date of its acquisition. The cost of usage rights is being amortised over the concession period in the proportion in which the actual revenue received during the accounting year bears to the projected revenue from such intangible assets till the end of concession period. De-recognition Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of profit or loss when the asset is de-recognised.
288 DLF Ltd. Real Estate Ind AS 40 Investment Property Investment properties Recognition and initial measurement Investment properties are properties held to earn rentals or for capital appreciation or both. Investment properties are measured initially at their cost of acquisition including transaction costs. On transition to Ind AS the Group had elected to measure all of its investment properties at the previous GAAP carrying value (deemed cost). The cost comprises purchase price borrowing cost if capitalization criteria are met and directly attributable cost of bringing the asset to its working condition for the intended use. Any trade discount and rebates are deducted in arriving at the purchase price. When significant parts of the investment property are required to be replaced at intervals the Group depreciates them separately based on their specific useful lives. Subsequent costs are included in the assets carrying amount or recognised as a separate asset as appropriate only when it is probable that future economic benefits associated with the item will flow to the Group. All other repair and maintenance costs are recognised in statement of profit and loss as incurred. The cost includes the cost of replacing parts and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of the investment property are required to be replaced at intervals the Group depreciates them separately based on their specific useful lives. All other repair and maintenance costs are recognised in profit or loss as incurred. Transfers are made to (or from) investment property only when there is a change in use. For a transfer from investment property to owner-occupied property the deemed cost for subsequent accounting is the carrying value at the date of change in use. Subsequent measurement (depreciation and useful lives) Investment properties are subsequently measured at cost less accumulated depreciation and impairment losses if any. Depreciation on investment properties is provided on the straightline method over the useful lives of the assets as follows: Buildings and related equipment;15 to 60;60 Furniture and fixtures;5 to 10;10 The leasehold premium is amortised over the period of lease. The group based on technical assessment made by technical expert and management estimate depreciates certain items of buildings and furniture and fixtures over estimated useful lives which are different from the useful life prescribed in Schedule II to the Companies Act 2013. The management believes that these estimated useful lives are realistic and reflect fair approximation of the period over which the assets are likely to be used. * Apart from all the assets the Group has developed commercial space (in addition to automated multi-level car parking) over the land parcel received under the build own operate and transfer scheme of the public private partnership (as mentioned in the intangible assets policy below) which has been depreciated in the proportion in which the actual revenue received during the accounting year bears to the projected revenue from such assets till the end of concession period. The residual values useful lives and method of depreciation are reviewed at the end of each financial year and adjusted prospectively if appropriate. Though the Group measures investment property using cost based measurement the fair value of investment property is disclosed in the notes. Fair values are determined based on an annual evaluation performed by an accredited external independent valuer applying a valuation model acceptable internationally. De-recognition Investment properties are de-recognised either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in statement of profit and loss in the period of de-recognition.
289 DLF Ltd. Real Estate Ind AS 7 Statement of Cash Flows Cash and cash equivalents Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less which are subject to an insignificant risk of changes in value. For the purpose of the consolidated statement of cash flows cash and cash equivalents consist of unrestricted cash and short-term deposits as defined above net of outstanding bank overdrafts as they are considered an integral part of the Groups cash management.
290 DLF Ltd. Real Estate Ind AS 102 Share based Payment Share based payments Employee Stock Option Plan The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model. That cost is recognised together with a corresponding increase in share-based payment (SBP) reserves in equity over the period in which the performance and/ or service conditions are fulfilled in employee benefits expense. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Groups best estimate of the number of equity instruments that will ultimately vest. The statement of profit and loss expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense. Upon exercise of share options the proceeds received are allocated to share capital up to the par value of the shares issued with any excess being recorded as share premium. Employee Shadow Option Scheme (cash settled options) Fair value of cash settled options granted to employees under the Employees Shadow Option Scheme is determined on the basis of excess of the average market price during the month before the reporting date over the exercise price of the shadow option. This fair value is expensed over the vesting period with recognition of a corresponding liability. The liability is re-measured to fair value at each reporting date up to and including the settlement date with changes in fair value recognised in employee benefits expense over the vesting period.
291 DLF Ltd. Real Estate Ind AS 110 Consolidated Financial Statements Basis of consolidation The consolidated financial statements comprise the financial statements of the Group its associates joint operations and joint ventures as at 31 March 2020. Control is achieved when the Group is exposed or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically the Group controls an investee if and only if the Group has: Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee) Exposure or rights to variable returns from its involvement with the investee and The ability to use its power over the investee to affect its returns Generally there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee the Group considers all relevant facts and circumstances in assessing whether it has power over an investee including: The contractual arrangement with the other vote holders of the investee Rights arising from other contractual arrangements The Groups voting rights and potential voting rights The size of the groups holding of voting rights relative to the size and dispersion of the holdings of the other voting rights holders The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets liabilities income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances. If a member of the group uses accounting policies other than those adopted in the consolidated financial statements for like transactions and events in similar circumstances appropriate adjustments are made to that group members financial statements in preparing the consolidated financial statements to ensure conformity with the groups accounting policies. The financial statements of all entities used for the purpose of consolidation are drawn up to same reporting date as that of the parent company i.e. year ended on 31 March. When the end of the reporting period of the parent is different from that of a subsidiary the subsidiary prepares for consolidation purposes additional financial information as of the same date as the financial statements of the parent to enable the parent to consolidate the financial information of the subsidiary unless it is impracticable to do so. Consolidation procedure for subsidiaries and partnership firms: (a) Combine like items of assets liabilities equity income expenses and cash flows of the parent with those of its subsidiaries. For this purpose income and expenses of the subsidiary are based on the amounts of the assets and liabilities recognised in the consolidated financial statements at the acquisition date. (b) Offset (eliminate) the carrying amount of the parents investment in each subsidiary and the parents portion of equity of each subsidiary. Business combinations policy explains how to account for any related goodwill. (c) Eliminate in full intragroup assets and liabilities equity income expenses and cash flows relating to transactions between entities of the group (profits or losses resulting from intragroup transactions that are recognised in assets such as inventory and fixed assets are eliminated in full). Intragroup losses may indicate an impairment that requires recognition in the consolidated financial statements. Ind AS 12 Income Taxes applies to temporary differences that arise from the elimination of profits and losses resulting from intragroup transactions. Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. When necessary adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Groups accounting policies. All intra group assets and liabilities equity income expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary without a loss of control is accounted for as an equity transaction. If the Group loses control over a subsidiary it: Derecognises the assets (including goodwill) and liabilities of the subsidiary at their carrying amounts at the date when control is lost Derecognises the carrying amount of any non-controlling interests Derecognises the cumulative translation differences recorded in equity Recognises the fair value of the consideration received Recognises the fair value of any investment retained Recognises any surplus or deficit in profit or loss Reclassifies the parents share of components previously recognised in OCI to profit or loss or retained earnings as appropriate as would be required if the Group had directly disposed of the related assets or liabilities Non-controlling interests presented as part of equity represent the portion of a subsidiarys statement of profit and loss and net assets that is not held by the Group. Statement of profit and loss balance (including other comprehensive income (OCI)) is attributed to the equity holders of the Holding Company and to the non-controlling interests basis the respective ownership interests and such balance is attributed even if this results in controlling interests having a deficit balance. The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the group. Such a change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised within equity.
292 DLF Ltd. Real Estate Ind AS 113 Fair Value Measurement Fair value measurement The Group measures financial instruments such as derivatives 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 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 participants 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 Group 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; and 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 reassessing 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. External valuers are involved for valuation of significant assets such as properties and unquoted financial assets and significant liabilities such as contingent consideration. Involvement of external valuers is decided upon annually by the management. Valuers are selected based on market knowledge reputation independence and whether professional standards are maintained. For the purpose of fair value disclosures the Group 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. This note summarises accounting policy for fair value. Other fair value related disclosures are given in the relevant notes. Disclosures for valuation methods significant estimates and assumptions (Note 5 and 37) Quantitative disclosures of fair value measurement hierarchy (Note 37) Investment in unquoted equity share (Note 8 and 9) Investment properties (Note 5) Financial instruments (including those carried at amortised cost) (Note 37 and 38)
293 DLF Ltd. Real Estate Ind AS 12 Income Taxes Taxation Current income tax Tax expense recognized in statement of profit and loss comprises the sum of deferred tax and current tax except the ones recognized in other comprehensive income or directly in equity. Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. Current tax is determined as the tax payable in respect of taxable income for the year and is computed in accordance with relevant tax regulations. Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. Minimum Alternate Tax (MAT) paid in a year is charged to the statement of profit and loss as current tax for the year. The deferred tax asset is recognised for MAT credit available only to the extent that it is probable that the Group will pay normal income tax during the specified period i.e. the period for which MAT credit is allowed to be carried forward. In the year in which the Group recognizes MAT credit as an asset it is created by way of credit to the statement of profit and loss and shown as part of deferred tax asset. The Group reviews the MAT credit entitlement asset at each reporting date and writes down the asset to the extent that it is no longer probable that it will pay normal tax during the specified period. In the situations where one or more units/ undertaking in the Group are entitled to a tax holiday under the Income-tax Act 1961 no deferred tax (asset or liability) is recognized inrespect of temporary differences which reverse during the tax holiday period to the extent the concerned entitys gross total income is subject to the deduction during the tax holiday period. Deferred tax in respect of temporary differences which reverse after the tax holiday period is recognized in the year in which the temporary differences originate. However the Group restricts recognition of deferred tax assets to the extent it is probable that sufficient future taxable income will be available against which such deferred tax assets can be realized. For recognition of deferred taxes the temporary differences which originate first are considered to reverse first. Deferred Tax Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences except: - When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and at the time of the transaction affects neither the accounting profit nor taxable profit or loss. - In respect of taxable temporary differences associated with investments in subsidiaries associates and interests in joint ventures when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets are recognised for all deductible temporary differences the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilised except: - When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction affects neither the accounting profit nor taxable profit or loss - In respect of deductible temporary differences associated with investments in subsidiaries associates and interests in joint ventures deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognised outside statement of profit and loss is recognised outside statement of profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. Sales tax/ value added taxes/ goods and services tax paid on acquisition of assets or on incurring expenses Expenses and assets are recognised net of the amount of sales tax/ value added taxes/ goods and services tax paid except: When the tax incurred on a purchase of assets or services is not recoverable from the taxation authority in which case the tax paid is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable. When receivables and payables are stated with the amount of tax included. The net amount of tax recoverable from or payable to the taxation authority is included as part of receivables or payables in the balance sheet.
294 DLF Ltd. Real Estate Ind AS 2 Inventories Inventories Land and plots other than area transferred to constructed properties at the commencement of construction are valued at lower of cost/ as re-valued on conversion to stock and net realisable value. Cost includes land (including development rights and land under agreement to purchase) acquisition cost borrowing cost if inventorisation criteria are met estimated internal development costs and external development charges and other directly attributable costs. Construction work-in-progress of constructed properties other than Special Economic Zone (SEZ) projects includes the cost of land (including development rights and land under agreements to purchase) internal development costs external development charges construction costs overheads borrowing cost if inventorisation criteria are met development/ construction materials and is valued at lower of cost/ estimated cost and net realisable value. In case of SEZ projects construction work-in-progress of constructed properties include internal development costs external development charges construction costs overheads borrowing cost if inventorisation criteria are met development/ construction materials and is valued at lower of cost/ estimated cost and net realisable value. Development rights represent amount paid under agreement to purchase land/ development rights and borrowing cost incurred by the Group to acquire irrevocable and exclusive licenses/ development rights in the identified land and constructed properties the acquisition of which is either completed or is at an advanced stage. These are valued at lower cost and net realisable value. Construction/ development material is valued at lower of cost and net realisable value. Cost comprises of purchase price and other costs incurred in bringing the inventories to their present location and condition. Stocks for maintenance and recreational facilities (including stores and spares) are valued at cost or net realisable value whichever is lower. Stock of food grocery items beverages wine and liquor are valued at lower of cost or net realisable value. Cost comprises of cost of material including freight and other related incidental expenses. In case of joint development/ collaboration agreements involving barter transactions revenue and cost are measured at the fair value of the goods or services rendered adjusted by the amount of any cash or cash equivalents transferred. Where the fair value of the goods or services received cannot be measured reliably the revenue and cost are measured at the fair value of the goods or services given up adjusted by the amount of any cash or cash equivalents transferred. Cost is determined on weighted-average basis. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and estimated costs necessary to make the sale.
295 DLF Ltd. Real Estate "Ind AS 8 Accounting Policies Changes in accounting policies and disclosures New and amended standards The Group applied Ind AS 116 for the first time in the current year. The nature and effect of the changes as a result of adoption of this new accounting standards is described below and note 56. Several other amendments apply for the first time for the year ending 31 March 2020 but do not have a material impact on the consolidated financial statements of the Group. The Group has not early adopted any standards or amendments that have been issued but are not yet effective. Ind AS 116 Leases Ind AS 116 supersedes Ind AS 17 Leases. The standard sets out the principles for the recognition measurement presentation and disclosure of leases and requires lessees to recognise most leases on the balance sheet. Lessor accounting under Ind AS 116 is substantially unchanged from Ind AS 17. Lessors will continue to classify leases as either operating or finance leases using similar principles as in Ind AS 17. Therefore Ind AS 116 does not have an impact for leases where the Group is the lessor. Upon adoption of Ind AS 116 the Group applied a single recognition and measurement approach for all leases for which it is the lessee except for short-term leases and leases of low-value assets. The Group recognised lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. The Group adopted Ind AS 116 using the modified retrospective method of adoption with the date of initial application of 1 April 2019. The Group elected to use the transition practical expedient to not reassess whether a contract is or contains a lease at 1 April 2019. Instead the Group applied the standard only to contracts that were previously identified as leases applying Ind AS 17. The Group also elected to use the recognition exemptions for lease contracts that at the transition date have a lease term of 12 months or less and do not contain a purchase option (short-term leases) and lease contracts for which the underlying asset is of low value (low-value assets). The Group has applied the modified retrospective approach to existing lease contracts as of 1 April 2019 and has recorded right to use assets for an amount equal to right to use liability adjusted for any related prepaid and accrued lease payments previously recognised. Lease liabilities were recognised based on the present value of the remaining lease payments discounted using the incremental borrowing rate at the date of initial application. Further lease arrangements where the Group is lessor lease rentals are recognized on straight line basis over the non-cancellable period and consequently period of security deposits has also been aligned as per the lease terms considered for Ind AS 116. Due to alignment of period of security deposit in line with lease term a gain of ` 1 266.04 lakhs has been recorded in retained earnings as at the said date. Refer note 56 for detailed disclosures as required under Ind AS 116. The Group also applied the available practical expedients wherein it: Used a single discount rate to a portfolio of leases with reasonably similar characteristics. Relied on its assessment of whether leases are onerous immediately before the date of initial application. Applied the short-term leases exemptions to leases with lease term that ends within 12 months of the date of initial application. Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application. Used hindsight in determining the lease term where the contract contained options to extend or terminate the lease. Appendix C to Ind AS 12 Income taxes Appendix C - Uncertainty over Income Tax Treatment has been inserted in Ind AS 12. The appendix C to Ind AS 12 addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of Ind AS 12 Income Taxes. It does not apply to taxes or levies outside the scope of Ind AS 12 nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The appendix specifically addresses the following: Whether an entity considers uncertain tax treatments separately The assumptions an entity makes about the examination of tax treatments by taxation authorities How an entity determines taxable profit (tax loss) tax bases unused tax losses unused tax credits and tax rates How an entity considers changes in facts and circumstances The Group determines whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments and uses the approach that better predicts the resolution of the uncertainty. The Group applies significant judgement in identifying uncertainties over income tax treatments. Upon adoption of the Interpretation the Group considered whether it has any uncertain tax positions. The Groups tax filings include deductions based on the management judgement and the taxation authorities may challenge those tax treatments. The Group determined based on its tax compliance and transfer pricing study that it is probable that its tax treatments will be accepted by the taxation authorities. The amendment did not have an impact on the consolidated financial statements of the Group. Amendment to Ind AS 109: Prepayment Features with Negative Compensation Under Ind AS 109 a debt instrument can be measured at amortised cost or at fair value through other comprehensive income provided that the contractual cash flows are solely payments of principal and interest on the principal amount outstanding (the SPPI criterion) and the instrument is held within the appropriate business model for that classification. The amendments to Ind AS 109 clarify that a financial asset passes the SPPI criterion regardless of an event or circumstance that causes the early termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termination of the contract. These amendments had no impact on the consolidated financial statements of the Group. Amendment to Ind AS 19: Plan Amendment Curtailment or Settlement The amendments to Ind AS 19 address the accounting when a plan amendment curtailment or settlement occurs during a reporting period. The amendments specify that when a plan amendment curtailment or settlement occurs during the annual reporting period an entity is required to determine the current service cost for the remainder of the period after the plan amendment curtailment or settlement using the actuarial assumptions used to remeasure the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event. An entity is also required to determine the net interest for the remainder of the period after the plan amendment curtailment or settlement using the net defined benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after that event and the discount rate used to remeasure that net defined benefit liability (asset). The amendments had no impact on the consolidated financial statements of the Group as it did not have any plan amendments curtailments or settlements during the period. Amendments to Ind AS 12: Income taxes The amendments clarify that the income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore an entity recognises the income tax consequences of dividends in profit or loss other comprehensive income or equity according to where it originally recognised those past transactions or events. An entity applies the amendments for annual reporting periods beginning on or after 1 April 2019 with early application permitted. When the entity first applies those amendments it applies them to the income tax consequences of dividends recognised on or after the beginning of the earliest comparative period. Since the Groups current practice is in line with these amendments they had no impact on the consolidated financial statements of the Group. Amendments to Ind AS 23: Borrowing Costs The amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete. The entity applies the amendments to borrowing costs incurred on or after the beginning of the annual reporting period in which the entity first applies those amendments. An entity applies those amendments for annual reporting periods beginning on or after 1 April 2019 with early application permitted. Since the Groups current practice is in line with these amendments they had no impact on the consolidated financial statements of the Group. Significant management judgement in applying accounting policies and estimation uncertainty The preparation of the Groups financial statements requires management to make judgements estimates and assumptions that affect the reported amounts of revenues expenses assets and liabilities the related 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. Significant management judgements The following are significant management judgements in applying the accounting policies of the Group that have the most significant effect on th